INSURANCE ISSUES

An Ontario Court sets out the factors for determining who the "lessee" of a rented/ leased vehicle is for the purposes of determining the priority of insurers providing coverage.

Aviva v Wawanesa, 2018 ONSC 5778, per Nakatsuru, J.

FACTS AND ISSUES:

On October 29, 2010, the Plaintiff Liu was rear-ended by a vehicle driven by the Defendant Mahamood, which was rented from New Horizons Car Truck Rentals. Mahamood was in the process of delivering furniture for his employer, Fine Furnishings. Liu sued Mahamood, Fine Furnishings and New Horizons Car Truck Rentals for vehicular negligence for $3,000,000.

Mahamood did not have any insurance of his own, and Fine Furnishings was insured by Wawanesa. New Horizons Car Truck Rentals was insured by Aviva. The issue was as to which insurer (as between Aviva and Wawanesa) was the first loss insurer under the Ontario Insurance Act, R.S.O. 1990 c. I.H, section 277(1.1). In other words, the question was as to who the "lessee" of the vehicle was – Mahamood or Fine Furnishings. Section 277 provides as follows: 277 (1) Subject to section 255, insurance under a contract evidenced by a valid owner's policy of the kind mentioned in the definition of "owner's policy" in section 1 is, in respect of liability arising from or occurring in connection with the ownership, or directly or indirectly with the use or operation of an automobile owned by the insured named in the contract and within the description or definition thereof in the policy, a first loss insurance, and insurance attaching under any other valid motor vehicle liability policy is excess insurance only.

(1.1) Despite subsection (1), if an automobile is leased, the following rules apply to determine the order in which the third party liability provisions of any available motor vehicle liability policies shall respond in respect of liability arising from or occurring in connection with the ownership or, directly or indirectly, with the use or operation of the automobile on or after the day this subsection comes into force:

  1. Firstly, insurance available under a contract evidenced by a motor vehicle liability policy under which the lessee of the automobile is entitled to indemnity as an insured named in the contract.
  2. Secondly, insurance available under a contract evidenced by a motor vehicle liability policy under which the driver of the automobile is entitled to indemnity, either as an insured named in the contract, as the spouse of an insured named in the contract who resides with that insured or as a driver named in the contract, is excess to the insurance referred to in paragraph
  3. Thirdly, insurance available under a contract evidenced by a motor vehicle liability policy under which the owner of the automobile is entitled to indemnity as an insured named in the contract is excess to the insurance referred to in paragraphs 1 and 2.

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