Determining Insurer Liability: A Borrowed Car

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In the recent decision, Tokio Marine & Nichido Insurance Company v. Security National Insurance Company, 2019 ABQB 622, the Alberta Court of Queen’s Bench (the “Court”) heard an appeal of a Master’s of an application for an order declaring that another insurer had a duty to defend a motorist involved in an accident. This is an important decision for insurers as it provides an examination of a unique factual scenario where there was overlapping insurance coverage.

The Facts

On June 4, 2016, Ms. Sran drove a vehicle owned by Mr. Gill (the “Gill Vehicle”), to an Acura dealership in Calgary, Alberta (the “Dealership”), for servicing. Ms. Sran was not a named insured under Mr. Gill’s insurance policy, and was not his spouse, however, she did have permission to take the Gill Vehicle, and had been informed by Mr. Gill that the Dealership would provide her with a courtesy car. After signing an agreement with the Dealership (the “Agreement”), Ms. Sran was given a courtesy car (the “Courtesy Car”), and left the Dealership.

While Ms. Sran was operating the Courtesy Car she collided with a skateboarder (the “Skateboarder”).

The Gill Vehicle was insured by Security National Insurance Company (“SNIC”), and the Courtesy Car was insured by Tokio Marine & Nichido Insurance Company Limited (“Tokio Marine”). Tokio Marine sought an order declaring that SNIC was required to defend Ms. Sran in the action commenced by the Skateboarder. Tokio Marine’s application was denied by a Master, who found that SNIC did not have to defend the claim. In this case, Tokio Marine was seeking to have the Master’s decision overturned, on the basis that Mr. Gill gave his consent for Ms. Sran to drive the Gill Vehicle, and that consent transferred to the Car.

Additionally, a term of the Agreement stated that Ms. Sran, as the signatory, would be liable for any damage to the Courtesy Car, and that Ms. .Sran’s insurance would be the primary carrier in the event of any loss.

The Decision of the Court

Justice Fraser agreed with the previous decision from the Master, and held that SNIC did not have to defend the action brought by the Skateboarder, and that Tokio Marine would be responsible for defending the action. Justice Fraser stated that while there was an understanding between Mr. Gill and Ms. Sran that the Gill Vehicle would be left at the Dealership for servicing, and that Ms. Sran would have a courtesy vehicle, that understanding could not be extended to the other parties involved.

Moreover, Ms. Sran agreed to a number of conditions when she signed the Agreement prior to using the Car, and there was nothing to demonstrate that Mr. Gill ever agreed to any of the terms, or that he even knew about them. Mr. Gill was not the owner of the Courtesy Car, and as a third party with no interest in the Courtesy Car, the Court simply was not able to find that he had the ability to give consent to anyone to drive it, despite the fact that he likely expected that a Courtesy Car would be provided.

In its submissions to the Court, Tokio Marine also argued that pursuant to the Miscellaneous Insurance Provisions Regulation, Alta Reg 120/2001, the Courtesy Car should be considered a rental vehicle, which would result in a priority flip for the insurers in regards to primary responsibility for defending any claims. The Court also found this argument lacking, as the Dealership clearly did not fall under the definition or a lessor or renter, as defined in the Traffic Safety Act, RSA 2000, c T-6.

The Take-Away

This decision provides clarity for interpreting insurance policies in a unique factual scenario that all stakeholders involved in priority dispute should be familiar with. Specifically, this decision serves as a reminder that situations that feature overlapping insurance policies can be reconciled by a plain language reading of their terms.

For more information, please contact Conor Fleming or another member of Dentons’ Insurance group.