How often have you lent your car to a family member, friend or colleague without giving it a second thought? Perhaps it’s time you did.
Recently, I was consulted by “Lisa”; a very distraught woman who had lent her car to her daughter, Susan, so she could take her friends to the movies. Unfortunately, what Susan did not tell her mother was they were stopping at a bar afterwards. On the way home, Susan was involved in a motor vehicle accident. One of her passengers was seriously injured. Shortly afterwards, Lisa’s automobile insurer advised her that she was legally responsible for the passenger’s injuries. Lisa was shocked! While she consented to her daughter using the car to go to the movies, she did not consent to Susan using it to go out drinking.
This situation was very similar to a case my law partner L. Craig Brown and I argued before the Ontario Court of Appeal; Fernandes v. Araujo and Almeida 2015 ONCA 571. In that case, Mr. Almeida lent his ATV to Ms. Araujo and Ms. Fernandes so they could drive it on his farm. Araujo and Fernandes left the property and drove to another farm. On the way back, Araujo lost control of the ATV and crashed. Fernandes suffered a serious brain injury. Fernandes sued Almeida and Araujo. Almeida took the position he was not liable, as he did not give the ladies permission to drive the ATV off the property.
At issue in our case was the correct interpretation of section 192(2) of the Highway Traffic Act, which deals with a vehicle owner’s liability. This section states:
192(2) the owner of a motor vehicle… is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle… on a highway unless the motor vehicle… was without the owner’s consent in the possession of some person other than the owner…
Historically, there were two competing lines of Appeal authority dealing with the meaning of the phrase “consent in the possession of”.
In Thompson v. Bourchier,  O.R. 525 (C.A.), the Court of Appeal held that an owner’s liability under section 192(1) of the Highway Traffic Act was based on possession, not operation, of the vehicle. Thompson was followed in the Court of Appeal decision Finlayson v. GMAC. In Finlayson, GMAC leased a car to Theresa Jefferies and James Simon. The lease expressly prohibited James Simon from operating the vehicle. Simon and Jefferies signed an acknowledgement to that effect. On March 3, 2000, Simon was involved in a single vehicle collision. His passengers were injured and commenced an action against GMAC as the owner of the vehicle. GMAC moved for summary judgment arguing that its liability under section 192(1) of the HTA was limited by the terms of the contract. The motion judge agreed. Finlayson appealed. The Court of Appeal overturned the decision and followed Thompson. In particular, the Court ruled that public policy dictates a motor vehicle owner cannot escape vicarious liability simply because the person with possession breaches some condition of having possession, but rather it imposes the responsibility of careful management upon whom possession is entrusted.
Compare this to Newman v Terdik  O.R. 1 (Ont. C.A.). In that case, Terdik gave his employee Perkinson possession of his farm truck for the sole purpose of driving it on the tobacco farm. Terdik gave Perkinson express instructions not to drive the truck on the highway. Perkinson took the truck on the highway and was involved in an accident injuring Newman.
Conversely, the trial judge and the Court of Appeal held that given Terdik expressly forbade Perkinson from driving the truck on the highway, he did not have consent in possession of the truck and, therefore, Terdik was not vicariously liable.
The Court in Fernandes convened a 5-member panel to deal with this inconsistency.
Counsel for Almeida relied on Newman and argued that Araujo’s possession of the ATV changed from possession with consent to possession without consent once the ATV was taken off the property. Justice Sharpe on behalf of the panel expressly rejected Almeida’s position concluding as follows:
The reference to “negligence in the operation of the motor vehicle… on a highway” means nothing more than that the owner’s liability will only be triggered where the place of the negligence and injury is on a highway. That does not qualify the general proposition that the owner’s liability turns on consent to possession, and consent to possession is not vitiated by violation of a condition attached by the owner to his or her consent to possession. If the owner cannot escape liability where the person with possession violates a condition that he or she not drive the car at all, it is difficult to see why the result should be different where the condition is that the car not be driven on a highway. I see nothing in the language of s.192(2) capable of justifying treating a stipulation by an owner that his or her vehicle not be taken on the highway differently from any other stipulation restricting the use or operation of the vehicle.
In summary, the Court of Appeal unanimously ruled that the interests of certainty and predictability in law would not be served by leaving Newman intact as it undermined the coherence of the law and will likely lead to confusion.
The law is clear. Car insurance follows the car. Your car, your policy, your liability.