Written by Jennifer Beresford.
The Ontario Court of Appeal released its reasons in Xu v. Mitsui Sumitomo Insurance Company Limited yesterday. Upholding Justice McEwan’s decision, the Court agreed that s. 267.12 of the Insurance Act is clear. The liability of a lessor and its insurer is limited to a maximum of $1 million. In so finding, the Court adopted Justice McEwan’s Reasons.
In April 2014, Justice McEwan rejected the submission that lessees are unnamed insureds under the lessor’s policy, with access to the full limits of that policy absent an OEF110. He relied on excerpts from Hansard to determine the legislative intent behind the amendments to the Act. Before the amendment adding s. 267.12, lessors faced uncapped liability for personal injury awards, arising solely from the fact of ownership. Lessors have no measure of control over drivers’ actions. This uncapped exposure unfairly raised lessors’ insurance rates dramatically, driving up their cost of business. That cost was passed on to consumers. The concern was that increasing damage awards, leading to increased insurance rates, would cause the demise of the leasing industry. Leasing would no longer be a viable option for consumers.
According to Justice McEwan, accepting the applicant’s argument would undermine the purpose of the amendments to the Act. On a practical basis, there would be no distinction between uncapped exposure arising from the lessor’s ownership of the vehicle or exposure arising from the lessee as an unnamed insured. Exposure under either route increases insurance rates for lessors, jeopardizing the industry. Accordingly, His Honour rejected the applicant’s position.
The OEF110 only clarifies the purpose of s. 267.12. Section 267.12 alone prevents a lessee from accessing the lessor’s insurance policies, provided that the lessee has $1 million in coverage. It is not clear if the matter will be further appealed.
Link to case:
Xu v. Mitsui Sumitomo Insurance Company Limited, 2014 ONCA 805
Xu v. Mitsui Sumitomo Insurance Company Limited, 2014 ONSC 167
