January 2015

Recent case law released concerning when policies must respond in actions involving rented or leased vehicles

Elias v. Koochek, 2014 ONSC 5003

Important case law has been released concerning when policies must respond in actions involving rented or leased vehicles. The question before Justice Firestone in Elias v. Koochek, 2014 ONSC 5003, was whether or not the policy of a renter would still rank in priority if the renter was a third party and not a defendant in the main action.

In Elias, the plaintiffs were passengers in a rented vehicle that was involved in a motor vehicle collision. The plaintiffs brought an action against the driver of the car, as well as against the rental car company, Aviscar. The plaintiffs did not name the renter, Moshe. Aviscar requested that the plaintiffs add Moshe as a defendant in the main action. Since the plaintiffs would not do so, Aviscar brought a third party claim against Moshe seeking contribution and indemnity, and argued that Moshe's policy was first to respond.

Under section 277(1.1) of the Insurance Act, renters' policies respond first, drivers' policies respond second, and owners' policies respond last. However, the policy must be "available" to fall into the priority system. A policy has been held to be available when a claim has been made against that party, as per the Ontario Court of Appeal's decision in Enterprise v. Meloche Monnex, 2010 ONCA 277. Moshe, through his insurer, Intact Insurance Company, argued that his policy was not available under section 277 because a claim had not been made against him directly by the plaintiffs.

The Court disagreed with Moshe, holding that insurance policies of third parties are indeed available. Justice Firestone held that if he were to accept the rationale proposed by Moshe, the priority of the policies to respond  would be completely dependent on whom the plaintiffs choose to add to the action. He underscored that a third party claim qualifies as a claim under the Court of Appeal's rationale in Enterprise.

This decision highlights how important it is for insurers of defendants to identify potential relevant parties and therefore ensure their lower priority status is not lost.

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