A car dealer’s insurer may not be responsible for damages suffered to cars while being test driven

An Insurer for a car wholesaler appealed a chambers judge’s ruling that it was to provide first loss coverage in regards to an accident involving a vehicle for sale by consignment that was damaged when it was being test driven while in the possession of the car dealer.  The insurer for the wholesaler argued that the dealer’s insurer should have been responsible for the loss.  The Chambers judge determined that the wholesaler was an owner pursuant to s. 650 of the Insurance Act and determined that the wholesaler’s insurer was responsible.

The Court of Appeal found that the chambers judge made no error in concluding that s. 650 of the Insurance Act applied, and therefore dismissed the appeal.

Federated Insurance Co. of Canada v. ING Insurance Co. of Canada, [2007] A.J. No. 762, Alberta Court of Appeal, C. Hunt, E. Picard and P. Martin JJ.A., July 11, 2007

A vehicle for sale by consignment was involved in an accident during a test drive. The Insurer for the vehicle dealership and the Insurer for the vehicle wholesaler disagreed as to which was to provide first loss coverage. The wholesaler was the owner of the vehicle. A chambers judge found that the Insurer for the wholesaler was to provide first loss coverage, on the basis that s. 650 of the Insurance Act, R.S.A. 2000, c.I-3, states that the owner’s policy is to provide first loss insurance.

The Insurer for the wholesaler argued that s. 610 of the Insurance Act operated, so as to make a provision in the dealership’s policy, which provided that the Insurer for the dealership would be the first loss insurer for vehicles in the dealership’s care or control, prevail over s. 650.

The Court of Appeal rejected this argument, and upheld the chamber judge’s ruling.

This case was originally summarized by Sarah Swan and originally edited by David W. Pilley.

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