A lessee with an option to purchase may be an owner

A lessee with an option to purchase a vehicle is an “owner” under s. 1 of the Motor Vehicle Act. Other insurance policies contemplating an “owner” must be read in light of this definition.

Lombard General Insurance Co. of Canada v. Canadian Direct Insurance Inc., [2013] B.C.J. No. 41, January 11, 2013, British Columbia Supreme Court, P.D. Leask J.

The plaintiff insurer, Canadian Direct Insurance (“CDI”), brought a petition seeking a declaration that the respondent insurer, Lombard General Insurance (“Lombard”), was a co-primary insurer of the defendant.

The action arose out of a motor vehicle collision involving the defendant. At the time of the accident, the defendant was in the course of employment and driving a vehicle which was being leased to his father. The defendant lived with his father at the time of the accident. The defendant had received permission from his father to drive the vehicle. The father was leasing the vehicle with an option to purchase it at the end of the lease term from the lessor. The vehicle was insured by the Insurance Corporation of British Columbia (“ICBC”) and by CDI.

Lombard insured the defendant’s employer and its employees in certain circumstances. The relevant coverage provision in the Lombard policy provided indemnification to employees for motor vehicle accidents if they were operating a vehicle with the consent of the owner, in the course of employement, and the vehicle in question was not owned in whole or in part by a person whom the employee resided with.

The only issue in dispute was whether the vehicle was “owned in whole or in part” by the father within the meaning of the policy. If so, then the accident was not insured by Lombard.

The court held there was no ambiguity as to the meaning of the term “owned in whole or in part”. The court refered to s. 1 of the Motor Vehicle Act R.S.B.C. 1996, c. 318 (the “MVA”) which defines ‘owner’ to include “a person in possession of a motor vehicle under a contract by which he or she may become its owner on full compliance with the contract”. A lessee with an option to purchase a vehicle may become its owner on full compliance with the contract. The court found the Lombard policy must be interpreted in light of the s. 1 MVA definition. The father was an owner of the vehicle under the MVA because he was in possession of the vehicle under a contract by which he may become its owner on full compliance with the contract. As he was an owner under the MVA, he was also an owner under the Lombard policy. Accordingly, his vehicle was not insured under the Lombard policy and CDI’s application was dismissed.

This case was originally summarized by Djuna M. Field, and originally edited by David W. Pilley of Harper Grey LLP.

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