Error of law to rely upon the face of rental agreement to determine lessee status

12. November 2019 0

The court must look beyond the surface of a car rental agreement to determine whether the renter is renting in his personal capacity or as an authorized representative of his employer.

Insurance law – Automobile insurance – Uninsured motorist – Priority coverage – Statutory provisions – Appeals

Aviva Insurance Co. v. Wawanesa Mutual Insurance Co., [2019] O.J. No. 4559, 2019 ONCA 704, Ontario Court of Appeal, September 10, 2019, K.N. Feldman, D. Paciocco and J.M. Fairburn JJ.A.

The driver of a rental car involved in a motor vehicle accident was personally uninsured. The insurer of the driver’s principal and the insurer of the rental agency sought a determination as to which was the first-loss insurer. The Insurance Act R.S.O. 1990, c.I.8 provides that the renter is liable for damages sustained by reason of negligence in the operation of a rented vehicle and relieves the insurer of the owner of a rented vehicle. The court held that the driver was the lessee as he had signed the rental agreement in his personal name. As the driver was uninsured, the rental agency’s insurer was the first-loss insurer.

On appeal, the Court of Appeal held that the driver entered into the rental agreement as an authorized representative of the principal, and the principal was the lessee. The lower court erred in determining the identity of the lessee by restricting itself to the face of the two-page rental agreement and failed to grapple with the fact that, in renting the vehicle, the driver was acting as his principal’s agent.

This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at