An insured can claim for losses caused by a renter under the insured’s policy

12. October 2012 0

The appellant lessee rented a truck from the insured lessor. The contents of the truck were damaged durring the course of the lease. The lessee sought compensation under the lessor’s insurance policy’s direct compensation for property damage provisions. The insurer denied coverage. At issue was whether the lessee’s claim fell under section 247 of the Insurance Act or sections 263(1) and (2) of the Insurance Act. The court held that the claim properly fell under sections 263(1) and (2) and not section 247 which dealt with third party liability coverage and had nothing to do with lessee’s claim for damage to its own property. The court ordered compensation for the damaged contents pursuant to the policy’s direct compensation for property damage provisions.

Siena‑Foods Ltd. v. Old Republic Insurance Co. of Canada, [2012] O.J. No. 4164, September 10, 2012, Ontario Court of Appeal, September 10, 2012

The appellant, Siena-Foods Ltd., rented a truck from Ryder Canada to transport a machine. The machine was damaged when the rental truck was involved in a collision with another vehicle. Siena-Foods sought compensation for the damage to its machine from Ryder’s insurer, the respondent, Old Republic Insurance Co. of Canada. Old Republic denied coverage. Siena-Foods then brought a motion to determine the following three questions:

1.         Is Old Republic the “insurer” of Siena-Foods for the purposes of section 263(2) of the Insurance Act?;

2.         If Old Republic is Siena-Foods’ insurer for the purposes of section 263(2), do the terms and conditions in the rental agreement between Siena Foods and Ryder Canada limit Siena Foods’ recovery?; and

3.         If Siena-Foods misrepresented to Ryder the type of cargo it was carrying, does this impact its recovery from Old Republic under section 263(2) of the Insurance Act?

The motions judge answered these questions No, Yes and Yes. On appeal, the motion judge’s reasons were overturned and the Court of Appeal answered the three questions as Yes, No and No.

As to the first question, is Old Republic the “insurer” of Siena-Foods for the purposes of s. 263(2) of the Insurance Act, the Court held that the question turned on whether Siena-Foods’ claim was governed by s. 247 of the Insurance Act or sections 263(1) and (2) of the Insurance Act. The Court held that the provisions of s. 247 of the Insurance Act applied to third party liability coverage and not to direct compensation for property damage. The Court held that s. 247 of the Insurance Act, and the corresponding sections of the insurance policy, dealt with third party liability coverage and had nothing to do with Siena-Foods’ claim, which was a claim for damage to its own property. The Court held that the applicable statutory provision was s. 263. Under s. 263 and the corresponding provisions of the automobile policy, the insured, Ryder, was entitled to coverage from its insurer, Old Republic, for damage to the truck and its contents. The Court held that the terms of the policy between Ryder and Old Republic extended this coverage to a lessee, such as Siena-Foods, who rented the truck from Ryder. As such, Siena-Foods was considered an insured under the policy.

The Court held that the conditions under s. 263(1) were met, such that s. 263(2) was triggered to entitle the insured to recover from its own insurer for damage to its automobile or contents as if it were a third party. The Court noted that the intended effect of s. 263 was to remove the insured’s right to sue for property damage and confer the right to claim such losses not caused by the fault of the insured against one’s own insurer.

In respect of the second question whether  the terms and conditions in the rental agreement between Siena-Foods and Ryder Canada limit Siena-Foods’ recovery, the Court held that the rental agreement was not part of the automobile insurance contract between Ryder and Old Republic, such that no part of the rental agreement could alter Old Republic’s obligation to Siena-Foods under the terms of the Ryder’s automobile policy.

Finally, in respect of the third question, if Siena-Foods misrepresented to Ryder the type of cargo it was carrying, does this impact its recovery from Old Republic under s. 263(2) of the Insurance Act, the Court answered this question in the negative. The Court held that even if Siena-Foods had misrepresented its cargo contents, that misrepresentation could not affect its entitlement under the direct compensation provision of the automobile policy.

This case was digested by Katherine E. Tinmouth and edited by David W. Pilley of Harper Grey LLP.

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