Vicarious Liability of Motor Vehicle Lessors in Canada

by Baker Donelson
Contact

The equipment finance industry breathed a sigh of relief when Federal legislation was enacted in 2005 preempting state laws imposing vicarious liability on lessors of motor vehicles. That relief may have been premature if the leased vehicles are used in Canada (whether or not such use outside the United States is permitted by the lease).

By way of background, the Federal legislation in the United States (known as the “Graves Amendment”), provided that equipment finance companies that rent or lease motor vehicles in the United States are generally protected from vicarious liability as a result of the use, operation or possession of the motor vehicle during the period of rental or lease so long as certain conditions are satisfied. The owner must be engaged in the trade or business of renting or leasing motor vehicles and there is no negligence or criminal wrongdoing on the part of the owner. The Graves Amendment preempts state vicarious liability laws and was enacted in an effort to create uniformity among the states, many of which did not impose vicarious liability on motor vehicle owners. It should be noted that the Graves Amendment does not preempt state financial responsibility laws, so an owner of a motor vehicle must still comply with state statutes imposing minimum insurance or financial responsibility requirements.

It is important for equipment finance companies to know that Canada does not have a similar uniform statute. Instead, each province has its own unique set of vicarious liability laws for motor vehicle owners (and it should be noted that, for this purpose, a motor vehicle owner may include the seller under a conditional sales contract). A few of the provinces have laws that protect motor vehicle owners from vicarious liability much like the Graves Amendment; however, most of the provinces impose vicarious liability on motor vehicle owners under certain circumstances. Some provinces impose vicariously liability on motor vehicle owners for personal injury, but not for property damage. Other provinces take the opposite approach and impose vicariously liability for property damage, but not for personal injury. Many of the provinces that impose vicarious liability have liability caps in place. In some provinces, the caps do not apply to certain types of motor vehicles, such as taxis, buses or limousines. Also, whether vicarious liability is imposed and whether a cap on such liability exists may depend on specific lease provisions (for example, whether the lease contains a purchase option or not) or whether the transaction is structured as a lease or a conditional sale.

In some provinces, the cap on the motor vehicle owner’s liability is reduced dollar-for-dollar for any payment made by the renter/lessee or its insurance. For example, if the cap is $1,000,000 and the province allows for a dollar-for-dollar reduction based on payments made by the renter/lessee or its insurance, the motor vehicle owner would have no liability so long as the renter/lessee or its insurance paid $1,000,000 or more. It should be noted that not all provinces allow for a dollar-for-dollar reduction, so in those provinces the motor vehicle owner would be responsible for paying an amount up to the statutory cap (e.g. $1,000,000) regardless of any amounts paid by the renter/lessee or its insurance.

This is an important issue for any equipment finance company that leases motor vehicles because the location of the accident will determine which law applies. Even if there is a provision in the lease prohibiting use of a motor vehicle in Canada, that contractual restriction will not provide any protection to an equipment finance company if the lessee violates the provision and operates the motor vehicle in Canada and an accident occurs. It is imperative that any equipment finance company leasing or renting motor vehicles or entering into conditional sales contracts for motor vehicles does proper due diligence (both before closing of a transaction and on a continuing basis) to ensure that the motor vehicles are not being operated in Canada unless sufficient safeguards such as higher insurance requirements are put into place. An equipment finance company should also consider maintaining its own liability insurance policy, especially if it knows that any if its motor vehicles will be operated in one or more of the provinces that impose vicarious liability without any cap on liability.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Baker Donelson | Attorney Advertising

Written by:

Baker Donelson
Contact
more
less

Baker Donelson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.