The Liability of Lessors and the Insurance Implications of Bill 35


The British Columbia Legislature recently took steps to cap the liability exposure of auto dealers and auto leasing companies. Included in Bill 35, the Miscellaneous Statutes Amendment Act (No. 2) 2007 are provisions amending both the Insurance (Vehicle) Act and the Motor Vehicle Act. These amendments were introduced in the Spring 2007 Legislative Session and, absent any amendments, are expected to come into force in the near future.

The amendments are intended to address concerns that sellers under conditional sales agreements and lessors are owners of vehicles, and therefore exposed to unlimited liability. This follows on the British Columbia Court of Appeal?s decision in Yeung v. Au, which found that section 86(3) of the Motor Vehicle Act did not exclude sellers under option to purchase agreements. The Supreme Court of Canada, in a judgment handed down October 11, 2007 agreed with the Court of Appeals decision. What these decisions mean in practice is that plaintiffs with significant damage awards, unable to fully recover against a negligent driver, will pursue the sellers and lessors of the vehicles since the sellers and lessors are often corporations with significant assets. During second reading of Bill 35, the Minister noted that limiting liability would help keep businesses like car rental companies in the province, thereby supporting major industries like tourism.

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