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Cap on Lessor’s Liability at $1,000,000

The BC court of appeal has reinforced the $1M cap on a motor vehicle lessor’s vicarious liability.

In Stroszyn v. Mitsui Sumitomo Insurance Co 2014 BCCA 431 the court held that a payment by a primary insurance policy reduces the joint and several liability of all the insureds under the policy, to the full extent of the payment. The court also held that a lessee is an additional insured on an excess policy of insurance obtained by the lessor, and that a lessee and persons living with and as a member of a lessee’s family, cannot be excluded from coverage on the excess policy, even with certain explicit language mandated by statute. Consequently, the effect of this decision is that the plaintiff was still able to recover the full amount of his $1.6M settlement: $1M under the ICBC policy which was primary, on behalf of lessee and lessor; and a further $600,000 under an excess policy, on behalf of the lessee/driver.

A lower court decision also allowed the plaintiff’s full recovery, but on the reverse basis: that the payment by ICBC did not reduce the lessor’s liability, such that the lessor remained liable for up to $1M beyond the primary policy; and the lessee was not insured by the excess policy of the lessor. While the appeal decision reinforces the cap on a lessor’s vicarious liability, it exposes a lessor’s excess insurer, who cannot exclude lessee drivers and members of their household from coverage, or provide them with coverage to different limits or on different terms, up to the limits of insurance.

Case summary by: Cathy Stoker