Intact, which was the employee's personal insurer, argued that the employer was the “lessee” of the vehicle because it would be reimbursing the employee for the rental and the employee was engaged in business on its behalf. Briefly put, Intact argued that the employer was the “de facto lessee”. American, which was the employer's insurer, argued that the definition of “lessee” in s.277(1.1) of the Insurance Act, R.S.O. 1990, c. 1.8 is clear and specific in stating that the employee is the lessee.
The Court found that a straightforward interpretation of s.277 resolved the issue and there was no reason to delve into any concept of a “de facto leasee”. If such a concept was introduced, the Court felt that this would encourage future disputes over how employment, agency, corporate, partnership and contract law might change the application of s.277. The fact that the lessor (car rental company) had a contractual relationship with the employee alone, and not the employer, was sufficient to resolve the issue in dispute for the Court. The Application was dismissed and the employee's personal insurer was the first responding policy.
Even though American's argument was creative and had some logical attraction, this decision reminds insurers, adjusters and counsel to use the wording of the legislation itself as the starting point for any interpretation analysis.
If an employee rents a vehicle while travelling for business, is the lessee the employee or the employer? This question was recently considered in Intact Insurance Company of Canada v American Home Assurance Company of Canada, 2013 ONSC 2372 and it has important implications for insurers as it determines which policy is the first to respond in the case of a claim.