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Court of Appeal Clarifies Vicarious Liability of Vehicle Owner

March 27, 2016

In Fernandes v. Araujo, the Ontario Court of Appeal recently overturned its own decision and in doing so clarified the law on vicarious liability of vehicle owners. The Court’s ruling is helpful for subrogation in that it affirms the principle that if the owner consents to possession of the vehicle, the owner will be vicariously liable for the driver’s negligence.

In Fernandes, the plaintiff was injured while riding as a passenger in an All Terrain Vehicle. The ATV owner gave permission to the driver and plaintiff to take the ATV out for a ride but stipulated that it could not be driven off the farm property where they were visiting. They proceeded to drive the ATV off the farm property in contravention of the owner’s instructions and rolled the ATV over resulting in injuries to the plaintiff.

The insurer for the ATV denied coverage taking the position that the owner did not consent to the ATV being driven off the farm property. The insurer brought a motion for summary judgment seeking to dismiss the lawsuit. The court denied the motion. The insurer appealed the decision to the Ontario Court of Appeal.

The issue before the Court of Appeal was the proper interpretation of section 192(2) of the Highway Traffic Act. This section of the Act provides that a vehicle owner will be vicariously liable for the negligent operation of the vehicle unless the owner did not give the operator consent to possess the vehicle. The Court of Appeal had previously interpreted this section of the Act in conflicting ways.

In examining the existing case law, the Court of Appeal held that the proper interpretation of the Highway Traffic Act does not qualify the general proposition that the owner’s liability turns on consent to possession of the vehicle and that a violation of the owner’s consent does not remove potential vicarious liability on the owner. In other words, if the owner consents to possession of the vehicle, the owner will be vicariously liable for the driver’s negligence even if the driver operates the vehicle in a way prohibited by the owner.

The Court of Appeal’s interpretation is consistent with the legislative policy behind the vicarious liability provisions of the Highway Traffic Act, which is to protect the public by insisting that owners exercise caution in permitting others to operate their vehicles.

From a subrogation standpoint, Fernandes confirms that the owner of a vehicle cannot escape liability for the negligence of an operator so long as the owner consented to the operator’s possession of the vehicle. When advancing a claim against the negligent operator of a vehicle, you should include the owner as a defendant if the evidence supports that the owner consented to the driver’s possession of the vehicle.