Does Family Protection Endorsement on Company Car Apply for Underinsured Coverage Arising From Out of Province Rental Car Use? by Nicholas Carmichael

In Macrae v Liberty[1], Justice Mitchell, of the Ontario Superior Court of Justice, held that an OPCF 44R Endorsement (Family Protection Coverage Endorsement) will not be engaged in respect of an automobile rented by an employee of a named corporate insured. 

The Plaintiffs (the operator and passenger) were Ontario residents that were rear-ended in a motor vehicle accident while inside of a rental vehicle in Texas.  The tortfeasor had only $30,000.00 of third party liability limits, and the rental vehicle did not provide for underinsured/uninsured motorist coverage pursuant to the laws of Texas.   On account of insufficient insurance coverage, the plaintiffs turned to their Ontario-based policies.

Thomas Macrae (the operator), and by extension his spouse, Gail Delaney (the passenger), were  insured under a policy issued by Liberty to his corporate employer (the “Liberty Policy”).  The Liberty Policy included an OPCF 44R Endorsement and covered a work-issued 2006 Chevrolet Impala. Gail  Delaney was the named insured under a separate  policy, including an OPCF 44R, issued by Unifund in respect of a 2009 Dodge Challenger (the “Unifund Policy”).  

A motion was brought by both Defendants, Liberty and Unifund, to determine whether the Liberty Policy ought to respond to the plaintiffs’ claim.  If so, a pre-arranged apportionment of liability was agreed upon.  Justice Mitchell concluded that this determination depended solely on the proper interpretation of the standard Ontario Automobile Policy (OAP 1). 

Both insurers agreed that Mr. Macrae was an “eligible claimant” under the OPCF 44R (and presumptively entitled to coverage under both policies), but disagreed about whether the Liberty Policy constituted “first loss insurance”.   If Liberty was correct in asserting that it was not, Unifund would be liable to pay for the loss, by virtue of the priority rankings under the OPCF 44R Endorsement. 

Whether the Liberty policy was “first loss insurance” depended on whether Mr. Macrae was a named insured under that policy, or was an occupant of a vehicle covered by that policy.  He was clearly neither.  The only other way the Liberty Policy could be “first loss insurance” was if the Texas rental vehicle was deemed an “other automobile” under the OAP 1.  Liberty argued that its policy was not engaged because of a carve-out (section 2.2.3, special condition No.6, bullet point 5 of the OAP 1), which excludes  vehicles rented by an employee of a corporate employer from the “other automobile” umbrella. 

Justice Mitchell held that the language of the OAP 1 was explicit and that the Liberty policy did not have to respond to the plaintiffs’ claims. Unifund argued that it was improper to use the OAP 1 to give meaning to the priorities under the OPCF 44 Endorsement.  Justice Mitchell rejected this argument on the basis that the OAP 1 is the parent document, and the OPCF 44 would not exist without it. 

This decision sets a clear precedent for very specific circumstances:  An Ontario-based corporate entity will not be obliged to respond to a claim for damages arising out of a collision involving an employee who rents a vehicle in a jurisdiction where underinsured coverage  is not required by law.