An issue that routinely arises in insurance defence practice involves determining an owner’s vicarious liability for the negligence of a person who had possession of the owner’s vehicle with limited consent when involved in an accident. Until August 10, 2015, when the Court of Appeal rendered a unanimous decision in Fernandes v. Araujo, De Almeida et al. 2015 ONCA 571, two conflicting decisions existed dealing with this issue Finlayson v. GMAC [1]and Newman v. Terdik[2].

The vicarious liability imposed on an owner of vehicle is found in s.192 of the Highway Traffic Act, R.S.O. 1990, c. H.8:

Liability for loss or damage

192 (1)  The driver of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway.

(2)  The owner of a motor vehicle or street car is liable for loss or damage sustained by any person by reason of negligence in the operation of the motor vehicle or street car on a highway, unless the motor vehicle or street care was without the owner’s consent tin the possession of some person other than the owner or the owner’s chauffeur

The question of whether a motor vehicle is in the possession of some person without the consent of the owner is a question of fact to be determined by the evidence in a particular case.[3]

Finlayson v. GMAC

This case involved a vehicle owned by GMAC which was leased to Simon and one other individual.  Under the lease agreement, Simon was expressly prohibited from driving the vehicle.  As a condition of insurance, Simon signed an excluded driver endorsement. Despite this, Simon drove the vehicle and caused an accident for which his passenger (Finlayson) claimed damages.  Finlayson sued GMAC. Before trial, GMAC moved for a determination as to whether it was vicariously liable for Simon’s negligence. The motion judge found that pursuant to s.192, GMAC was vicariously liable. The Court of Appeal dismissed the appeal, finding that Simon possessed the vehicle with the consent of GMAC. In reaching this conclusion, the Court cited a long line of authority dating back to 1993 in support of their reasoning.

Newman v. Terdik

Contrary to the decisions leading up to and including Finlayson, the Court of Appeal held in Newman that where the owner permitted the driver to drive only on a private road, and expressly prohibited the driver from going on the highway, the owner was not vicariously liable for damages sustained due to the negligent operation of the vehicle by the driver on a highway.

Fernandes v. Araujo

This decision appears to settle the two divergent streams of jurisprudence.  In Fernandes, Araujo drove an ATV owned by Carlos, who had told Araujo not to take the ATV off his property.  Araujo drove the ATV off the property and rolled the ATV, injuring her passenger. Carlos’ insurer, Allstate, brought two summary judgment motions.

Summary Judgment One – Third Party Claim: Araujo v. Allstate

Allstate sought a declaration that there was no duty to defend or indemnify Araujo.  The summary judgment motion was granted by Mr. Justice Perell on the basis that because she held a G1 driver’s license, Araujo had contravened Statutory Condition 4.1 of the insurance policy, and was operating the ATV while not authorized by law. At paragraph 80, he stated: “Whether the driver is in breach of a statutory condition in the insurance policy is a separate question from whether the owner of the car is in breach of the statutory condition.” At paragraph 86, Justice Perell concluded that there was no genuine issue requiring a trial on the basis that Araujo “only had a G-1 license at the time of the accident and that she was driving the ATV without being licensed to do so.  If she was an insured under the Allstate policy she therefore policy-breached the statutory condition of the policy that the insured shall not drive or operate the automobile unless authorized by law to drive or operate it.”  This decision was not appealed.

Summary Judgment Two – Main Action: Fernandes v. De Almeida

Allstate brought a second motion in the main action on behalf of Carlos to dismiss the Plaintiff’s claim on the ground that Araujo was not driving the ATV with his consent. Justice Perell would not draw the inference that Araujo knew Carlos forbade her from driving the ATV on the highway based on Araujo’s discovery evidence, despite acknowledging that she was told “Whatever you do, do not leave the property, stay in the property area”.

Like Justice Perell, the Court of Appeal rejected Allstate’s submission that the consent “test” could be met based on the subjective belief of the driver/possessor. Regardless of the factual findings, Justice Perell had found that pursuant to the authority of Finlayson, any restrictions on Araujo’s use of the ATV would not exculpate the vehicle’s owner from vicarious liability.

The Court of Appeal ultimately overruled Newman because it rests on the proposition that “possession can change from rightful possession to wrongful possession, or from possession with consent to possession without consent” where the person in possession violates a condition imposed by the owner”.[4]  The Court held that this proposition is inconsistent with the reasoning cited in Finlayson, concluding that consent to possession is not vitiated by violation of a condition attached by the owner to his or her consent to possession because nothing in the language of s. 192(2) justifies treating a stipulation by an owner differently from any other stipulation restricting the use or operation of the vehicle.[5]


In situations where an owner provides restricted or limited consent to possession, and the driver/possessor ultimately breaches them, those same restrictions or limitations will not relieve the owner of vicarious liability arising from section 192 of the Highway Traffic Act.


[1] Finlayson v. GMAC 2007, 86 O.R. (3d) 481 (ON CA).

[2] Newman v. Terdik, 1952 Can LII 97 (ON CA), [1953] O.R. 1, (C.A.).

[3] Fernandes v. Araujo, 2014 ONSC 6432, at para. 52.

[4] Ibid, para. 41.

[5] Ibid, paras. 43 – 44.