Insurer Must Defend Lessor Although Car Driven by Excluded Driver

As if insurers needed more encouragement to tighten their procedures, the Court of Appeal today ordered Lombard Insurance to defend an action arising out of use of a car by an “excluded driver” because the insurer had not delivered a copy of the endorsement to the leasing company which owned the vehicle. The case is GMAC Leaseco v. Lombard Insurance.

The car had been leased from GMAC Leaseco by Angelique Saweczko and Marc O’Neil Powell. Both had signed an OPCF 28A Excluded Driver Endorsement form, which stated that there would be no coverage under the policy whenever Powell was operating the vehicle.

GMAC Leaseco had been provided with certificates of insurance that noted that such an endorsement had been issued. However, Lombard did not deliver the endorsement itself to GMAC Leaseco, nor was there any evidence that GMAC knew that Powell was an excluded driver.

Powell was involved in an accident while driving the car and GMAC Leaseco was sued as the vehicle’s owner. Lombard denied coverage, relying on the OPCF 28A form, and had itself added as a statutory third party. GMAC Leaseco applied to court for an order requiring Lombard to defend it. At first instance, its motion was dismissed. But the Court of Appeal overturned that dismissal and ordered Lombard to defend and indemnify GMAC Leaseco.

The Court held that s. 232(3) of the Insurance Act requires an insurer to deliver or mail to the insured a true copy of every endorsement or other amendment to the contract. Sending a certificate to GMAC Leaseco was not enough and did not comply with the statute.

Insurers should bear in mind that this decision is not limited to this particular endorsement; it interprets the Insurance Act to require that all endorsements must be sent to the insured.

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