Owner “Relinquished Dominion and Control” of Car, But Her Consent to Possession by Driver Still Necessary?

In Seegmiller v. Langer, Justice George R. Strathy reviewed the law with respect to when the owner of an automobile will be liable when someone else drives it and is involved in an accident. His reasons contain a useful review of the law concerning consent to possession of a vehicle and make it clear that an owner’s liability does not depend on consent to operation of the vehicle.

However, we are puzzled as to why, on the facts found by Justice Strathy, he did not conclude that the driver was the owner, such that no consent to possession of the vehicle was required.

The plaintiff was injured as a result of the negligence of the defendant Patrick Langer. The car that Patrick was driving had been leased by his girlfriend’s mother (“Linda”). Under the terms of the lease, Linda was to become the owner of the car at the end of the lease. She agreed with her daughter (“Kelli”) and Patrick to sell the car to them for what was then owing on the lease (about $700). She continued to pay for the insurance, but otherwise had nothing more to do with the car.

However, neither Kelli nor Patrick was licensed to drive. Their understanding with Linda was that they could not operate the car until they acquired their driver’s licences. When that happened, Linda was going to transfer the car’s registration to them.

On the day of the accident, Patrick and Kelli had taken the car without Linda’s consent. The accident in which the plaintiff was injured resulted from Patrick’s negligence.

In addition to suing Patrick and Linda, the plaintiff sued her own insurer, State Farm, on the uninsured motorist coverage in the policy. By the time of trial, the plaintiff’s claim had been settled, leaving only the dispute as to which insurer (State Farm or Linda’s insurer) was responsible to pay the claim.

Linda’s insurer took the position that it was not liable because, at the time of the accident, the car was in Patrick’s possession without Linda’s consent. Counsel for Linda’s insurer argued that Patrick’s conduct in taking the car had been “tantamount to theft” and that accordingly, that insurer was not liable.

Justice Strathy emphasized that the issue was not whether Patrick had Linda’s consent to drive the car: clearly, he did not. However, s. 192 of the Highway Traffic Act makes the owner of a car liable for the negligence of a driver of that car, “unless the motor vehicle or street car was without the owner’s consent in the possession of some person other than the owner or the owner’s chauffeur”.

Although it was not mentioned in the decision, the other relevant provision is to be found in the standard auto policy: “You are covered when you, or anyone else in possession of a described automobile with your consent, uses or operates it. We will consider these other people insured persons.” (paragraph 3.2)

Justice Strathy reviewed the caselaw and distilled from it the following eight principles:

  1. 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.
  2. The meaning of possession is a question of law but the application of that definition to any particular set of facts is not a question of law alone.
  3. Possession is a concept capable of different meanings and there are different types of possession. The primary definition of possession contemplates power, control or dominion over property.
  4. Once ownership of a vehicle is established, the onus passes to the owner to establish that the vehicle was, without the consent of the owner, in the possession of some person other than the owner.
  5. The owner’s vicarious liability under s. 192 is based on possession, as opposed to operation of the vehicle.
  6. Consent to possession of a vehicle is not synonymous with consent to operate it. Public policy considerations reinforce the importance of maintaining that distinction.
  7. If possession is given, the owner will be liable even if there is a breach of a condition attached to that possession, including a condition that the person in possession will not operate the vehicle.
  8. Breach of conditions placed by the owner on a person’s possession of the vehicle, including conditions as to who may operate the vehicle, do not alter the fact of possession.

Applying those principles to the facts of this case, HIs Honour concluded that Kelli and Patrick were in possession of the car with the consent of Linda. As a result, Linda’s insurer had to pay the claim.

(We’re oversimplifying a bit here. Linda’s insurer, of course, would have been entitled to deny coverage to Patrick, on the basis that he was in breach of statutory condition 4, in that he was operating the car without being authorized by law to do so: he was not licensed. However, that breach would not relieve the insurer of its “absolute liability” to the plaintiff under s. 258(4) of the Insurance Act. That liability is limited to $200,000. Here, the amount paid to settle the plaintiff’s claim was $150,000, so the policy defence would not have prevented the application of absolute liability. The insurer would be able to seek reimbursement from Patrick for the $150,000, under s. 258(13) of the Insurance Act. Patrick’s breach of statutory condition 4 would not have been a basis for the insurer to deny coverage to Linda unless she permitted him to drive, which does not appear to have been the case.)

Leaving that issue aside though, Justice Strathy’s conclusion, that Kelli and Patrick were in possession of the car with Linda’s consent, on the basis of the following findings of fact:

Linda had relinquished dominion and control over the Sunbird to Kelli and Patrick. She had given up the right to treat the Sunbird as her own and had transferred that right to Kelli and Patrick. If Kelli or Patrick had had the Sunbird towed to a repair yard or had sent it to a paint shop, Linda would have had no objection. She would have had no objection if Kelli or Patrick sold the Sunbird, sent it to a scrap yard or traded it in for another car, as long as she was paid the balance owing on the lease. In fact, she would have allowed them to drive the Sunbird, once they had their licences, even if they had not yet paid the balance owing. 

Given these facts, why was it even necessary to establish Linda’s consent? The evidence seems to us to point more strongly to Kelly and/or Patrick being the owner of the car, such that Linda’s consent was irrelevant.

True, Linda remained the registered owner of the car. But there have been many decisions that have held that registered title merely raises a rebuttable presumption of ownership: see Sonny v. Sonnylal, where Pitt J. has reviewed,in some detail, the caselaw about the incidents of “ownership”.

So, if Patrick were held to have been the owner of the vehicle, no question of consent would have arisen. There would still have been an issue with respect to his breach of statutory condition 4 (authority to drive), the absolute liability provisions of the Insurance Act and reimbursement of Linda’s insurer. Presumably though, if Patrick and Kelli between them were having difficulty paying off the last $700 owing on LInda’s lease, there wasn’t much prospect of Linda’s insurer getting paid $150,000 by Patrick.

There might have been a further wrinkle however. It was Linda who was paying the insurance premiums on this car. Justice Strathy’s reasons do not discuss this, but it seems likely that Linda’s insurer knew nothing about her having “relinquished dominion and control over the Sunbird to Kelli and Patrick”. In those circumstances, what insurable interest did Linda still have? Could her insurer not have argued that there had been a material change in risk (statutory condition 1)? If so, then s. 233 of the Act would have meant that his right to recover indemnity was forfeited.

But again, the absolute liability provisions of s. 258(4) of the Act would have required the insurer, even if there was a material change in risk, to pay the plaintiff up to $200,000 and then pursue recovery against Patrick.

So, it looks like Linda’s insurer decided to advance the only argument that, if it had succeeded, would have gotten the insurer off the hook altogether: lack of owner’s consent to possession by the driver. That argument would not have been available if either Patrick or Kelli were treated as being the owner of the car; it would only have worked (potentially) if Linda were the owner.

While it appears to us that Justice Strathy’s analysis of the law in the area of consent is correct, as is his application of that law to the facts of this case, it does seem that those facts pointed much more strongly to Kelli and/or Patrick being the true owner of the car, which would have made Justice Strathy’s analysis of the consent issue unnecessary.

This entry was posted in Auto, Insurance News. Bookmark the permalink.