Employer/Owners No Longer “Protected Defendants”?

Happy Canada Day à tout le monde!We wish we could be the bearers of more cheerful news on this festive day. In an important decision, a judge of the Superior Court has just ruled that the Insurance Act does not exempt an employer from vicarious liability for the negligent operation of a motor vehicle by an employee. In Vollick v. Sheard and Atherley Towing, which can be viewed at http://www.canlii.org/on/cas/onsc/2004/2004onsc11564.html, Justice Alan Bryant held that “Bill 59 does not immunize the vicarious liability of the employer for the acts of its employee in the operation of the tow truck”. (Justice Bryant is a former law professor at the University of Western Ontario and co-author of the leading Canadian text on the law of evidence.)

His decision might not, at first blush, seem like news. But what is significant about the case is that counsel for the defence had argued that the employer could only be vicariously liable for negligence unrelated to the actual use or operation of the vehicle (negligent training of the employee, for example). Mr. Justice Bryant expressly rejected this argument. In doing so, he declined to follow a decision of Mr. Justice Nordheimer, also of the Superior Court, in R. v. Hechavarria. Justice Bryant interpreted the Hechavarria decision to have stood for the following proposition: “the owner is vicariously liable for the negligent acts of the employees where the acts were independent of, and unrelated to, the operation of the motor vehicle of which the employer was the owner. Nordheimer J. held that the owner was a protected defendant under the Insurance Act and did not lose its immunity by reason of vicarious liability.”

However, Bryant J. then went on to say that “I respectfully decline to follow the reasons and conclusions set out in Hechavarria.”

Thus, it appears that Vollick is authority for the proposition that an employer/owner can be held vicariously liable for the negligence of an employee in the use or operation of a motor vehicle, without any of the “protection” provided by the Insurance Act (threshold, deductible, collateral benefits deductions, limits on pre-trial income loss claims, etc.) for “protected defendants”.

This, in turn, raises another issue. Will the employer’s liability be covered by an auto or a CGL policy? Last year’s decision of the Court of Appeal in Unger v. Unger would seem to lead to the conclusion that the auto policy would have to respond. This is even more likely, given that plaintiffs’ lawyers will no longer have to draft creative pleadings that characterize the employer’s negligence as arising other than through the use or operation of the vehicle.

If this is so, Vollick would seem to have stripped auto insurers of all of the protection of the Insurance Act (so far there is third party liability for employees’ operation of automobiles owned by the employer), yet left intact all of the enhanced levels of statutory accident benefits available to the driver, passengers and others. In other words, the worst of all possible worlds, from an insurer’s perspective.

No word yet on an appeal, but we would certainly expect that this case will be taken further.

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