New Lessor Vicarious Liability Law in BC : The $1,000,000 Cap

02 / 15 / 2008

The BC government recently amended the law concerning vicarious liability of automobile lessors. The new law caps lessors’ vicarious liability at $1 million. In some cases it may have the effect of eliminating lessor liability all together.

In the following short article, my colleague Don Lebans explains the recent changes in the law.

If you have any specific questions regarding the amendments or lessor liability generally, please feel free to contact Don Lebans at or at (604) 654-2977.

New Lessor Vicarious Liability Law in BC : The $1M Cap
– Don Lebans, Branch MacMaster

On November 8, 2007, the British Columbia Government brought into force statutory amendments to the Motor Vehicle Act (s. 86) and to the Insurance (Vehicle) Act (s. 82.1) (formerly the Insurance (Motor Vehicle) Act). The amendments change the law of lessor vicarious liability in British Columbia.

For over ten years, vicarious liability provisions in B.C.’s Motor Vehicle Actdid not apply to lessors engaged in leasing vehicles under long-term lease agreements including the so-called “option to purchase”. However, the B.C. Court of Appeal ended that the lessors’ immunity with its 2006 decision in Yeung v. Au. As a result of the Yeung decision, all lessors became subjected to unlimited vicarious liability exposure, regardless of the duration of the applicable lease or whether or not it contains a purchase option.

Newly enacted amendments to the Motor Vehicle Act (s. 86) confirm that all lessors face vicarious liability for accidents involving the vehicles they leased. However, concurrent amendments to the Insurance (Vehicle) Act (s. 82.1) cap that liability at $1 million (or any greater amount that in the future may be identified by regulation or required by law to be carried as third-party liability insurance coverage).

While the statutory amendments are not entirely clear, the lessors’ $1 million vicarious liability exposure could be satisfied by motor vehicle insurance purchased by the lessee. Typically, vehicle leases require the lessee to purchase a specified amount of third-party liability coverage for the leased vehicle, and the lessor is then included on the policy as a “named insured”. The assumption is that the lessor, as a named insured, will be able to rely on that third-party liability insurance in answering a vicarious liability claim against it. Provided the lessee-purchased coverage is at least $1 million, the maximum vicarious liability of the lessor will then be satisfied, and the lessor should not be required to contribute any additional amounts toward resolution of the plaintiff’s claim for damages.

If this interpretation is correct, then the legislated amendments in B.C. will be determined in a manner similar to recent amendments to the Ontario’s insurance and motor vehicle legislation – the $1 million cap on lessor liability will be reduced by amounts recovered from insurance maintained by the vehicle lessee and driver, with the practical result that, so long as the lessee and driver have at least $1 million in coverage, the lessor will have no vicarious liability exposure.

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