Vicarious Liability Of Vehicle Owner – What If The Vehicle Owner Provided Limitations On The Use Of The Vehicle?

Article by Sudevi Mukherjee-Gothi

The Court of Appeal in the August 10th, 2015 decision in Fernandes v. Araujo et al. addressed the vicarious liability of an owner of a vehicle for the negligence of a person who had possession of the vehicle with the owner’s consent. The Statutory Third Party Insurer for the owner of the ATV was denying third party coverage to the Defendant driver and was relying upon the 1952 decision in Newman and Newman v. Terdik, which held that:

The owner is not vicariously liable for damages sustained as a result of a highway accident when the person with possession of the vehicle violated the condition and drove the vehicle on a highway

However, the Court of Appeal

Affirmed a long line of authority going back to 1933 holding that as the vicarious liability of an owner rests on possession rather than operation of the vehicle, the owner will be vicariously liable if the owner consented to possession, even if the driver operated the vehicle in a way prohibited by the owner.

What is the basis for this finding?

1. The Highway Traffic Act

s. 192 (2) of the Highway Traffic Act provides:

192(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 car was without the owner’s consent in the possession of some person other than the owner or the owner’s chauffeur.

This provision therefore places the onus on the owner of the vehicle to be careful in who is being provided responsibility for the operation of the vehicle.

2. Was the decision in Newman wrongly decided?

The Court of Appeal held that:

The proposition upon which Newman rests, namely, 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, is inconsistent with the reasoning of this line of authority.

The Court of Appeal cites many cases contrary to the findings in Newman. Although it grapples with its authority to overturn Newman, the Court of Appeal ultimately finds that

Overruling Newman would enhance rather than undermine the interest of clarity, coherence and predictability in the law. Accordingly, it is my view that we should overrule the case and declare that it no longer represents the law of Ontario.

What does this mean?

1. 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.

2. 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.1

Therefore, be careful with regard to who borrows your vehicle.


1 Seegmiller v. Langer (2008), 301 DLR (4th) 454

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Insurers continue to provide individual consumers with advice and counsel them on the need to better understand their risks and take action to reduce their vulnerability to property damage. Before storms hit, consumers should proactively contact their insurance representatives for information about their policies and what types of coverage are best suited to their individual circumstances. For more information about home, car or business insurance, phone IBC’s Consumer Information Centre at 1-844-2ask-IBC (1‑844‑227‑5422) or visit

* CatIQ compiles and combines comprehensive insured loss amounts and related information to serve the risk management needs of the insurance and reinsurance industries.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market inCanada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 118,000 Canadians, pays $6.7 billion in taxes and has a total premium base of $48 billion.

If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

SOURCE Insurance Bureau of Canada

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He earned a Bachelor of Arts in English and Economics at the University of Toronto and holds both Associate (AIIC) and Fellowship (FIIC) designation levels from the Insurance Institute of Canada (IIC).

About Allianz Global Corporate & Specialty

Allianz Global Corporate & Specialty (AGCS) is the Allianz Group’s dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: Marine, Aviation (incl. Space), Energy, Engineering, Entertainment, Financial Lines (incl. D&O), Liability, Mid-Corporate and Property insurance (incl. International Insurance Programs).

Worldwide, AGCS operates in 29 countries with own units and in more than 160 countries through the Allianz Group network and partners. In 2014 it employed more than 3,500 people and provided insurance solutions to more than half of the Fortune Global 500 companies, writing a total of €5.4 billion gross premium worldwide annually.

AGCS SE is rated AA by Standard & Poor’s and A+ by A.M. Best.

For more information please visit or follow us on Twitter @AGCS_Insurance and LinkedIn

Cautionary Note Regarding Forward-Looking Statements


Allianz Global Corporate & Specialty
Jacqueline Maher, 646-472-1479
Harden Communications Partners
Erin Burke, 631-239-6903

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