Interpretation of the Standard Non-Owned Automobile Policy

The Standard Non-Owned Automobile Policy is commonly found as part of many insureds’ Commercial General Liability policy (sometimes included as an Endorsement to the CGL policy); however, interpretation of the policy has received little judicial review in B.C.

The typical wording of the non-owned auto policy provides coverage for the insured for loss or damage arising from the use or operation of any automobile not owned in whole or in part by or licensed in the name of the Insured

On its face, the wording appears straightforward. For example, imagine the situation where an employee of Company X has a motor vehicle accident in the employee’s personally owned vehicle, while acting on Company X business. Company X is sued for vicarious liability and the non-owned auto policy is triggered for Company X because the loss arose out of a vehicle not owned or licensed by Company X. However, there is no coverage for the employee, as the vehicle was owned by the employee. Therefore, for the employee, her own auto insurance responds, not Company X’s non-owned auto policy.

However, coverage under this particular policy can become convoluted where the vehicle at issue is a rental car, is borrowed from a client or friend, or is borrowed from an employee’s family member. 

It is this last scenario that was reviewed by the B.C. Court of Appeal in Canadian Direct Insurance Incorporated v. Lombard General Insurance Company of Canada, 2013 BCCA 523.  In that case, the Court looked at whether an employee of the Sto:Lo Nation, which had a non-owned auto policy with Lombard, was an Additional Insured under the policy. The case was complicated by the fact that the employee was operating a vehicle that was leased by his father from Ford.

The Court pointed to the wording of the Additional Insured section contained within the non-owned policy wording, as follows:

a.   Additional Insureds

We agree to indemnify in the same manner and to the same extent as if named herein as the Insured, every partner, officer or employee of yours who, with the consent of the owner thereof, personally drives

1)   in your business as stated on the Coverage Data Page, any automobile not owned in whole or in part by or licensed in the name of

a)   you, or

b)   such additional Insured Person, or

c)   any person or persons residing in the same dwelling premises [as] you or such additional Insured Person, or

2)   any automobile hired or leased in the name of the Insured except any automobile owned in whole or in part or licensed in the name of such additional Insured Person….

In its analysis, the Court confirmed that if the vehicle was “owned” or “licensed” by the employee’s father, there would be no coverage for the employee under the policy. The Court held that the vehicle was not “owned” by the employee’s father, rather it was “leased”.  It then turned to consider whether the vehicle was “licensed” in the name of the employee’s father. The Court ultimately found that the vehicle was licensed in the employee’s father’s name; therefore, there was no coverage for the employee. In so finding, the Court stated:

[The policy] provides that a Sto:Lo Nation employee is not an additional insured if the vehicle being driven is licensed in the name of the Sto:Lo Nation, the employee, or a person with whom the employee resides… It follows that, because Norman Dunn and his son were residing together, and the vehicle was licensed in Norman Dunn’s name, Nathan Dunn was not an additional insured under the Lombard Policy… 

The Court of Appeal’s decision confirms the intent of the non-owned policy, which is to provide coverage in only select situations. Where the vehicle at issue is owned or licensed by the insured’s employee, or is owned or licensed by a person residing with the employee, there is no coverage under the non-owned auto policy.

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