Who is a “Lessee”?

Section 277(1.1) of the Insurance Act outlines the order in which motor vehicle liability policies have to respond to accidents involving rented and leased vehicles. The order is: lessee, driver, and owner.

In Aviva Insurance Company v. Wawanesa Mutual Insurance Company, 2019 ONCA 704, the Court of Appeal examined who is a “lessee”.

At the time of the accident, Mahamood was delivering furniture under a subcontractor agreement with Fine Furnishings.

Mahamood was operating a rental truck. He signed the rental agreement. The rental was charged to Fine Furnishings’ credit card.

The Court of Appeal overturned the application judge’s finding that Mahamood was the lessee, stating that it was an error of law to simply rely upon the face of the two-page rental agreement to determine the lessee status.

Applying agency principles, the Court of Appeal said that Mahamood entered into the rental agreement as an authorized representative of Fine Furnishings. Therefore, Fine Furnishings was the lessee.

This decision shows that the name on a rental agreement is not determinative of who is the actual renter or lessee.