Canada: Membership Has Its Privileges: Expanding Priority - Are Car-Share Insurers Sharing More Than They Thought?

Last Updated: February 15 2016
Article by Helen D.K. Friedman

The car-share model is coming of age in many urban centres. The attractions of the car-share concept include reduced urban traffic congestion, generational mind shifts about car ownership, increasing costs of personal vehicle ownership and environmental sustainability.

According to recent statistics, as of November 2014, the largest car-share networks across North America and Europe include Zipcar with 767,000 members and 11,000 vehicles, and Car2Go with 900,000 members and 12,000 cars.

Car-share enterprises are not only commercial, they can be built on cooperative or non-profit models. Car-share programs generally have similar features including a check of past driving records and a monthly or annual fee to become a member in the car-share. Once accepted for membership in a car-share, access to vehicles is facilitated by a reservation system, generally online or by phone or mobile device. Reservations are generally required at least 24 hours in advance. Once a reservation is made and confirmed, a vehicle meeting the reservation profile will be delivered at a time and place scheduled or made available for pickup at a designated location. Access to the vehicle may be facilitated by member-card activation. Once the vehicle is accessed, keys will be found inside.

The car-share member simply pays a membership fee and, generally, liability for loss or damage is limited to under $1,000.00 per claim. The membership cost is a win/win for people who need vehicles but do not want to incur ownership expense and for those in the business of supplying the vehicles to a new market. Is it a win for insurers or does the car-sharing economy trigger more issues than anticipated?

The implications of the car-share model in the context of priority for payment of Statutory Accident Benefits in the province of Ontario may be significant. Insurers who provide motor vehicle liability insurance policies to car-share organizations may be getting more than they bargained for.

We can assume that most individuals who participate in car-shares do not have access to their own or other vehicles and as such would not be considered "insured" under any other motor vehicle policies. Consider the implications of this scenario for the insurer of the car-share vehicles. Section 3(7)(f) of O. Reg. 34/10 (Statutory Accident Benefits Schedule) provides:

(7) For the purposes of this Regulation,

(f) an individual who is living and ordinarily present in Ontario is deemed to be the named insured under the policy insuring an automobile at the time of an accident if, at the time of the accident,

  1. the insured automobile is being made available for the individual's regular use by a corporation, unincorporated association, partnership, sole proprietorship or other entity, or
  2. the insured automobile is being rented by the individual for a period of more than 30 days. O. Reg. 34/10, s. 3 (7); O. Reg. 289/10, s. 1 (3); O. Reg. 194/11, s. 1.

The broad implication of this provision is that the car-share membership offered by an incorporated or unincorporated for profit or not for profit entity provides access to a vehicle for the individual member's "regular use". This provision has the potential to elevate the car-share member to a "deemed named insured" under the policy insuring the car-share vehicle.

The decision in St. Paul Fire & Marine Travelers Insurance v. Wawanesa (Samworth, January 15, 2014) confirmed that the post-September 2010 change in the wording to section 3(1) of the Schedule, which defines 'insured person' (the addition of the words "if the named insured is an individual"), does not negate the deemed named insured provisions and as a result, a deemed named insured (as defined in section 3(7)(f)) can be an individual car-share member whose spouse and dependants would also have access to coverage offered by the car-share insurer.

This potential scope of coverage has significant ramifications. Firstly, it is arguable that simply being a car-share member means that the vehicle is always "available" for your regular use. If this alone is sufficient, not only is the insurer responsible for any motor vehicle accident which may befall the car-share member (whether or not a car-share vehicle is involved), but also any motor vehicle accident which may befall that member's spouse and/or dependants whether they are vehicle occupants or even pedestrians. Consider the spouse of a car-share member struck as a pedestrian. As the spouse of a "deemed named insured", coverage could be available under the car-share policy for the spouse's accident benefits claims.

The decision in ACE INA v. Co-operators, (2009) O.J. No.1276 (ONSC, has clarified that status as a deemed named insured is not a portable status. That status is only conferred at and for a limited time, namely at the time of the accident. Coverage extends if a vehicle is 'made available' for the individual's regular use at the time of the accident. Does this mean that as long as a car-share membership is held at the time of the accident, the vehicle is made available at the time of the accident? After all, membership has its privileges.

In the context of the car-share model, the concept of being "made available" is pivotal in addressing priority. Are the vehicles in the car-share "made available" to the member simply by virtue of membership? Promotional literature for a number of car-share organizations would suggest that this is the case, with their promises of availability of significant numbers of vehicles of all shapes and sizes, all at a moment's notice.

As noted, however, most car-share organizations operate on the reservation system. Reservations are generally required 24 hours in advance. Does this mean that a car-share vehicle is only "available" at the time of the accident if it has been reserved for use by a member within the same timeframe the accident occurs? If no reservation was made to cover the timeframe within which the accident occurred, arguably the vehicle was not "available" at the time. Conversely, if a reservation had been made, at least one vehicle in the car-share fleet would have been available for that timeframe. What if the organization has a practice of waiving reservation requirements, or offers guaranteed 'availability'?

What about other similar modes of transportation which may be "available for regular use" at the time of the accident. Broadly speaking, taxis are available for everyone's regular use all the time. Caselaw suggests that despite the term "regular use", it is not necessary for the use to be all that regular. Use can be irregular and even sporadic. The emphasis has shifted to availability rather than regularity. Arguably, taxis are "made available" for an individual's regular use simply by virtue of their existence. (As would all ride-share services). A judge or arbitrator may well have difficulty with the concept that a taxi cab is being "made available for the regular use" of anyone but the taxi driver, no matter how regular and predictable the taxi ride is. (Think of a regular taxi trip by an elderly person to their doctor's appointments).

Consider, however, the intriguing scenario in Gore Mutual v. The Guarantee Company (Samis, April 18, 2009), upheld on appeal July 8, 2010. In that case, the argument was put forward that The Guarantee Company, as insurer of public transit vehicles operated by Hamilton Street Railway (HSR) should be the insurer responsible for payment of accident benefits to an occupant of a stolen passenger vehicle on the basis that both the claimant and his mother were, from time to time, passengers of HSR public transit vehicles. The issue was whether or not their use of, or access to, public transit would make them deemed named insureds under the HSR policy. It was not clear whether the claimant or his mother held the monthly transit pass at the time of the accident, but the claimant did use transit to travel to and from class.

The Arbitrator found that both the claimant and his mother had regular use of HSR vehicles at the time of the accident, finding that the deemed named insured provision did not require the vehicle to be made available for personal, exclusive or frequent use. 'Use' was not the determining factor, rather, availability for use was the governing language. Applying this logic, public transit vehicles are either made available for no one's use or for everyone's use. Everyone is entitled to be a passenger on a scheduled route simply by payment of fare. At this point, the Arbitrator slammed on the brakes, finding that if simply paying a fare made a transit vehicle available for regular use in accordance with the Schedule, all of those passengers (and their spouses and dependants) could be entitled to accident benefits from HSR's insurer. If so, coverage could apply to accidents which did not involve HSR vehicles, which may be outside the Hamilton area or potentially, outside the country. To find that potential users of public transit are deemed to be named insureds under a transit insurer's policy would mean that they would be able to enjoy the benefits of being considered a named insured under a program that they have paid nothing for.

From a public policy perspective, the Arbitrator concluded this would make no sense, as the ultimate effect would be to increase the cost of transit in order to pay benefits to persons involved in accidents which did not involve public transit vehicles or transit activities. In this regard, coverage under a transit vehicle policy would be so broad that the balance of the priority ladder in section 268(2) of the Insurance Act would have no meaning. In fact, no claimant would need to access the other rungs on the priority ladder, as nearly every claimant would be someone who had public transit available to them. Such a finding would extend claims against all common carriers including municipal transit authorities, private bus lines, taxi services and others. In all of these cases, a person could assert "availability" of vehicles. Thus, the Arbitrator could not accept that purchasing a transit pass would create any type of special nexus. Availability for transit pass holders would be no different than it would be for anyone else. At the end of the day, the Arbitrator found that to interpret availability in such a broad manner would create an unjust, inequitable and absurd result which would not accord with insurance business practices and principles and could render parts of the Insurance Act meaningless. HSR vehicles therefore were not "made available for the claimant's use at the relevant time".

Consider, however, whether the interpretation would change vis-à-vis car-share memberships. Is the connection between use and availability more cogent if there is membership? Membership, after all, has its privileges. A membership in a car-share organization would surely have more of a "special nexus" than simply the purchase of a bus ticket or monthly transit pass. Further, the vehicle use is clearly for more specific purposes rather than simply travelling on predetermined routes at predetermined times. If the real issue is "availability", does the reservation criteria have an impact? If a vehicle has not been reserved, is it 'available' for use at the time of the accident or, is the simple fact of membership sufficient to argue that the car-share vehicle is made available for use at the time of the accident?

There may be no clear answers at this stage. What is clear, however, is that those offering car-share services will require a high level of underwriting scrutiny in drafting of the membership documents, otherwise car-share insurers may find themselves liable for payment of benefits, not only to car-share members who may not be using a car-share vehicle, who may be pedestrians, and who may not even be in the same city at the time of the accident, but also to their spouses and dependants in similar circumstances. The insurance industry will need to address what they are prepared to share as car-share insurers in a sharing economy and may need to narrow the privileges of membership.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Helen D.K. Friedman
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions