Dalton McGuinty Jr. and Kegan Bradley

On May 17^th, 2022, Canada’s largest car-sharing company, Turo, brought their platform to Prince Edward Island. The service allows car owners (lessors) to lend out their vehicles to drivers (lessees) through the company’s app. Turo’s expansion comes amid concerns over an anticipated car rental shortage during the Island’s tourism season and brings with it questions regarding the insurance implications of the new car rental business model.

The insurance coverage issued to individuals using the platform on Prince Edward Island will function very similarly to the system in Nova Scotia. Turo provides comprehensive coverage to owners and varying amounts of selected coverage to drivers through their insurance provider. To accomplish this, Turo purchases a unique automobile insurance certificate that amends certain provisions of their Standard Automobile Policy (S.P.F.-1). These changes, along with various other fleet related schedules and endorsements enable the policy to insure the owner’s vehicle for the period of time that it is being delivered to the driver, up to the point in time when the vehicle is returned.

Turo’s policy must take priority over the owner’s while they are renting their vehicle through the platform because the Standard Automobile Policy for personal insurance states in Section E subclause 8(a) that unless coverage is expressly given by an endorsement of this policy, the insurer shall not be liable under this policy while the automobile is rented or leased to another.

Third Party Liability

Amendments with respect to the priority of coverages are likely the most consequential to determinations regarding the extent of each party’s liability while using this platform. The effect of these and other amendments and endorsements will be discussed in turn, beginning with the changes to the S.P.F.-1 in Section A ‘Third Party Liability’.

Under Turo’s policy for owners, the preamble of Section A in the standard policy is altered so as to state that it indemnifies the insured against third-party liability “for the exclusive purpose of Carsharing” and goes on to list the priority of coverages under this policy, which is as follows:

• the coverage provided by this policy is excess to any Third Party Liability coverage available to the other insured persons, including the Carsharing Lessee and driver, under any other automobile third party liability policy, but shall provide primary coverage to the Carsharing Lessor;
• the policy to which this endorsement is attached shall respond prior to the Carsharing Lessor’s automobile insurance policy; and
• except for the Insured, this policy does not provide any defence for the other insured persons if they are entitled to a defence under any other automobile insurance policy.

The result of the changes to Section A means that with regards to third-party liability, the personal insurance coverage of the vehicle owner and lessor may only be applied after (1) the driver’s coverage, and (2) Turo’s coverage. As such, the vehicle owner and their personal insurance provider face minimal risk of liability for damages of this sort.

The coverage of the carsharing driver is placed first in line for liability. Turo provides third-party liability coverage to the driver, however, this coverage is secondary to whatever personal insurance coverage the individual may have.

Accident Benefits

Both the owner and driver are provided with standard accident benefits coverage. However, with respect to coverage priorities, Turo’s policy states:

For the purposes of determining priority in respect of claims made for Accident Benefits under Section B of the Policy by a Carsharing Lessee, driver, passenger, pedestrian or cyclist, this Policy will respond subsequent to the insurer of an automobile in respect of which such claimants are an insured but this policy shall respond prior to any other automobile liability policy available to a Carsharing Lessor…

Once again, the car owner and their insurer would face little risk of liability for these damages while the personal insurance of the driver would be primary.

Physical Damage Coverage

The owner and lessor of the vehicle is covered for Section C Physical Damage by the coverage provided by Turo while it is being rented out. However, the driver and lessee may or may not have coverage for these damages depending on a few factors. There are four levels of protection offered to drivers by Turo. The premier plan includes physical damage coverage that is primary to any personal insurance. The three other options include only secondary coverage, or none at all.

If a lessee decides to forego purchasing a protection plan they will still have third-party liability insurance coverage, but could be liable for all physical damage costs. Unless the lessee has a S.P.F.-27 endorsement for Legal Liability for Damage to Non-Owned Vehicles which is accessible through their personal insurance, then they are at risk of facing fairly significant liability for at-fault physical damage to the host’s vehicle.

Key Points

For individuals who are renting out their vehicle, they will be covered by Turo’s provider against the major sources of liability regarding their automobile. However, they should consider how this could affect their personal insurance. A personal insurance provider might require an endorsement on the existing policy before permitting carsharing. Turo stresses that it is important for individuals to reach out to their personal insurance provider if they intend to rent their vehicle through their carsharing platform.

Additionally, according to s. 220(1)(1) of the Insurance Act, RSPEI 1988 c I-4, every insurance policy requires the insured to notify the insurer of any change in the risk material to the contract. The Act’s definition of a change in the risk material to the contract includes at s. 220(1)(2)(c) instances where any other insurance is added to cover the same interest (i.e. the owner’s vehicle).

Those who are interested in driving vehicles rented through carsharing services should consider that they are likely in the position facing the most liability. Their personal insurance will be primary in many cases and if they do not have comprehensive coverage they could face significant physical damage claims. These individuals would also benefit from speaking with their personal provider about the coverage available to them in the case of an accident.

It would be prudent for both owners and drivers alike to advise their insurers if they decide they would like to participate in carsharing services.

Dalton McGuinty Jr. is counsel in our Charlottetown office. At the time of this article’s release, Kegan Bradley is a law student, also in our Charlottetown office.

This update is intended for general information only. If you have any questions on the above we would invite you to contact the authors or any other member of our Insurance Group.

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