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Dec 20, 2005 3:27 PM

Legislation limiting vicarious liability for owners of rented and leased vehicles has been approved by the Ontario, Canada, Legislature, according to information from the Truck Renting and Leasing Association (TRALA).

The legislation, supported by TRALA and its Council for Vehicle Renting and Leasing, limits the vicarious liability exposure of long-term and short-term vehicle lessors to $1 million, less any amount recovered from the lessee.

The legislation also amends Ontario's statutory priority of payment requirements making the lessor's insurance secondary to the lessee's insurance.

Canada's action follows the August 10, 2005, enactment of TRALA-sought federal legislation eliminating vicarious liability in the United States. That new law took effect immediately and will save the vehicle renting and leasing industry and its customers billions of dollars through savings in unfair liability awards, attorney's fees, and supplemental insurance premiums.

The US legislation also opened or re-opened markets previously avoided by vehicle lessors because of the threat of liability without fault, TRALA said.

An unprecedented November 2004 vicarious liability settlement of $12.8 million against Primus Automotive Financial Services for an accident in Ontario heightened the concern of lessors within the Province.

Following the announcement of the settlement, TRALA immediately began working in Ontario with the Associated Canadian Car Rental Operators (ACCRO) and the Canadian Finance and Leasing Association (CFLA) to build support and raise the funds necessary for the legislative effort.

The vicarious liability reform provisions were passed as part of a larger Ontario budget bill. The vicarious liability provisions will be implemented following a phase-in period of about three months. During these three months, TRALA and its representatives will be working with its industry allies and the Financial Services Commissions of Ontario (FSCO) to incorporate the new law into Ontario's insurance regulations and forms.