Membership has its Privileges: Expanding Priority – Are Car-Share Insurers Sharing more than they Thought?

February 12, 2016 | 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,

(i) 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

(ii) 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.


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