AMTA  E-News

May 2010

Vehicle Leases, Vicarious Liability, and WCB- Alberta

If you rent or lease a vehicle for your business, you need to know about vicarious liability.

What is vicarious liability?

The owner of a motor vehicle can be held vicariously liable for the negligent operation of the vehicle by anyone who uses it with the owner’s permission. In Alberta, the Traffic Safety Act extends this liability to any registered owner of a vehicle. Where vehicle rental and leasing companies retain ownership of the vehicles they lease or rent, they are subject to vicarious liability.

If you are the renter or lessee, why should that matter to you?

Vehicle rental or leasing companies often require their customers to sign an indemnity agreement. This agreement will usually stipulate that if any action is taken against the leasing company for an accident involving that vehicle, the lessee will be responsible for paying any damages or expenses arising from that accident—this potentially makes customers liable for the costs the leasing company may incur through their vicarious liability.

A driver covered by the WCB who is acting in the course of his employment and is involved in an accident is protected from personal injury lawsuits by any other worker or employer covered by the Workers’ Compensation Act who was injured in that accident. The registered owner of a vehicle whose liability arises only through vicarious liability is not protected from tort action because such liability arises only through operation of the Traffic Safety Act. The protection from lawsuits provided by the Workers’ Compensation Act also does not extend to liability that arises through indemnity agreements. As such, vicarious liability can be passed on through such agreements to parties who rent or lease a vehicle even if those parties might otherwise have been protected under the Workers’ Compensation Act.

WCB’s responsibility to pursue third party actions

WCB is the neutral administrator of the Workers’ Compensation Act and is responsible for applying the legislation and its policies. The pursuit of a third party action is part of WCB’s due diligence in protecting the rights of injured workers and employers, and can provide an injured worker with additional compensation while assisting in removing claims costs from an employer’s experience record.

Know your risk

If there is an indemnity agreement in place between an employer and a leasing company, the employer may ultimately be required to pay any damages awarded against the leasing company. Although this situation is unusual, it does happen and employers need to be aware of the risk they assume when they sign this type of indemnity agreement. The indemnity agreement between the employer and the rental or lease company does not have any bearing on the Workers’ Compensation Act or on WCB’s responsibility to pursue third party recoveries.

Not all vehicle leases or rentals are the same. The risks discussed above relate to leases or rental agreements where the leasing or rental company remains the registered owner of the vehicle. In many leasing agreements, particularly longer term leases, the party leasing the vehicle becomes the registered owner of the vehicle at the motor vehicle registry.

In all cases, WCB-Alberta remains committed to providing fair, balanced services to both workers and employers. Protect yourself and your company. Know the risks before you sign on the dotted line.

Further Information

If you have questions about your WCB coverage in relation to vehicle leases and vicarious liability, you can contact your WCB Account Manager for further information.