The Stolen Rental Car

A potential gap in the OPCF 27 endorsement

The OPCF 27 is a standard automobile insurance change form in Ontario which extends certain loss or damage coverages under Section 7 of the Ontario Automobile Policy (OAP 1) to rented or other non-owned vehicles. It generally costs approximately $50 on a one-year policy and is therefore a relatively inexpensive way of covering loss or damage to a client’s rental vehicles when compared to having to pay for a rental company’s loss or damage waiver on a daily basis each time the client rents a vehicle. Unfortunately, there may be at least one significant gap in the coverage under the OPCF 27 that might not entirely be anticipated by brokers or their clients. That gap is coverage with regard to damage to a rented vehicle while it is stolen or otherwise driven without the insured’s consent. This gap could leave your client with a large bill for damage to their rental vehicle and may potentially expose a broker to liability.

The full title of the OPCF 27 hints at the coverage gap that could arise. The form is called Liability for Damages for Non-Owned Automobiles and Other Coverages when Insured Persons Drive, Rent or Lease other Automobiles. Section 1 of the OPCF 27 spells out the purpose of the endorsement or change form. It states:

“this change is part of your policy. It extends coverage:

  • for loss or damage to a non-owned automobile including its equipment resulting from the care, custody or control of that non-owned automobile by an insured person, and
  • when a person named below drives other automobiles or rents or leases other automobiles.”

The wording above states that the change form extends coverage for loss or damage to a rented vehicle when resulting from the care, custody or control of that vehicle by an insured person.

But if the purpose section of the endorsement is not clear enough by itself, the limitations section, Section 3.2.5 of the endorsement, spells out the potential gap in coverage more explicitly. It states, “the automobile must be used with the owner’s or lessee’s consent.” A person who expects their coverages under section 7 of the OAP 1 to be simply transferred to apply to their non-owned rented vehicle may be shocked to find that if their rented vehicle is stolen, damaged while stolen, and recovered, they do not have coverage under the OPCF 27. A stolen automobile is, by definition, not used with consent.

This may be considered a coverage “gap” because this consent requirement is not found in the coverage provided by most rental companies in their loss or damage waiver or in the coverage that some credit cards extend to rental vehicles. These alternate sources of loss or damage insurance on a rental vehicle each have their particular drawbacks but some explicitly provide coverage in the case of damage when the rented vehicle is stolen.

A broker who sells the OPCF 27 to a client must be careful to fully explain this subtle point for fear of opening him or her self up to a potential E&O claim.

This limitation in the OPCF 27 does not appear to have been litigated before the Courts in the recent past, but it is a fairly clearly worded exclusion of coverage, which may run counter to the expectations of both the public and people in the industry.

The OPCF 27 will cover damage to a rented vehicle while the insured person is driving it if that person has specific loss or damage coverages under their regular policy. Make sure that you are aware of this potential gap and that your clients are also made aware of this potential gap in order to avoid uninsured losses and the spectre of a broker’s liability claim.

 

Claude Blouin is a senior partner in the law firm of Blouin Dunn LLP, and Brendan Lanigan is an associate with the law firm of Blouin Dunn LLP. Both specialize in all areas of insurance defence litigation.

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Copyright 2012 Rogers Publishing Ltd. This article first appeared in the January 2012 edition of Canadian Insurance Top Broker magazine.

Copyright © 2017 Transcontinental Media G.P.
Transcontinental Media G.P.