Don't assume that insurance coverage is automatically transferred to a newly leased vehicle if the dealership hasn’t disposed of its interest in the vehicle that the lessee is surrendering, the British Columbia Court of Appeal has ruled.
The decision comes in a dispute between Ocean Park Ford in Surrey and its insurers over coverage for a crash involving a 2003 Mercedes-Benz SL500 that the store leased to SCK Motor Co., a high-end used vehicle dealership, court records said.
The crash happened the same day that SCK returned a 2007 BMW Z4 it had leased from the Ford store and picked up the SL500.
Ocean Park and SCK contended that the SL500 was a “substitute vehicle” for the Z4 and thus covered by the same policies. The insurers denied coverage.
The court sided with the insurers because Ocean Park still owned the Z4 at the time of the crash.
Guy Brown, a lawyer in Vancouver for Insurance Corp. of British Columbia, called the Aug. 2 ruling “an important decision for dealerships.”
“There was evidence that the prevailing practice of dealerships in B.C. is to rely on the purported transfer of insurance by a lessee from one leased vehicle to a replacement leased vehicle,” he said.
“This decision confirms that is not effective and results in the replacement vehicle being uninsured.”
Ocean Park’s lawyer, Ryan Parsons of Vancouver, and SCK lawyer Randy Taneda of Langley, said crash-related claims against their clients remain open.