An Ontario court ruled a dormant company on a rental contract was not the true lessee, redirecting priority insurance to the active firm's policy.
In Ravichandran et al v. Ali et al, 2026 ONSC 3059, Justice Leiper of the Ontario Superior Court of Justice held on May 26, 2026 that 1228527 Ontario Inc., carrying on business as Metrowide Marketing and Distribution, was the lessee of a cargo van involved in a Toronto collision - not the affiliated company named on the rental account. The decision puts the Certas Home and Auto Insurance Company motor vehicle liability policy issued to Metrowide in first position to respond, ahead of the Chubb Insurance Company of Canada policy covering owner Enterprise Rent-A-Car Canada Limited.
The collision occurred at 4:08 a.m. on June 14, 2018, at Markham Road and Ellesmere Road in Toronto. Driver Asif Ali was operating a 2018 Dodge Ram ProMaster 2500 rented from Enterprise the day before. He collided with the plaintiffs' Honda Civic. Mr. Ali was working for Metrowide, delivering magazines and flyers.
The complication for insurers was the paperwork. The corporate rental account had been opened on August 30, 2013 under the name of Chariot Inc., an affiliated company. Both Chariot and Metrowide were owned by Benjamin Chladny. The account listed the renter as "All employees of Chariot," with Mr. Chladny as the authorized signatory. Mr. Ali signed the June 13, 2018 rental agreement as a Renter's Representative for Chariot. But Chariot had been inactive since 2010 and carried no insurance. Mr. Chladny agreed that he had failed to notify Enterprise of that fact.
The Certas policy, a standard Ontario Automobile Policy (OAP 1) carrying $1,000,000 in liability limits, named Metrowide and Mr. Chladny and recorded vehicle use as newspapers and magazines delivery. The Chubb policy covered all vehicles owned by Enterprise.
Under section 277(1.1) of the Insurance Act, the lessee's policy responds first to liability claims arising from rental vehicle use, ahead of the driver's policy and then the owner's. Section 267.12 caps a lessor's liability at $1,000,000.
Justice Leiper applied agency principles from the Court of Appeal's decision in Aviva Insurance v. Wawanesa Mutual, 2019 ONCA 704, which permits a court to look beyond the rental contract to identify the true contracting parties. The judge worked through three factors: who the driver was working for, what the vehicle could be used for, and who paid for the rental. On each, the answer pointed to Metrowide. Chariot, being dormant, could not be the principal behind any agent.
"I conclude that the true lessee on these facts was Metrowide and not Chariot," Justice Leiper wrote.
The arrangement was formalized after the collision. On November 11, 2018, the parties changed the corporate rental agreement to replace Chariot with Metrowide. Metrowide continued renting from Enterprise until Mr. Chladny retired in 2020.
Justice Leiper fixed partial indemnity costs at $20,000 in favour of the defendants. Trial in the underlying personal injury action is scheduled for October 2026.
