If you are looking to buy a car, you will probably do some preliminary research on what type of vehicle is best suited to you and then take a test drive. Not all test drives are without incident. What happens if you get into a minor accident? Or if someone is seriously injured in a collision? Who covers the cost of repairing any damage to the vehicle or pays the claims of any people who are hurt? What if you caused the accident and do not have your own policy of auto insurance?
Dealership Insurance Coverage
In the case of an accident during a test drive, the car dealer bears the responsibility for any physical damage done to its vehicle. As the owner, the dealer is the party with interest in the vehicle, not you as the test driver. If you lend someone your car, you’re lending them your insurance too (please see our earlier blog on vicarious liability). This means that the dealer’s insurance would be responsible for the cost of any physical damage to the vehicle caused during the test drive.
This test drive insurance is part of the Ontario Garage Automobile Policy approved by the Superintendent of Financial Services. This Policy provides coverage for many parts of a dealership’s business and operations — including dealer vehicles and customers’ vehicles while being serviced.
It is a Statutory Condition of garage policies that the insured shall not “permit any other person to drive or operate the automobile unless the Insured or other person is authorized by law to drive or operate it.” According to recent research, only about 80% of dealerships require a person going for a test drive to show they have a valid licence. The absence of a valid permit could mean no insurance coverage if there is an accident.
Ontario’s Statutory Accident Benefits Schedule
Dealerships must also have insurance coverage for Statutory Accident Benefits if a driver (or another person involved in an accident with the vehicle) is injured during a test drive, even if that driver is at fault. However, if the test driver has their own auto policy, Statutory Accident Benefits would be paid by that insurer. If the test driver was uninsured at the time of the accident, the dealership’s insurance would pay out any Statutory Accident Benefits.
Liability Waivers
Some dealerships try to minimize their risk and eliminate their responsibility by asking test drivers to sign waivers acknowledging that the test driver accepts responsibility for any damage that occurs during the test drive. Other dealerships feel these waivers discourage people from taking a test drive and this means fewer sales. Overall test drive waivers are not common in Ontario. In the absence of an industry standard, each dealership that asks test drivers to sign a waiver will provide documents with its own wording.
Courts generally frown upon liability waivers but sometimes do find waivers valid and enforceable. Any challenge to the validity of a liability waiver requires a careful analysis of the particular wording used and the circumstances under which it was signed. As a general practice, you should not sign a liability waiver unless you are comfortable assuming the risks involved with the particular activity. When it comes to test drive waivers, ask yourself this question: why would I sign a liability waiver just to take a test drive when I can probably find another dealership that does not require a waiver and offers the same vehicle?
This blog post was written by Edward (Ted) Masters, a member of the Disability Insurance Claims and Personal Injury teams. He can be reached at 613-566-2064 or at ted.masters@mannlawyers.com.
