Your Liability when Someone Borrows your Car

Who is responsible if someone driving a borrowed car is involved in an automobile accident? That is the question that both the owner and the borrower of the car could be faced with in the event of a car crash. You might loan your car to someone else for any number of reasons.  Most often, it is friends and family members that ask to borrow your car. Most people respond in the affirmative when asked the favor of lending their vehicle but many do so without fully understanding the financial ramifications an automobile accident involving a borrowed car can have, in addition to potentially resulting in personal injury or death. 

In the event of a motor vehicle accident in a borrowed car, it is the responsibility of the insurer of the vehicle at fault to pay the injured parties. Regardless of whether the vehicle is being borrowed or not, the car owner's insurance company is liable to pay for the damages. Because their insurance company may be liable for damages, the owner of a vehicle is expected to exercise good judgement when they lend their vehicle to another person.

Under Ontario’s Insurance Act, “The insured shall not drive or operate or 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.”

This means that if you lend your vehicle to someone who was impaired while driving, did not have a valid driver’s licence or was guilty of committing a criminal offence while driving, and this person causes an accident, your insurer may deny your claim, particularly if the owner should have known that the borrower was committing an illegal act. 

Parents lending their vehicles to children 21 years and under need to keep this in mind because under Ontario law, there is zero tolerance of blood alcohol for novice drivers.  With even a very small amount of alcohol in their bloodstream, if a novice driver is involved in a car accident resulting in property damage or serious injury, it can be at a huge cost to the parent/owner of the vehicle if their coverage is subsequently denied.

If the driver of the car gets a speeding ticket or commits another traffic violation, it is the driver and not the car owner who must pay the fine and who may receive demerit points on their driver’s licence. However, if the vehicle is involved in an accident, then it is the owner’s insurance rates which may be impacted negatively.

An employer can be held liable if they do not properly register each employee that has access to operating a company vehicle or vehicles and the employee has an accident.

It is clearly in the best interests of a vehicle owner to be discerning when someone asks to borrow their vehicle. The car's owner is ultimately responsible for any damage caused by their vehicle, so it is a good idea to keep the risks of lending in mind.