Andrew Tolomizenko is corporate counsel for a large production company and provides legal services to outside clients in the television commercial and film industries.

Large production companies and suppliers to the commercial film industry have the benefit of reduced insurance rates for their vehicles if they meet the definition of ‘fleet’ vehicles. With personal auto insurance rates as high as they are, corporate owners will sometimes include personal-use vehicles within their list of corporate fleet vehicles. This practice can be risky, particularly in the case of large six-figure claims where an insurance company is more apt to scrutinize the facts surrounding the claim to determine its obligations under the policy.

The Financial Services Commission of Ontario is bestowed with the task of regulating the insurance industry in Ontario. I am certain that similar agencies exist in all other provinces. Although the FSCO has no legislating authority, it has statutory responsibilities and can make recommendations to the minister of finance regarding those matters it is mandated to regulate.

In December 2000, the FSCO issued a bulletin on the definition of ‘fleet.’ In Ontario, the definition is found in the regulations to the Insurance Act. Fleet vehicles are defined as, ‘…contracts of automobile insurance that insure groups of at least five vehicles that are under common ownership or management and that are used for business, commercial or public purposes…’

The central issue in determining whether a vehicle is insurable as a fleet vehicle is the concept of common ownership or management. Common ownership simply means that the registered owner of all vehicles in the fleet is the same, usually a corporation. Vehicles leased to the corporation, although not owned by the corporation, will still qualify as fleet vehicles.

The concept of common management, as stated by the FSCO, ‘refers to the fact that the owner or manager has a measure of control over the vehicles.’ This control can manifest itself, for example, through corporate policies and programs requiring vehicle inspections and maintenance at specific intervals.

Personal use vehicles included in fleet policies have the most potential of attracting concern and risk. It is common for corporations to provide incentives to their executive staff by offering them a corporate vehicle for personal use at fleet rates. This is acceptable provided that the other elements of the definition of a fleet are satisfied. That is, if the vehicle is owned by the corporation or there is some evidence of common management being exercised over the vehicle, then the vehicle may be insured under the corporation’s fleet insurance provided that the owner is listed on the policy as a named insured.

However, if the registered owner of the vehicle is an employee, whether executive staff or otherwise, or an employee’s spouse or relative, then his/her vehicle may fall outside of the statutory definition of fleet vehicle and, thus, may not be insured in the event of accident.

If you maintain fleet vehicle insurance and you include personal-use vehicles that are not under common ownership or management of your company, I urge you to discuss the coverage of such vehicles with your broker.

(This article is intended to provide general legal information and opinions. If you are involved in a legal matter related to those issues discussed above, you should seek your legal counsel’s advice. Andrew Tolomizenko is a freelance writer for On The Spot. Accordingly, his opinions do not necessarily reflect those of the publication.)