What happens when you leave your car at a parking lot and the car is stolen? Who is liable? Does giving your keys to the parking lot change the outcome? A recent Supreme Court of Canada decision addressed these issues in a case concerning a hotel establishment’s civil liability for the theft of cars belonging to its guests and the applicability of an exclusion clause in its liability insurance policy.

The Facts

The car thefts occurred at a “park and fly” hotel located near Montréal–Pierre Elliott Trudeau International Airport. The hotel’s main purpose is to provide travellers with accommodation before they leave for the airport and upon their return from a trip. The hotel invites travellers to sleep in its rooms, leave their car in its parking lot while travelling and use its shuttle service to get to the airport. The guests normally keep their car keys after parking. However, during the winter, guests who left their car in the hotel’s parking lot while travelling had to hand over their keys at the front desk so that their car could be moved if necessary for snow removal. At the time of the incidents, the hotel held property and liability insurance policiesthat contained clauses excluding liability insurance coverage for property damage to personal property in its care, custody or control.

During the winters of 2005 and 2006, two of its guests had their cars stolen from the hotel’s parking lot while they were abroad. Both victims of the thefts had handed over their keys at the hotel’s front desk before leaving. The two guests were compensated for the loss by their respective insurance companies. The two insurance companies then brought actions against the hotel and its insurer to recover the amount of compensation paid to the guests.

The trial judge found the hotel liable for the theft of the cars. The judge also held that the standard care, custody or control exclusion clause in the hotel’s liability insurance policy did not apply in these cases because the hotel had neither custody nor real control or care of its guests’ cars. The fact that the keys had been left at the front desk so that the parking lot could be cleared of snow did not have the effect of transferring custody of the cars to the hotel.

The Quebec Court of Appeal upheld the trial judge’s finding that the hotel was liable for the thefts. However, it disagreed with the finding regarding the exclusion clause; in its view, the clause applied in the circumstances and the stolen cars were therefore excluded from the hotel’s insurance coverage. It found that possession of the keys meant that the hotel had custody of the cars and that the insurance coverage was therefore inapplicable.

At Issue

The appeal to the Supreme Court of Canada raised two issues:

  • Is the hotel liable for the theft of the car because it did not take reasonable steps to secure its parking lot, and;
  • Does the clause in the hotel’s insurance contract excluding coverage for property damage to personal property in the care, custody or control of the hotel apply in this case?

The Decision

At the outset, the Supreme Court found that the hotel was liable for the theft. The trial judge had correctly characterized the contract between the hotel and its guests as a service contract. As such, the hotel had an obligation under article 2100 of the Civil Code of Québec to act in the best interests of its clients, with prudence and diligence. It agreed with the lower courts’ determination that the hotel had breached its obligation of prudence and diligence by failing to take reasonable steps to secure its parking lot. The evidence before the trial judge showed that the hotel did not take even minimal steps to watch over or monitor the parking lot.

The remaining issue was whether the handover of keys by the guests triggered the application of the care, custody or control exclusion clause in the hotel’s insurance policies. Whether the hotel had custody of the vehicles is a question of mixed fact and law; while custody is a legal concept, the determination of custody is a highly factual question that depends on the facts of the case.

Because this was a question of mixed fact and law, the Supreme Court found that the trial judge’s decision was not open to appellate review unless a palpable and overriding error had been made; in its opinion, the trial judge did not make such an error and the decision should not be interfered with.

The Supreme Court agreed with the trial judge’s determination that handing over the keys was not sufficient in itself to transfer custody of the vehicles to the hotel. The reason the guests handed over their keys was important because it distinguishes custody from mere physical holding of the vehicles; a holder of property does not have custody of it where the holder is able to exercise only a limited, and not a general, power over the property. “Care, custody and control” requires that control and responsibility for the preservation of the property be transferred sufficiently to change legal custody of the property, which did not occur in this case.

As a result, the Supreme Court upheld the trial judge’s determination that, without having legal custody of the cars, the exclusion clauses in the hotel’s insurance policies did not apply.

Finally, the Supreme Court rejected the submission that there was a contradiction or inconsistency in law between the judge’s finding that the hotel had an obligation of prudence and diligence and the finding that the stolen cars were not in its care, custody or control, as these obligations are different in nature.

For Help

If you have an insurance issue, hiring an experienced lawyer can be your best chance to negotiate the benefits you are entitled to. At Petker Campbell Postnikoff, our lawyers have worked in this region for decades, developing a reputation for dedication to clients.

We represent clients throughout southern Ontario, including the communities of Cambridge, Guelph, Elmira, Brantford, Fergus, Elora and the surrounding area. Call 519-886-1204 or contact us online for a consultation.