Q6. Some car-sharing apps can match people who wish to rent a car for a day and people who have a spare car to rent out at a cost. Can a private car owner rent his car to someone else? What is the potential risk to the car owner and the car renter? Does it make a difference if he just lends his car to a friend without charging him a fee?
Can a private car owner rent his car to someone else?
Under Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) :
“Subject to the provisions of this Ordinance it shall not be lawful for any person to use, or to cause or permit any other person to use, a motor vehicle on a road unless there is in force in relation to the user of the vehicle by that person or that other person, as the case may be, such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Ordinance.”
A private car owner may only rent his car to someone else if there is in force a policy of insurance in relation to the user of the vehicle by that person or that other person. Thus, unless there is in force an insurance policy in relation to the renter driver of the motor vehicle, any person may not rent a motor vehicle in the absence of such third party insurance policy protecting him or her against third party’s claim.
For the person who rented his car out, knowing that the renter of the car may not be covered under a third party insurance, he may be liable to “causing or permitting any other person to use a motor vehicle” without insurance.
The coverage of insurance policy is also a vital factor. Where the insurance policy only covers a private user instead of a commercial user, the rent of a car for commercial gain may not be covered under the original insurance policy.
However, some motor policy often contains a provision extending the insurance cover to any person driving the insured car on the order or with the permission of the assured but such kind of cover usually only apply to third party risks. Where the original motor policy contains a provision covering the insurance of a permitted driver, both the person who rented out the car or the person who rented the car may not contravene Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272).
What is the potential risk to the car owner and the car renter:
Both the car owner and the car renter may be liable under Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272) for “using”, or “causing or permitting any other person to use” a motor vehicle in the absence of a third party motor insurance in force.
Under Section 4(2)(a) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272), if a person acts in contravention of this section, he shall be liable to a fine at HK$10,000 and to imprisonment for 12 months, and a person convicted of an offence under this section shall (unless the court for special reasons thinks fit to order otherwise) be disqualified from holding or obtaining a licence to drive a motor vehicle for such period as the court may determine being not less than 12 months nor more than 3 years from the date of conviction.
For the car renter, in the absence of any third party insurance, any third parties may directly claim against that car renter instead of the insurer. Thus, there would be a risk of legal liability.
Does it make a difference if he just lends his car to a friend without charging him a fee?
No. The fact that the car is lent without charge does not exonerate the car driver or the renter/friend from ensuring that there is in force a policy of insurance in relation to the user of the vehicle by that person or that other person. Thus, it doesn’t matter whether the car owner lent his car for fee or not, a third party insurance is required and any default in purchasing an insurance would be contravention of Section 4(1) of the Motor Vehicles Insurance (Third Party Risks) Ordinance (Cap. 272).