Personal injury of case when the driver is not the ownet of the car

This question is often phrased as “does the insurance follow the car or does it follow the driver?” This issue is important when there is an accident in determining which insurance policy will pay for the liability of the driver who is at fault if the driver is not driving his or her own car. Different states have different laws regarding whether the policy follows the car or the driver. Also, every insurance policy is different and has different limitations on who and what is covered under different circumstances.

In a state where the policy follows the car, the primary coverage will be from the policy held by the owner of the car. So, if Friend is driving Owner’s car with permission and Friend has an accident that is his fault, the primary policy that will cover the liability is Owner’s policy. However, if the policy on the car does not provide enough coverage to pay all claims, then the driver’s policy (if there is one) may kick in and pay the additional claims up to its limits of coverage. This is called “excess coverage.”

Suppose Friend is driving Owner’s car and has an accident with Victim and the accident is Friend’s fault. Victim’s damages are $200,000. If Owner’s policy limits are $100,000 and Friend also has a policy that covers excess liability, then Owner’s policy will pay its limits of $100,000 and then Friend’s policy will pay the other $100,000 as excess coverage.

On the other hand, in a state where the policy follows the driver, in an accident the primary policy will be the policy held by the driver, assuming he or she has one. Thus, in our example, in a state where the insurance follows the driver, Friend’s policy would primarily cover Friend’s liability. Then, depending on the law and the insurance policies, Owner’s policy may provide excess coverage if Friend’s policy is insufficient to cover all of the claims.

Liability for Acts of Another Driver...Beware

There are three positions that states take with regard to the liability of the owner of the car for accidents caused by others using the car with the owner’s permission. In many states, a driver cannot be held personally liable (beyond their insurance policy) to pay for the fault of a driver using the owner’s car with permission. In some states, the owner can be held personally liable only if the owner was negligent in letting the driver use the car, such as the owner knew the driver was drunk or otherwise not reasonably fit to drive.

This is called negligent entrustment; I discussed it in some detail in the previous chapter. Beware, though, that in some states, a driver can be held personally liable for the negligence of someone using his or her car with permission no matter what. In those states, if Owner loans his or her car to Friend and Friend negligently causes an accident in which the damages go beyond the insurance coverage available, not only can the injured party go after the personal assets of Friend, but also the personal assets of Owner.

You should check with an personal injury attorney or insurance agent to find out whether your state imposes liability on owners for the acts of others using your car with permission. This could be a very important factor in deciding whether to loan your car to someone.

As an added wrinkle to all of this, some states do not impose personal liability upon an owner except under a family use law.

Under family use laws, if an owner’s car is being used by a member of the vehicle owner’s family (the law will indicate how close of a family member the person must be in order for the law to apply), the law presumes that the car is being used for the overall benefit of the family and as such makes the owner personally liable for accidents committed by the family member.

There are many issues that crop up in family use laws that are handled differently in different states. For example, does the family member have to live with the owner for the doctrine to apply? Does the law apply to children only if they are under the age of majority? Does it apply to children who are using a car owned by the parent while away at college? Is a parent liable for the fault of a child if the car is titled in the name of the child?

In addition, some states have scaled back the law so that the owner family member is liable only to the extent that they have insurance, which makes it irrelevant if their policy primarily covered the car anyway. This is another situation where you may want to consult an personal injury attorney or your insurance agent to find out your state’s laws regarding the extent of family liability.