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Before You Hand Over The Keys …


Insurance coverage may not apply to anyone who drives the car.

A recent court case highlighted the question of who is covered by car insurance. Is your son or daughter covered if they are not specifically listed on the policy? What happens if someone borrows your car and gets in an accident? Are you liable if someone drives your car without your consent?

These issues need to be clarified before handing the over the keys to your vehicle. Or before you catch a ride with someone. It can be a nightmare to be on the hook for someone’s else’s accident – or to be seriously injured with no legal recourse.

Court says friend of the policyholder’s son was not covered

A federal court in South Carolina ruled that the insurance company (Nationwide) was not obligated to defend or cover a driver who was driving a car without the knowledge or permission of the principal policyholder.

Lois was the owner (policyholder). Her son Broderick did not live with her but was listed as an insured driver. Lois entrusted the car to her son with the stipulation that no one else drive it. Broderick’s friend Appolonia drove the vehicle and caused a car accident that injured another couple. Broderick testified Appolonia did not have his permission, while Appolonia claimed she did.

The plaintiffs argued that Broderick was an insured driver and therefore Nationwide should cover anyone who borrowed his car while it was in his custody. But the court ruled that Broderick was not a “named insured” or a resident relative and thus – even if he had given verbal permission — could not transfer liability coverage to Appolonia.

In the plain language of the policy, the court concluded, Lois was the only named insured. This is consistent with California Insurance Code § 11580.1, which says that a driver is covered if (and only if) they have the consent, express or implied, of the named insured.

Liability coverage is a gray area unless you pay the premiums

Would Broderick be covered if he crashed the car? Yes. Although he was not a named insured and did not live with his mother, he had her consent to drive it. If Broderick lived with his mom, would Appolonia have been covered? Perhaps. The best scenario is express permission of the policyholder, rather than a secondary party, in recorded form (such as a voice-mail, email or text) rather than verbal consent that can later be disputed.