It’s true: friends don’t let friends drive drunk. When loaning out the car, we don’t usually think about fender benders and insurance claims either.
Maybe you went out for the night and handed your designated driver the keys. Or a friend who purchased some furniture wants your vehicle to transport it home.
Some insurance providers recommend that you ask if would-be drivers have a license and a good driving record before sending them along. Raise your hand if you’ve taken these precautionary measures.
Didn’t think so.
Even if you did, you’ll be hard pressed to find an insurance company that says the driver—not you, the vehicle owner—will be liable for injuries and property damage if he or she causes a collision while borrowing your car.
How can you know if you or the driver will be liable when loaning out your car?
We scoured the internet for credible answers and found that it really depends on who you ask. Some experts say that liability insurance applies to the vehicle, no matter who’s driving. Others say in no uncertain terms that liability insurance follows the driver. A third school of thought states that there’s just no easy answer.
The California Department of Insurance could provide clarity by surveying insurance providers about their policies and reporting the information online, in plain English.
When we contacted the Insurance Department, asking for information about who is liable when someone loans out a car to a friend and a collision occurs, a media spokesman told us, “Insurance typically follows the vehicle. However, you should check on your policy to understand the specifics regarding a collision when there isn’t a named insured driving the vehicle. However, when damages amount to more than coverage, you could become liable for the difference in the coverage and the amount of damage you are liable for.”
The department spokesman also referred us for more information to DMV.org, a privately owned website that’s easily mistaken for a state government website, one that says car insurance stays with the vehicle, not the driver.
Read on for a summary of the viewpoints you’ll find in the media and on the websites of national insurance brands that attempt to answer this question.
In Most Cases, The vehicle owner is liable
Esurance, an auto insurance provider owned by Allstate, says plain and simple that you are liable if you loan out your car. “Contrary to popular belief, in case of an accident, car insurance follows the car—not the driver. If you lend your car to a friend or a visiting relative, you could be liable if an accident occurs,” Esurance says.
If someone else causes a collision while driving your car, Esurance continues, you will have to file a claim, pay the deductible, and face the possibility of a rate increase.
The Zebra, an online auto insurance marketplace, lets people ask insurance agents for free advice and publishes responses for anyone to see. Asked whose insurance provides coverage if an insured driver borrows a neighbor’s truck, The Zebra echoed Esurance. “The rule of thumb is that the insurance coverage on the vehicle you are driving is primary in the event of an accident,” says The Zebra’s consumer advisor Neil Richardson.
JD Supra, a website that publishes legal news, commentary, and analysis by lawyers, published an article by a Southern California attorney who also says that insurance follows the vehicle. The article cites California Vehicle Code Section 17150, stating: “Every owner of a motor vehicle is liable and responsible for death or injury to person or property resulting from a negligent or wrongful act or omission in the operation of the motor vehicle, in the business of the owner or otherwise, by any person using or operating the same with the permission, express or implied, of the owner.”
End of story? Not quite.
The driver is liable for the car
About six months ago, the San Francisco Examiner published a headline that directly contradicts the message from JD Supra. “Liability coverage under auto policies follows driver, not car,” it says. This article, written by a San Francisco attorney, focuses on an unusual set of facts involving a driver who was injured while borrowing his sister’s car. The driver had insurance. The vehicle owner, his sister, did not.
But according to the article, it doesn’t matter if the vehicle owner had insurance or not because liability coverage applies to the driver. “If you had caused the accident, your auto policy would have protected you,” says the author, Christopher Dolan. “Since you have an auto policy that covers the vehicles you operate, your sister’s car is considered ‘insured’ under the law.”
The Examiner is not the only news publisher voicing this perspective.
Claims Journal, an insurance industry publication, says the question of whether auto insurance follows the car or driver is a common one, and a confusing one. It’s also a question that can vary based on policy terms. While the Claims Journal author, attorney Gary Wickert, agrees that “liability insurance coverage on a personal auto policy follows the driver no matter whose vehicle is being operated, provided it is an eligible vehicle,” he notes that people should be asking themselves a different question.
“Exceptions do exist,” he says. “In most cases, therefore, the right question to ask would be ‘Is there insurance coverage under these specific facts?’”
There Are No easy answers
There’s a big difference between asking about legal protections that apply equally to everyone versus insurance coverage that can vary from policy to policy. If the terms of the insurance agreement have final say, then all you can do is speak with an insurance agent before letting someone else drive the car. It turns out that is exactly what State Farm advises you to do.
Even then, different insurance carriers may have different ways to determine whether you’re covered if you borrow a friend’s car. Progressive says coverage depends on how much you’re using the vehicle and what you’re using it for.
Here’s what USAA says in its frequently asked questions about auto insurance. Question: Does USAA cover me if I drive someone else’s car? Answer: Yes, in most cases. But there are some exceptions. For example, if a car is not yours but is available for you to drive regularly, USAA will probably not cover you when you drive that car.
If this three-sentence answer doesn’t give you absolute clarity, you’re not alone.
When shopping for auto insurance, you may be choosing between policies with very different kinds of coverage for incidents that occur when you’ve loaned the car to a friend. You’re also choosing between insurance companies with very different practices for handling these types of claims.
Read the policy terms carefully before signing a contract and ask your insurance agent lots of questions until you fully understand the coverage that you will receive. If you’ve had an experience with an insurance provider when someone else was driving your car, we’d like to hear about it. Please share a comment on our blog or join the discussion on our Facebook page!