I had to empathize with my friend. Poor guy: out of the goodness of his heart, the man lent his vehicle to a relative. And then, his relative got into a major accident, resulting in two totaled vehicles – the car he had borrowed from my friend and the truck he collided into!
For those uneducated in the matter, when you lend your car to someone else, that driver is referred to as a permissive driver by the insurance industry. If a permissive driver causes an accident, here’s how the insurance companies will respond.
Auto Insurance and an Accident Caused by a Permissive Driver
If you gave permission to someone not listed as a driver on your auto insurance policy and that person causes a car accident, the procedure is generally as follows.
1. In the event the driver and the car owner have individual auto policies, the car owner’s insurance will pay for damages under the collision part of the coverage – after any required deductible is paid out-of-pocket by the policyholder.
2. If there are significant property damages as well as bodily injury to the other driver or his or her passengers or pedestrians, the car owner’s insurance will cover the damages as well as any legal fees of an associated lawsuit filed against the car owner. Insurance payouts are subject to the limits on the policy. If the limits on the car owner’s policy lead to an outstanding balance, the driver of the borrowed car can seek compensation from his or her own insurance company to receive the remaining owed funds for the damages. If the borrower of the car to is injured in an accident he or she caused, related payments would generally be covered under the Personal Injury Protection portion of his or her auto policy. In the event, the driver does not have this insurance protection but the car’s owner does – coverage will go through that.
3. What if the person who borrowed the car got into an accident but did not have a valid driver’s license? In this case, there’s a good chance that coverage may be denied. Many insurance company exclude coverage for an unlicensed driver. If this occurs, the car’ owner you and the ‘permissive driver’ will be responsible to pay for all damages as well as court fees if there are any.
But aside from related aggravation and possible wallet burnout,policyholders may find their premiums up at time of the policy’s renewal.
Of course, anyone dealing with an experienced independent agency that’s appointed to do direct business with many of the leading underwriters have an advantage of working with the edge in the market to locate the lowest premium available under the circumstances.