Am I Liable if My Friend is Driving My Car and Causes an Accident?

When you allow another person to drive your car, the permissive use principle comes into play. It's essentially a guideline that determines how your auto insurance policy covers damages in such instances. The principle hinges on the idea that the car owner's insurance, acting as the primary coverage, will foot the bill for any accidents caused by authorized drivers.
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In general, the owner of a motor vehicle is liable for injury or damage caused by the negligent operation of the vehicle if it is being used with the owner’s express or implied consent. This principle isn’t universal and depends heavily on the permissive use stipulations mentioned in your insurance contract. These stipulations can vary widely from one policy to another.

Exceptions to the Permissive Use Rule

While the permissive use rule is generally applied, there can be specific exceptions within an auto insurance policy that limit coverage under certain conditions.

Figuring out who has primary coverage when accidents occur can become complicated due to these exceptions. Common ones often include:

  • Excluded drivers: Some insurance policies may specify certain people who are not covered.
  • Business use: Accidents while the vehicle is being used for business may not be covered by your auto insurance.
  • Illegal activities: The insurance may refuse coverage if the driver participates in illicit activities during the accident.

The Role of Named Driver Policies

Named driver policies are a notable deviation from the permissive use rule, often seen in auto insurance agreements—these policies state who is authorized to operate a specific vehicle, offering a range of advantages. Benefits of such policies can include a potential reduction in policy premiums when vehicle usage is restricted to a select group of skilled, low-risk drivers. However, these policies also come with certain restrictions.

Restrictions of named driver policies can include the chance of claim rejection if a driver not listed on the policy causes an accident while operating the vehicle.

Illicit Activities

Permissive use typically provides coverage for accidents during lawful activities. At the same time, Unlawful conduct often falls outside the permissive use rule, which can expose the car owner to considerable liability.

Impact of Business Use on Coverage

How does using your car for work-related activities influence your insurance coverage if an accident happens?

Most personal auto insurance policies don’t cover vehicles used for business activities. So, if an accident occurs during work-related use, you might find yourself without adequate protection.

If you plan on driving for work, you likely need commercial auto insurance specifically designed to cover vehicles used for business activities.

Understanding Negligent Entrustment

Negligent entrustment is sometimes a factor in deciding responsibility when an accident involves an owner’s car driven by someone else. This term refers to knowingly letting an unfit or unlicensed individual enter your vehicle. As the car owner, you must verify the driver’s capability.

Rental Car Exclusion

If the renter causes a wreck, their insurance is the primary coverage. However, car rental companies must have liability coverage for our state minimum coverage (25/50/25) for each vehicle they rent. They would be on the hook if they failed to get insurance proof from the renter.

Oklahoma Case Law Examples

Sheffer v. Carolina Forge Company (2011), Oklahoma Supreme Court

Employees of Carolina Forge were on a business trip and rented a car paid for by the employer. After dinner, the employees went to a casino 30 miles away, becoming intoxicated. On the drive back, the employee driving missed an exit and got into an accident, injuring the plaintiffs.

Parents and minor children injured in a car accident sued the driver’s employer under theories of respondeat superior and negligent entrustment. The trial court granted summary judgment to the employer. Supreme Court reversed, finding reasonable minds could differ on whether the driver was in scope of employment and whether the employer negligently entrusted the vehicle. So, negligent entrustment is a question for the jury. Suppose an employee is on an open-ended business trip, and the employer encourages or authorizes drinking. In that case, the employer may be liable for accidents related to intoxication under respondeat superior and negligent entrustment.

How this case applies to letting a friend drive your car:  liability can arise if you let someone operate your vehicle knowing they are incompetent or impaired. It’s best to avoid letting friends go to your car unless you know they are sober, licensed, and insured.

Spears v. Preble (1983), Oklahoma Supreme Court

Preble borrowed Lambert’s car with permission and a restriction to return it by 11:30 p.m. Preble committed a burglary with the car and was chased by Spears, resulting in a collision. Spears sued to collect a judgment against State Farm. The court found that Preble had general permission to use the car without restrictions, so State Farm’s policy covered the accident. The rationale is that once general permission is given to use a car, coverage applies even if the particular use was not contemplated.

What Happens if the Person Driving My Car Does Not Have Their Insurance?

Remember, the insurance goes with the vehicle as the primary insurance, not the driver. Your insurance will likely pay the damages if they get into an accident. However, this can result in a spike in your insurance premiums. In more severe cases, you might find yourself facing legal liability issues.

What Happens if the vehicle is uninsured, but the driver borrowing it has insurance?

Oklahoma law requires all motor vehicle owners always to maintain liability insurance on their vehicles. If the owner’s vehicle is uninsured, the owner can be held liable for damages arising from the negligence of someone operating the vehicle with permission. However, the driver’s motor vehicle liability policy would provide primary coverage for the accident. If the driver’s policy limits are insufficient to cover the damages, the owner could be held jointly and severally liable for the excess damages since the owner failed to maintain the required insurance on the vehicle.

What Are the Potential Consequences if I Lend My Vehicle to Someone With a Suspended License?

If you fail to take reasonable care in lending your vehicle to someone without ensuring they have a valid license, you could potentially face civil liability or criminal charges for negligent entrustment in some circumstances.

The person driving your vehicle with a suspended license can be charged with a misdemeanor for driving with a suspended license. For a first offense, the penalty is a fine between $100-$500. For a second offense, the fine is $200-$750. For a third offense, the fine is $300-$1000 and/or up to 1 year imprisonment. If your friend causes a wreck, you’ll likely be liable for negligent entrustment. The specific penalties can differ depending on the laws of your area, but they often involve monetary fines, hikes in insurance costs, and the possibility of being sued.

You may be held liable for any damage or injury caused by the unlicensed driver you allowed to operate your vehicle, and your insurance may not provide coverage.