Auto Liability basics

[TucsonCyclist]

I've only been in the business for 6 years, but I've always assumed that one's liability coverage would follow them if they happened to be driving another vehicle.

Here is the situation. A client of mine here in Arizona borrowed her neighbors truck. Unbeknown to her, the truck was uninsured. She was in an accident and caused $2000 worth of damage to a third party. Her insurance carrier has denied the claim because she was not driving what would qualify as an "insured vehicle". The adjuster seems to be stuck on what would qualify as a replacement vehicle, but I'm reading part A of her policy, which does not limit her liability coverage to accidents while driving the 'insured vehicle'.

Am I wrong, or should her insurance company cover her legal liability?

I feel like such a rookie asking such a basic question, but I thought it was just a matter-of-fact that one would be covered in this situation.

[Pacman]

Your reading of the liability policy is correct, on a personal auto policy, any eligible vehicle is covered. However, you stated they borrowed "a truck". What kind? What was the GVW ? What was the usage? The policy is very specific on what kind of vehicles are classified as an eligible vehicle and the usage. You have to look at all the exclusions on a policy to determine coverage. I taught insurance for 15 years and one of my sayings went " to look for coverage begin with the exclusions, if it is not excluded there is a chance it could be covered."

[yoyowordup]

There is a difference between "The" insured vehicle and "an" insured vehicle.

"An" insured vehicle can mean a variety of other vehicles that the insured might drive including a friends or neighbors vehicle or a rental car, but there are exclusions. If that vehicle was available for regular use then it isn't covered as well as many other exclusions.

Usually an adjuster will cite specific policy provisions when denying coverage. If they haven't done that then you should ask them to.

Also, the agent should be the primary advisor on why there is or isn't coverage. Unless you're with State Farm or Farmers then your just out of luck.

BEAR DOWN.

[d's insurance store]

As its been stated, you're looking for definitions under 'insured vehicle'. There are many carriers, usually standard and substandard, that strictly define and limit what constitutes an 'other vehicle'.

It sounds like in your case, a 'replacement' vehicle would be covered, but perhaps only under circumstances where the insured's vehicle cannot be operated for some specific reason, such as a repair. Just borrowing another person's truck to haul stuff may not constitute enough of a definition of 'replacement' vehicle to cover the vehicle as an extension of the insured's policy.

I'd say you may want to review what you've told the insured in the past about 'borrowing' or renting other vehicles to see if you're about to enter E&O hell. And your state may impose certain penalties for driving an uninsured vehicle and being involved in an accident both for the driver and the owner of that uninsured truck. If funds are available, it may just be cheaper to pay the total loss and get it out of the way...

Good luck.

[mccluney]

The lesson to be learned here is that in today's environment there in no such thing as a standard automobile policy. One has to be very cautious especially when a client is driving other than a "private passenger vehicle not owned and listed on the insured's policy." The agent needs to be very careful to explain what coverages are and those coverages not included in the insured's policy.

[pdxagentgal]

I do believe that there may be exclusions to the extention of liability if the vehicle being driven does not have insurance. I would ready every single part of that policy. AZ (and CA too for that matter) have some unique insurance laws.

[darnovak]

Remember insurance school ? They took an ISO personal auto specimen policy and everybody in class had a copy and you went over it line by line. This is what they did when I went to insurance school for the 90 hour licensing requirement course. If your agency has 15 carriers writing personal auto you have at least 15 different personal auto policies to examine. To sell them you must know the differences among them. Most definitions, coverage parts, and exclusions will be similar looking, but I can guarantee you that coverage for non-owned autos will be different for some and non-existent for others. As a licensed agent or broker you should know how to access specimen contracts, read, and understand all policies you sell. If you do not or will not educate yourself about the policies you are selling and servicing, IMHO you should get out of the business because you choose to remain incompetent. Now for your original post: Is this the question? "Does the policy provide coverage if the insured operates a non-owned vehicle?" Read the coverage statement of the policy. It may read like this: "WE will pay damages for BI and PD to others........for which the law holds an INSURED responsible because of an accident which results from the ownership, maintenance, or use of a COVERED AUTOMOBILE, a NON-OWNED AUTOMOBILE, or a TRAILER while being used with a COVERED AUTOMOBILE or NON-OWNED AUTOMOBILE." It may not.
Now go to the definitions and see what constitutes a NON-OWNED AUTOMOBILE. Many policies exclude coverage for non-owned autos furnished to you (the insured) or available for your your regular use (this includes other autos in your household owned by relatives and household members as well as company cars used by the same people and by you the insured). Being a competent agent or broker, you have read the policy and know that you will have to add 'Extended Non-owned Auto' coverage to the policy, advise the insured in writing the coverage is not available, or place them with a carrier that will provide it. In New York, with this coverage in place, my personal auto policy insured can operate any non-owned auto (with exceptions, of course) and his/her policy will follow as excess insurance (no physical damage coverage follows) for the non-owned vehicle. So in a nutshell, get copies of all the contracts you sell and read them, understand them, and know what they cover and what they don't cover. Otherwise, get a big suitcase full of money (for your E&O deductible - you do have E&O coverage?) and get ready to pay because your insured didn't have the coverage and you had no idea what you were selling. regards, Dar Novak

[TucsonCyclist]

Thanks for the responses. Good to know that I was right in my first assumption. My conclusion is that the claims adjuster must be new. Heck, if these things were so straightforward, there wouldn't be a need for the dispute resolution process.

[pdxagentgal]

ISO's most recent AZ PAP (personal auto policy) shows the following:

OTHER INSURANCE

If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own, including any vehicle while used as a temporary substitute for "your covered auto", shall be excess over any other collectible insurance.

Interesting.

[LadyBroker]

I think the sticky point here is the borrowed vehicle was not insured, which means your client's policy is now primary, and that's not the intent. I agree with a post above, though, if they are denying coverage, they must specifiy where in the policy they find the exclusion. You, on the other hand, must rip that policy apart and find coverage.

Good luck!!!

[kevinraz]

I remember this from when I first got in the business:
Auto liability generally follows the driver
Auto physical damage generally follows the vehicle
Loan your vehicle = loan your insurance

This would only apply to personal lines, obviously. In commercial lines it's a lot more clear - any auto, owned auto, etc.

I would think that under the vast majority of PL policies that there would be liability coverage for this incident. PD would be available as well but would be secondary to any PD purchased by the vehicle owner for that vehicle. If no PD then your insureds would step in and cover it as long as they have purchased physical damage coverage on at least one vehicle.

And I think that your insureds liability will be primary. If the borrowed vehicle had liability it would probably state something like "we will pay for BI/PD that you cause". Since the owner did not cause the BI/PD it would not provide coverage unless the owner was named in legal proceedings & somehow liable. Your insureds auto liability would be primary because they caused the accident.

[sacman]

This varies from state to state and company to company.

You need to look at the definitions sections and determine what is considered a "covered vehicle" and an "insured".

Normally, the coverage follows the vehicle because on most, but not all, policies an insured is "any person using your covered auto".

Since the vehicle wasn't insured, this is when things can get tricky. I'm not in AZ, but in my state the responsibility would fall onto the vehicle owner. They are the ones deemed legally responsible for the damages because the are the owner, regardless of who the driver was.
I've been doing this for a bit over 20 years and have never heard of a company denying coverage to a client using a "borrowed" vehicle. It could be that the adjuster is being a jerk, maybe they haven't come across it before and not sure what the procedure is, or maybe there really is an exclusion in the policy. Like others have stated, instead of looking under the "covered" portion of the policy, I would look to the "exclusions" section. YOu may have better luck fighting for your client if you can show that borrowed vehicles are not specifically excluded.

good luck

[RandyOlson]

My understanding has always been that you can borrow another vehicle with the consent of the owner and drive it but, that vehicle at least needs to be insured under its owners name and you need at least liability car insurance in your own name.

[TRacer]

I know this is slightly off topic, but it follows the "my client didn't know" train of thought.

Back in mid-2008 I loaned by really nice older station wagon (I'm a gearhead) to a very good friend I'd known over 30 (!!)years so that he could move a large item from Point A to Point B, a distance of a few miles at most. At some point in transit, he was pulled over for exceeding the speed limit. As it turned out, he had a suspended CA D/L I was completely unaware of for several outstanding traffic warrants, was arrested on the spot, and my wagon towed to an impound yard. When I went to the Traffic Division to plead my case, I was essentially told that "ignorance of someone's MVR is not an excuse if you loan them your vehicle even if registered and insured in your name (and it was, of course)." Would YOU think of saying to your friend of 30+ years, "Hold on a second, let's go to the DMV and run your MVR first."?

At any rate, my wagon had to sit in the impound yard for the required 30 days, and cost $1,500 (which my now ex-"friend" did not have) to release. When I was allowed in to the yard to retrieve the car I hadn't seen for a month, it's condition was horrible. To make matters worse, after brushing off the dirt from one of the windows I found a case of Pabst Blue Ribbon that had been sitting in the back seat...with the windows closed...in the hot sun...for a month...

Moral of the Story: Know if the NOA is insured before you drive it, or know your NOA coverage. By the same token, KNOW YOUR FRIEND'S MVR before you graciously loan your car out. Also, find friends who drink better beer.

[michga11]

lol @ PBR!