I received this question recently. “Will my customer’s personal auto policy cover their adult child that has moved out of their house?”
That’s a pretty good question and I’m glad it was asked. Thankfully, I was able to see the customer’s personal auto policy.
First off, I remember something that I heard back in one of my earliest insurance classes. “It’s always best to be a you.” That’s good advice here. The adult child wants to be a you on their policy. My unsolicited advice is that the adult child buy their own policy and be the you.
Having said all that, it doesn’t answer the question. Here’s how I looked for an answer. Before I looked at the policy, I started with the assumption that there’s coverage. I keep that assumption until I find a place where coverage is excluded or limited. That may not be how you do it, but you didn’t get the question. Did you?
Now to the policy. I looked at the insuring agreement first.
“We” will pay compensatory damages for “BI” or “PD” for which any “covered person” becomes legally liable because of an auto accident….
Assuming that the liability is for compensatory damages and not punitive damages, it looks like we haven’t ruled out coverage yet. We did come across the defined term “covered person”. Let’s see what that means.
“Covered person” as used in this Part means:
- You or any “family member” for the ownership, maintenance or use of any auto or trailer.
- Any person using “your covered auto”.
- Any other person or organization, but only with respect to legal liability imposed on them for the acts or omissions of a person for whom coverage is afforded in 1. Or 2. above….
That helps some, but it still isn’t clear because now we have to determine if the adult child that moved out is still a “family member” for this insurance policy. Oh yes. Family might not be family, depending on what the policy says. It might also help if we find out what “your covered auto” is.
“Family member” means a person related to you by blood, marriage, or adoption who resides primarily in your household. This includes a ward or foster child.
That creates a bit of a wrinkle. It looks like the adult child that moved away from her parents’ home is no longer a “covered person”. If the adult child were living away from the household for a short time (intentionally undefined), it’s possible that we could call them primarily residing in the household, but it may still be questionable. At this point, I’m going to say that the child is not a “family member” but I’m not yet willing to say whether there is (or is not) coverage.
Number 2 in that list tells us that any person using “your covered auto” is a “covered person”. Just keep walking with me.
“Your covered auto” means:
- Any vehicle shown on the Declarations.
- Any “newly acquired vehicle”.
- Any “trailer” you own.
This definition begs the question. Is the auto that the adult child is taking with them a “your covered auto”? Let’s say that the auto in question is indeed a “covered auto” because it does appear on the declarations page.
Putting everything together that we’ve looked at so far, there is still evidence that the adult child might have coverage. She is driving a “your covered auto” and she is an any person. That means that she fits number 2 in the definition of “covered persons”. Hang on. We aren’t done yet. We haven’t even started looking for exclusions or limitations anywhere.
Don’t worry. I found the exclusions. For the sake of space, I plan to summarize the following exclusions.
We do not provide Liability Coverage for any “covered person”:
- Who intentional acts or directs to cause BI or PD…
- For “PD” to property owned by a “covered person”.
- For “PD” to property rented to… any “covered person”.
- For “BI” to an employee of that person which occurs during the course of employment…
- For that person’s liability arising out of … operations of a vehicle while it is being used to carry person for a fee.
- While employed or otherwise engaged in the “auto business”.
- Maintaining or using any vehicle while that person is employed or otherwise engaged in any business or occupation other than the “auto business”, …
- Using a vehicle without expressed or implied permission.
- For “BI” or “PD” for which that person is an insured under any nuclear energy liability policy.
- For “BI” or “PD” while “your covered auto” is rented or leased to others, …
- For punitive or exemplary damages.
- For “BI” sustained as a result of exposure to “fungi” …
- For “BI” to a relative who resides primarily in that “covered person’s” household.
Those exclusions all limited coverage for anyone who qualified as a “covered person”. Nothing seems to shout out that the adult child living in a new home is now excluded. Maybe there is an exclusion that might apply to the “your covered auto”.
We do not provide Liability Coverage for the ownership, maintenance, or use of:
- Any vehicle that is not “your covered auto” unless that vehicle is: …
- Any vehicle, other than “your covered auto”: that has fewer than four wheels; or that is designed mainly for use off public roads.
- Any vehicle, other than “your covered auto” that is owned by you, or furnished or available for your regular use.
- Any vehicle, other than “your covered auto”, that is owned by or furnished or available for the regular use of, any “family member”.
- Any vehicle while being operated in, or in practice for, any “driving contest or challenge”.
It looks like those exclusions all limit liability for vehicles other than “your covered auto”. In fact, it repeated the exact phrase several times. It looks like the only limitation on “your covered auto” is if it is used in a “driving contest or challenge”. The question didn’t address that, so that doesn’t apply.
I still haven’t found any exclusion that applies in our situation where an adult child moved out of her parents’ home and is driving an auto listed on the policy.
While a technical reading of the policy didn’t provide any direct exclusions, and it does truly seem that the adult child that has moved out of the parents’ house still has coverage, there’s still one more item that I want to look at and comment on.
We do not provide any coverage under this policy for any person who has knowingly concealed or misrepresented any material fact or circumstance relating to this insured:
- At the time application was made; or
- At any time during the policy period; or
- In connection with the presentation or settlement of a claim.
At this point, the question is not about whether or not there is coverage. The question is whether anyone is knowingly concealing or misrepresenting any material fact about the insured. In my experience, it is hard to prove misrepresentation from the company’s side of things. Yet, the insured knows whether they knowingly concealed a material fact and the agent knows if they concealed a material fact.
Is the adult child moving out of the parents’ house a material fact?
That, my friend, I leave up to you to decide.
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