Question: What does the term "Named Driver Exclusion" (also called "Designated Persons Coverage Exclusions") mean in an insurance policy? Does this eliminate liability of the owner even if someone else is driving their car? Does this means the owner's insurance company does not have to pay for any liability if someone else is driving the owner's car as a named driver exclusion? If so, that would mean an owner with that clause can have anyone driving his or her car, they can cause damage without the owner being liable?
Answer: In general, a named driver exclusion is an endorsement added to an insurance policy that states a specifically named individual that has access to your insured vehicle will NOT be covered by the insurance provider to drive the insured vehicle. The car's liability insurance will thus not cover an accident if that driver is operating the insured vehicle. However, the driver and the car owner that allowed the excluded person to drive can -- and will -- be held liable for damages the driver is at-fault for causing.
State laws and insurance companies policy terms and definitions may differ regarding a named driver exclusion and if it's allowed. For instance, some states don't allow you to exclude your spouse from your car insurance policy through a named driver exclusion.
Why exclude a driver?
A named driver exclusion is usually attached to a policy when the underwriter is aware of a problem driver who might be allowed to use an insured automobile, such as a child of the named insured. A problem driver may be that the person has a suspended license, DUI conviction, had multiple accidents, etc.
Some insurers may request that the driver be excluded. If you fail to do so, the insurer may instead cancel your policy since the risk the one driver poses is too much for their underwriting standards.
Or, a policyholder may not want their rates to be affected due to a household driver that has a bad driving record (multiple convictions, a DUI, etc.) that would raise the household's car insurance premiums too high and thus choose to exclude the person and save some money.
The wording of a driver exclusion can vary, but here are some examples of how the document would be written:
- No insurance is provided by this policy while any automobile is being driven by or under the direct control of [named driver]; or
- In consideration of the premium charged for the policy to which this endorsement is attached, it is agreed that the [insurance company's name] shall not be liable for damages, losses or claims arising out of operation or use of your insured car, or any other automobile to which the terms of this policy are extended, either with or without expressed or implied permission of the named insured(s) by the driver(s) listed below as excluded.
Basically a named driver exclusion is an endorsement to an auto insurance policy which the policyholder signs acknowledging that the person(s) named on the exclusion form will not be afforded any insurance coverage if they operate the vehicle(s) listed on the policy. Again, this does not take away liability from the excluded driver or car owner if the excluded driver does operate the vehicle.
If the excluded driver does operate the vehicle and gets into an accident, he or she -- as well as the car owner (who has vicarious liability for who they allow to drive their car) -- can be held personally responsible for and damages the driver causes.
Thus, if the excluded driver causes minor or serious bodily injuries and/or property damage to others that the insurance on the car will not cover the accident and the expenses of the accident will be the responsibility of the driver AND car owner. This can be quite costly and so anyone that excludes a driver should not let that driver operate the car, even in an emergency since no insurance coverage (liability or physical damage coverages) will be extended to the situation at all.
If, though, an excluded driver took the car without permission, then, depending upon state laws, the owner may be able to not be held personally responsible. Otherwise, both the excluded driver and the car owner can be held responsible, the named driver exclusion is not a way for a car owner to get liability taken off of them for the acts of a driver.
Remember for a person to be excluded from car insurance coverages the person should be listed on the exclusion form. If a car owner lets a friend borrow a car, then normally insurance coverages would extend to this friend since they are not listed as an excluded driver from the policy.