Question: I loaned my car to my boyfriend, and he crashed it. I didn’t know he was unlicensed. Now my insurance company is denying coverage, saying that my policy only covers drivers with a valid license. Can this be possible? Am I now liable for damages?
Answer: Yes, to both questions. This is why it’s important for all car owners to be mindful of whom they allow to drive their cars -- and to carefully read the exclusions portion of your policy when you switch insurance companies.
Car insurance companies’ rules and policy terms vary, but there are policies that specifically exclude unlicensed drivers. Other common exclusions might result in no coverage for anyone except the owner, or reduced limits if someone else is behind the wheel. (See "7 gotchas of cheap car insurance.")
Since your car insurance provider is denying claims surrounding the accident and is giving your boyfriend's unlicensed status as the reason, it would appear your policy has such a clause.
Where to look for exclusions
If all claims are being denied, then the exclusion is probably present in both the liability and physical damage sections of your car insurance policy.
Your liability coverage (bodily injury and property damage) is what normally covers those who are injured by your insured vehicle and/or whose property is damaged by it. This is the part of your policy that the party harmed by your car would have filed claims under, though due to your boyfriend's license status were apparently denied.
Collision coverage is what you would usually place a claim under if your vehicle was damaged in an auto accident that was the fault of the driver of your vehicle.
Review your policy to see if you can find the language that states an exclusion to coverages if a driver is unlicensed. If you’re unable to find it, contact your car insurance company for its representative to point out the specific portion of your policy that states this and allows your insurer to deny claims associated with your boyfriend’s accident.
Vicarious liability for those that drive your car
Car owners have vicarious liability for anyone they give permission to operate their vehicles. This means if a person crashes your car -- like your boyfriend did -- that you can be held liable for that person’s actions.
Without your car insurance benefits available to cover the damages to others and your own vehicle, then you – and your unlicensed boyfriend – are likely to be asked to compensate those who were injured or whose property was damaged.
Your boyfriend may be looked at first as the at-fault driver, and if he cannot – or will not – pay for the damages he caused, then you would be looked at next as the car owner. This puts your assets at risk.
If neither of you pays, then you can be taken to court by the harmed party or that person’s insurance company, if it paid for property damage and/or injury claims.
If a judgment is found against you, then liens can be placed against your assets. And, in some states, your license and/or vehicle registration can be suspended until complete restitution is made
This doesn’t take into account your vehicle either. If your boyfriend won’t pay to repair the damages your vehicle sustained, then you may have to take him to court and get a judgment against him. I can’t imagine that being good for the relationship.
Ask before loaning out your car
Being liable for others when they hop behind the wheel of your car is why it’s important to ask questions before handing someone the keys to your car (and finances) -- and not loan your car out to just anyone.
It may be difficult to broach the subject of if a person has a valid license, but before a friend, boyfriend or even relative borrows your car you should:
- Ask if the person is licensed.
- Ask to see the license. Check the date and type to make sure it’s not unknowingly expired, a permit or restricted license.
- Ask if the person is insured on his or her own auto policy. Your car insurance is primary, but the driver’s coverage may be secondary if your liability limits are exceeded. Also, some coverages, like personal injury protection, follow the driver.
- Review your policy or call your own car insurance company to make sure permissive users (anyone you allow the use of your vehicle) are covered by your policy. Be aware of any exclusions, such as if someone under a certain age isn’t covered.
- Check that permissive users get the same level of coverage that you get. Some policies have “step-down” coverage that lowers liability limits to state minimum or have higher physical damage deductibles for permissive users.
- Show the driver where your registration and insurance cards are located in your vehicle. If pulled over the documents will be needed.