Question: A friend that just moved to Texas and does not have a car, but does have a Texas driver's license. She went to a used car dealership and took a car for a test drive. During the test drive, she got into an accident and now the used car dealerships insurance company is saying she owes not only the deductible, but all the damages to the car she was driving. Is that legal? She was not asked if she had insurance prior to the test drive and with her not owning a car, she had no reason to have insurance.
Answer: In most states, a car dealership maintains a car insurance policy that covers their vehicles for such an occasion as when a potential buyer crashes during a test drive. Typically, unless you sign a form stating you'll be responsible for the damages to the car while taking a test drive, the dealer's insurance will pay if you crash.
Even if your friend did have her own car insurance policy, a vehicle's owner's policy is primary. A driver's policy is then secondary and used only if the owner's liability limits are exceeded. (See "Totaled on the test drive: Who pays?"). However, we have heard of a dealership, or its insurer, collecting the deductible amount or even for the whole cost of the car’s repairs.
You mentioned this occurred in Texas, so we contacted the Texas Department of Insurance (DOI) to see how state laws affect this type of situation.
The Texas DOI said that the auto dealership should have in place a garage liability policy to handle claims for events such as your friend crashing during a test drive.
In Texas, if a car is wrecked during a test drive, normally the dealership will report the accident to its insurer, which then pays out the claim, less any deductible. The insurer can pass the right to recover the deductible to the dealership from the person responsible for the accident.
You, however, said that the insurer was seeking not only the deductible (to return to the dealership) but compensation for all damages to the car driven by your friend.
The Texas DOI told us that although your friend was operating the vehicle with permission from the dealership, state laws do allow that the auto insurance company for the dealer may pursue her to recover the repair amount of the vehicle; this means not only the deductible but the full costs of the repairs.
Your friend may want to speak to legal counsel to see what her next steps should be. And of course, the next time she takes a car for a test drive, she should ask specifically if she will be held personally liable if she has an accident.