Question: What does the term named driver exclusion (sometimes called designated persons coverage exclusions) mean on a car insurance policy? Does this eliminate the liability of the owner if someone else is driving their car? Does this mean the owner’s insurance company does not have to pay for any liability if someone else is driving the owner’s car and there is a named driver exclusion? If so, that would mean that clause allows the owner let others drive their car without any liability?

Answer: A named driver exclusion is an endorsement added to an insurance policy that names one driver in your household and specifically excludes that person from coverage. The liability insurance policy will not cover an accident if that driver is operating the insured vehicle.  However, the owner of the car is still liable for damages if that person does drive and causes an accident.

State laws and insurance companies policy terms and definitions may differ regarding the named driver exclusion. You can’t always exclude a driver.  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 there is a problem driver in the household who has access to an insured vehicle.  A problem driver could be someone with a suspended license, DUI conviction or multiple accidents.

Some insurers may request that the driver be excluded and will cancel your policy if you don’t. That happens when the driver in question doesn’t meet the company’s underwriting standards. In other words, that person doesn’t qualify for coverage.

In other cases, a policyholder may not want their rates to be affected by a household driver that has a bad driving record and will choose to exclude that person.

The wording of a driver exclusion can vary, but here are some examples:

  • 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 states 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, they — as well as the car owner (who has vicarious liability for anyone they allow to drive their car) — can be held personally responsible for any damages the driver causes.

Thus, if the excluded driver causes bodily injuries and/or property damage to others, the insurance on the car will not cover the accident and the expenses of the accident will be the responsibility of the driver and the car owner. A driver who is excluded should never be allowed to drive; the financial consequences can be serious.

If an excluded driver takes the car without permission, the owner may not be held liable, depending on state laws. The driver may be held solely responsible and may even face criminal charges if the car is reported as stolen.

Only the person listed on the exclusion form is excluded from coverage. If a car owner lets a friend borrow a car, the insurance company will extend coverage to the friend, since they are not listed as an excluded driver on the policy.