When taking a look at who is or is not covered under an auto policy, it’s common to hear “just add them as a driver so that they always have coverage.” But it might be worth your while to find out what it does when you add a driver as well as what it doesn’t do.
When a driver is added onto a car insurance policy, it is mainly done as an underwriting tool to give the insurance company the ability to get a Motor Vehicle Report for each listed driver. For example, the majority of insurance companies would prefer, on a personal auto policy, that anybody living with the named insured and any other regular driver(s) be listed as a driver. Similarly, on business auto policies, it is desired that all employees that drive insured vehicles be listed as drivers. This enables the insurance company to correctly underwrite any risks, surcharge for accidents/violations and, if needed, cancel the risk or non-renew it.
The section of “who is an insured” in a car insurance policy must be examined to determine who is covered. Under a personal auto policy, who is insured tends to include the named insured, their spouse, family members living in the same house and any driver with permission to drive the insured vehicle(s). But, note that the section of “who is an insured” says nothing about listed drivers also being covered. In an example, Henry’s auto insurance policy has him as the named insured and his daughter, Samantha, is a listed driver.
If Henry lets his friend Mary borrow the car and she gets in an at-fault accident, she is still covered under his policy as a permissive user even though she isn’t a listed driver. In another scenario, Samantha goes on vacation and borrows a car from her friend but she is negligent and has a collision with a pedestrian. Samantha is still covered under her dad’s personal auto policy but because she is a family member and not because she is a listed driver on his car insurance policy. To give an example of how a listed driver is not covered, let’s say that Henry and Mary are living together (unmarried). Henry owns the household’s only car and is the only named insured.
Mary is a regular driver and Henry, being responsible, adds her as a listed driver to his policy. When she drives his car she’s considered “an insured” since she drives with his permission, but being a listed driver has no affect on her coverage. That being said, Mary goes out of town, rents or borrows another vehicle and is involved in an at-fault accident. At this time, Henry’s car insurance policy does not cover her because she isn’t a named insured, Henry’s wife, a member of his family, or operating Henry’s car. For Mary to be seen as an insured under Henry’s personal auto policy for Liability, Medical Payments, Personal Injury Protection, Uninsured Motorist and/or Physical Damage she has to be driving Henry’s car.
This gives Mary a gap in her coverage but she can fill it with a Named Non-Owner policy which can give her coverage for Medical Payments, Liability and Uninsured Motorists. The above is a good example of a court case that occurred in Louisiana.
Bob was the named insured on his personal auto policy and was living with his fiancée, Jen, who was a listed driver. One day, Jen was driving her sister-in-law’s car and was involved in an accident that injured a third party who sued her and others. Jen went to claim that she had coverage under her fiancée’s policy as a listed driver. But, the Louisiana Supreme Court found her as having no coverage stating that “…being listed as a driver on the declarations page does not transform that person into a named insured.” It was also decided by the court that she also did not qualify as a family member. (Lemoine v. Illinois National Ins. Co., March, 2004) When it comes to a business auto policy, insurance companies apply the same principles.
For an employee that is listed as a driver they would have coverage only when driving insured vehicles under that policy. Borrowing another’s car or renting one for personal use does not cover the employee. To cover situations in another’s vehicle they would need to either purchase their own personal auto policy or the previously mentioned Named Non-Owner policy. One other option is to add an endorsement of Driver Other Car to their companies’ business auto policy, but that may or may not require the permission of the business owner.
If you have any questions about how or why being a listed driver does not affect one’s coverage, please give us a call at 305-270-2100.