Is a policyholder liable if a person on their policy causes an auto crash?

If your spouse, teenage child, or someone else is often driving your car, it's important to know what will happen if they get in an accident. Read on for help understanding your rights and responsibilities as a policyholder following a crash in your car.

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Rachel Bodine graduated from college with a BA in English. She has since worked as a Feature Writer in the insurance industry and gained a deep knowledge of state and countrywide insurance laws and rates. Her research and writing focus on helping readers understand their insurance coverage and how to find savings. Her expert advice on insurance has been featured on sites like PhotoEnforced, All...

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Written by Rachel Bodine
Feature Writer Rachel Bodine

Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Jun 7, 2022

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Things to Remember

  • Policyholders are always responsible for the damages their teens cause in insured vehicles
  • Adults listed on a policy generally assume liability for accidents they cause — not the policyholder
  • Several factors affect a policyholder’s level of responsibility, including their relationship to the at-fault driver and state laws

For many families, buying auto insurance for a family with multiple drivers makes sense. This is particularly true for parents with teen drivers.

However, when one driver on the policy causes a crash, is the policyholder liable for the other driver’s negligence? More specifically, you may wonder, “Am I liable if my spouse causes a car accident?” Unfortunately, determining the answer to this is not so cut and dried, as several factors may affect liability.

Are you liable if a person on your insurance policy causes an accident?

First and foremost, it is important to note that if a person on your policy causes an automobile accident, your policy should cover the cost of damages. In the best-case scenario, the cost of damages will not exceed the policy limits. However, if the value of damages does exceed the policy limits, then liability becomes an issue.

Generally, the courts will not hold you accountable for the actions of other adult drivers on your policy. So, if your spouse causes a crash and the damages exceed your policy limits, the other party can file a claim against them, not you — even if you are the policyholder.

However, say a teen driver causes a crash. Will the parent’s car insurance cover the damages? If you add your teenager to your policy, you may be liable for them. If the damages exceed the policy limits, then the parent becomes liable for the remaining damages. Once a teen is no longer underage by legal standards, though, the courts may let the parents off the hook for any damages a teen causes with their vehicle.

What about extended family members? What if you let your elderly mother, a college-aged niece, or your child’s babysitter drive your car and have them listed on your policy? Who is liable for the damages any of these persons cause while driving your vehicle?

Unfortunately, this is where matters become complex. In determining liability for damages that exceed policy limits, the courts will consider factors such as age, relationship to you, residency, and the at-fault driver’s ability to satisfy a claim.

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How do state laws affect your insurance liability after a crash?

The minimum car insurance required in each state is different. These state laws affect liability in a few ways. If you live in one of the 12 no-fault states, whose name is on your policy does not matter. Each driver’s own policy covers the cost of medical expenses, lost wages, and funeral expenses that arise from a car accident, regardless of who was at fault.

Only if the value of damages is excessive can the not-at-fault driver file a legal claim for additional damages. In this case, the driver would file a claim against the at-fault driver personally — not the owner of the policy attached to the car involved in the crash.

As for the cost of property damage in no-fault states, your own collision or comprehensive policy should kick in to pay for repairs. If your vehicle caused damage to the other vehicle, your liability policy would help pay for repairs — assuming, that is, that the at-fault driver is a named person on your policy.

In fault-based states, matters are not so simple. In these states, insurance companies only pay claims after they determine fault.

It’s also important to consider whether your state allows you to name additional people on your auto insurance policy. In all states, you can name your spouse and children, but some states draw the line there. Many states do not allow policyholders to name persons who do not live in the same household and/or who are not immediately related to them. However, others are more liberal and allow policyholders to name extended family and even friends as insureds. The former states maintain strict laws to prevent liability issues.

What are permissive and non-permissive drivers on your policy?

Generally speaking, car insurance follows the car, not the driver. What this means is that if your car is involved in a car crash, your insurance will kick in to cover the cost of damages, so long as the at-fault driver had permission to use your vehicle.

A permissive driver is any person who is listed on your policy and/or any person to whom you gave express permission to drive your vehicle. If the permissive driver is not a person listed on your policy, your policy should still cover the cost of damages up to the limits. If damages exceed the limits, the permissive driver may have to rely on their own coverage to cover the remaining costs.

However, if the permissive driver does not have auto insurance, you may assume financial liability for the remainder of the costs.

Non-Permissive Use

When a person who does not have your permission to use your vehicle causes an accident in it, it is unlikely that your insurance policy will cover the cost of damages. Non-permissive use of your vehicle can occur in one of three ways:

  • You do not give a driver permission to use your vehicle. If you did not give the at-fault driver permission to use your vehicle, they may have to file a claim against their own insurance policy. However, if the at-fault driver does not have insurance, you may be liable for damages.
  • The at-fault driver is an “excluded driver.” If the at-fault driver is a person whom your insurer excluded from your policy for any reason, your insurance will not cover the cost of damages they caused to your vehicle. This is the case even if you gave the excluded driver permission to use your vehicle.
  • The at-fault driver was under the influence or unlicensed. If you gave someone permission to use your vehicle and then they caused an accident while under the influence and/or while unlicensed, your insurance will not pay for damages. This is because driving while under the influence or without a license is a violation of any auto insurance policy.

Your Liability When a Person On Your Policy Causes a Crash

Being a policyholder comes with great responsibility and possible liability concerns. It is important to understand when you may or may not assume liability for damages other drivers cause in your vehicle before allowing anyone to use it.

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