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Auto Liability Insurance Coverage

Fairfax Injury Lawyer Brien Roche Addresses Auto Liability Insurance Coverage

Brien Roche

Auto liability insurance coverage protects you in the event that someone else alleges that you were at fault for a crash.  By “you”, I mean either you as the insured or anyone who was driving your auto with your consent.  Under state law anyone who is a “permissive user” is covered.  Liability coverage is the only form of coverage in Virginia that comes close to being required.  You can choose to pay an uninsured motorist fee, in which event you may go without liability coverage.  The minimum coverage allowed in Virginia for liability is $25,000 as of December 1,2020.

The insurer will pay up to those limits in the event that you are found to be at fault for a crash.  The insurer will also provide a lawyer to defend you.  The attorney is one that they choose. For more info on other forms of auto coverage, uninsured coverage and insurance in general see the links highlighted.

Some General Rules to be Aware Of

Some general principles to be aware of in regards to insurance are:

  • If two opposite interpretations are possible, then the policy is ambiguous.  Ambiguity works against the carrier.
  • If a statute relating to coverage is designed to benefit the insured or claimant, then it will be interpreted liberally to provide coverage. 

Specific Inquiries As To Auto Liability Insurance Coverage

In the following paragraphs I’ll try to lay down some specific rules as to coverage with exceptions that may apply.  The injured party or the plaintiff will be referred to simply by the letter “P”.  The at-fault motorist or the defendant will be referred to simply by the letter “D”.

1. Are You Dealing With An Accident?

In general accidents are covered.  That means that intentional acts are not covered.  Punitive damages probably are covered if there is any ambiguity in the policy as to what damages means.  USAA v. Webb, 235 Va. 655 (1988)

2. Is The Driver Insured?

The named insured is covered.  That includes family members.  Also covered are non-resident relatives who are listed as being drivers.  That listed driver must have a reasonable belief that he is entitled to use the vehicle.  If that is the case, then that driver has coverage while driving a covered auto and also a non-owned auto.  In addition permissive users are covered.

3. Coverage Follows the Vehicle Therefore Determine If The Vehicle Is Owned By The Driver Or Non-owned

The traditional rule in terms of liability coverage is that the coverage follows the vehicle.  If you talk with an insurance adjuster, they will cite that phrase.  That is the foundation of liability coverage in regards to automobiles.  The coverage on the vehicle is always going to be primary.  Think of it as being stuck to the vehicle.

A. Owned Vehicle

An important point that is made in these policies is that the term “owned auto” is precisely defined.  An owned auto includes a trailer, a replacement or newly acquired auto or a temporary substitute auto.  A rental car is a temporary substitute if your covered auto is out of commission due to breakdown, repair, servicing, loss or destruction.  If however the rental car is simply being used for vacation purposes, then it is a non-owned auto.  Imagine that you own two vehicles insured by two separate companies.  You are driving vehicle #2 and are involved in a crash that is your fault.  You are entitled to liability coverage under vehicle #2 but not under vehicle #1, since vehicle #1 is not a covered auto under the policy issued for vehicle #2.  

B. Non-owned Auto May Lead To Wealth Of Coverage

The term “non-owned auto” is important.  A non-owned auto is one that the driver does not own but rather may be one that is borrowed for casual or infrequent use from someone not a family member.  If that vehicle is being used on a regular basis, then it is not a “non-owned’ auto.  For instance father owns a vehicle with $1 Million policy on it.  He borrows his son’s car which has a $25,000 policy on it.  Father is involved in a crash and injures P.  Son’s car in this case is not a non-owned auto because it is loaned to father by a relative.  It was assumed that when the term “non-owned” was defined that relatives living in the same household would be using each other’s vehicles on a regular basis.  Since this usage is regular, this does not qualify as “non-owned”. 

This however does not apply to the named insured using a vehicle owned by a family member. That is, the named insured is saved from this exclusion, meaning that coverage applies whether the use is frequent or not frequent.

C. Temporary Substitute Vehicle

A temporary substitute vehicle is one not owned by the named insured which is used temporarily as a substitute while the covered auto is in the shop. This may include a rental or loaner.

A rental car can be either a temporary substitute or a non-owned auto.  It’s  a temporary substitute if your covered auto is out of commission due to breakdown, repair, servicing, loss or destruction.  If however you’re simply on vacation then it becomes a non-owned auto.

In regards to rental cars, there frequently arises the issue of permissive use.  Typically in a rental agreement one or two people are identified as being the authorized user(s).  If the renter gives permission to a third party to drive the vehicle who is not authorized under the rental agreement, that may invoke coverage if this is a non-owned auto.  That is, if the user resides with his parents, then the rental car may be deemed to be a non-owned auto and all the user need prove is that he had a reasonable belief that he had permission.  He did in this instance because the renter gave him permission.

Exceptions To Coverage Following The Vehicle

Permissive Use

A key element of coverage under the non-owned auto concept is the idea of permissive use.  Permissive use means permission where the user has a reasonable belief that he is entitled to use the vehicle. In general no permission means no coverage.

Consider an example. Father tells daughter that she is absolutely barred from driving the family car.  In spite of that daughter takes the keys and crashes the car.  Daughter is a family member while driving a covered automobile and is covered even though she does not have permission and does not even believe that she has permission.

Change the facts a bit and suppose that dad gives permission to daughter to drive the vehicle but says that there can be no alcohol consumption by anyone while driving the vehicle.  Boyfriend starts driving the vehicle after consuming alcohol.  Boyfriend had been granted permission by daughter to drive.  Under the omnibus clause any restriction on permissive use is invalid.  As such the “no drinking” bar is not a bar to coverage.  This applies even if we’re dealing with a rental car.  That is, the “no drinking” exclusion is likewise void.

Garage Policies

Garage policies are an exception to the general rule that coverage follows the vehicle.  Here coverage does not follow the vehicle.  The primary coverage is with the user.  If the user has no coverage, then the garage policy kicks in.  This only applies to liability coverage.  For instance UIM coverage would be available to the user.  This same principle applies in regards auto dealers’ loaner cars and test drive cars.  If the user has coverage then that coverage is primary.  If the user does not have coverage, then the minimum statutory limits applicable to the loaner/test car would apply.

i. Look at the Driver for Excess Coverage as a Named Insured 

If the coverage on the vehicle is not enough to satisfy the claim of P, then you need to look to the driver for two purposes:

(a) If this is a non-owned vehicle and then all of the potential coverage associated with a non-owned vehicle may apply.  

(b) To see if the driver is on-duty or otherwise acting as an agent or employee for someone else.  If that is the case, then that agency principle may invoke coverage.  For example if D is on his way to work and is deemed to be on-duty while he’s on his way to work because he is going to an offsite job, then whatever auto coverage the employer has, the employee likewise has.  That may be a source of a great amount of insurance coverage.

ii. Look at Who the Driver Lives with for Excess Coverage Based upon Family Member Coverage

Sometimes you have to literally follow the driver home.  By following the driver home, you may find additional coverage.  If the driver was driving a non-owned vehicle, then he may be insured under the policies issued to the relatives who live in that home with him.  

Examples

For instance assume that you are a traveling salesman.  Your employer furnishes a vehicle for you on a regular basis.  You are involved in a crash that causes injury and you’re at fault.  Your personal auto policy does not apply in that case.  

Take another example, you own a vehicle insured through Carrier #1.  Your son and daughter live with you.  Your daughter is driving the son’s car which is insured by Carrier #2.  The daughter does not own a vehicle.  She is involved in a crash for which she is at fault.  She is covered under the son’s policy but not under your policy since she was driving a vehicle owned by a family member and she is not a named insured.  The only named insured is you for liability purposes.  

Change that example a bit and assume that you are driving your son’s vehicle.  Since you are the named insured, the exclusion does not apply to you and therefore you have coverage under both your son’s policy which covers his vehicle and your policy which covers your vehicle. If the situation was reversed and your son was driving your vehicle, the outcome would be the same since he is a named insured under his policy.  

Change the facts again and imagine that daughter borrows a friend’s car on a regular basis.  Daughter is then involved in a crash that is her fault.  Daughter cannot obtain coverage under dad’s policy or under brother’s separate policy since the vehicle is not “non-owned”.  That is, it is provided to her for regular use.

4. Negligent Entrustment May Expand Coverage

In a negligent entrustment claim you may have double or perhaps even triple coverage.  If there is not only a named insured but also a spouse who negligently entrusted the vehicle, then they may each be entitled to the policy limits insuring the covered auto.  If the entrusted car is non-owned or a temporary substitute under the driver’s policy, then that policy may also provide excess coverage.  

5. Auto Liability Insurance Coverage-Who Pays and How Much?

Liability coverage may come in the form of either single limit or split limit policies.  A single-limit policy simply means that a fixed amount is defined on the Declaration page.  The Declaration page is the face page of the policy.  That single limit may be $500,000.  That means that the carrier will pay no more than that amount to either one claimant or multiple claimants.  However if your policy is a split limit policy, then that means that on the Declaration page the limits may be defined as being $100,000/$300,000.  What that means is that you have $100,000 coverage for each claimant or a total of $300,000 for multiple claimants.  

Other Insurance

The term “other insurance” in a policy must be looked at closely.  It defines how each insurance company will pay if a person is covered by more than one policy.  These other policies may be excess and their coverage may be pro-rated among the carriers.  For instance if you borrow a neighbor’s car which has limits of $25,000, you own two cars, each with $25,000 coverage issued by separate carriers.  You hurt P in a crash.  Your total coverage is $75,000.  If the judgment entered against you however is for $50,000, then the coverage on the car you were driving must be fully paid, but the coverage on your two vehicles will be pro-rated i.e., each will pay 1/2 of their limits.  

 

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Contact Us For A Free Consultation

Auto Liability Insurance Coverage

Fairfax Injury Lawyer Brien Roche Addresses Auto Liability Insurance Coverage

Brien Roche

Auto liability insurance coverage protects you in the event that someone else alleges that you were at fault for a crash.  By “you”, I mean either you as the insured or anyone who was driving your auto with your consent.  Under state law anyone who is a “permissive user” is covered.  Liability coverage is the only form of coverage in Virginia that comes close to being required.  You can choose to pay an uninsured motorist fee, in which event you may go without liability coverage.  The minimum coverage allowed in Virginia for liability is $25,000 as of December 1,2020.

The insurer will pay up to those limits in the event that you are found to be at fault for a crash.  The insurer will also provide a lawyer to defend you.  The attorney is one that they choose. For more info on other forms of auto coverage, uninsured coverage and insurance in general see the links highlighted.

Some General Rules to be Aware Of

Some general principles to be aware of in regards to insurance are:

  • If two opposite interpretations are possible, then the policy is ambiguous.  Ambiguity works against the carrier.
  • If a statute relating to coverage is designed to benefit the insured or claimant, then it will be interpreted liberally to provide coverage. 

Specific Inquiries As To Auto Liability Insurance Coverage

In the following paragraphs I’ll try to lay down some specific rules as to coverage with exceptions that may apply.  The injured party or the plaintiff will be referred to simply by the letter “P”.  The at-fault motorist or the defendant will be referred to simply by the letter “D”.

1. Are You Dealing With An Accident?

In general accidents are covered.  That means that intentional acts are not covered.  Punitive damages probably are covered if there is any ambiguity in the policy as to what damages means.  USAA v. Webb, 235 Va. 655 (1988)

2. Is The Driver Insured?

The named insured is covered.  That includes family members.  Also covered are non-resident relatives who are listed as being drivers.  That listed driver must have a reasonable belief that he is entitled to use the vehicle.  If that is the case, then that driver has coverage while driving a covered auto and also a non-owned auto.  In addition permissive users are covered.

3. Coverage Follows the Vehicle Therefore Determine If The Vehicle Is Owned By The Driver Or Non-owned

The traditional rule in terms of liability coverage is that the coverage follows the vehicle.  If you talk with an insurance adjuster, they will cite that phrase.  That is the foundation of liability coverage in regards to automobiles.  The coverage on the vehicle is always going to be primary.  Think of it as being stuck to the vehicle.

A. Owned Vehicle

An important point that is made in these policies is that the term “owned auto” is precisely defined.  An owned auto includes a trailer, a replacement or newly acquired auto or a temporary substitute auto.  A rental car is a temporary substitute if your covered auto is out of commission due to breakdown, repair, servicing, loss or destruction.  If however the rental car is simply being used for vacation purposes, then it is a non-owned auto.  Imagine that you own two vehicles insured by two separate companies.  You are driving vehicle #2 and are involved in a crash that is your fault.  You are entitled to liability coverage under vehicle #2 but not under vehicle #1, since vehicle #1 is not a covered auto under the policy issued for vehicle #2.  

B. Non-owned Auto May Lead To Wealth Of Coverage

The term “non-owned auto” is important.  A non-owned auto is one that the driver does not own but rather may be one that is borrowed for casual or infrequent use from someone not a family member.  If that vehicle is being used on a regular basis, then it is not a “non-owned’ auto.  For instance father owns a vehicle with $1 Million policy on it.  He borrows his son’s car which has a $25,000 policy on it.  Father is involved in a crash and injures P.  Son’s car in this case is not a non-owned auto because it is loaned to father by a relative.  It was assumed that when the term “non-owned” was defined that relatives living in the same household would be using each other’s vehicles on a regular basis.  Since this usage is regular, this does not qualify as “non-owned”. 

This however does not apply to the named insured using a vehicle owned by a family member. That is, the named insured is saved from this exclusion, meaning that coverage applies whether the use is frequent or not frequent.

C. Temporary Substitute Vehicle

A temporary substitute vehicle is one not owned by the named insured which is used temporarily as a substitute while the covered auto is in the shop. This may include a rental or loaner.

A rental car can be either a temporary substitute or a non-owned auto.  It’s  a temporary substitute if your covered auto is out of commission due to breakdown, repair, servicing, loss or destruction.  If however you’re simply on vacation then it becomes a non-owned auto.

In regards to rental cars, there frequently arises the issue of permissive use.  Typically in a rental agreement one or two people are identified as being the authorized user(s).  If the renter gives permission to a third party to drive the vehicle who is not authorized under the rental agreement, that may invoke coverage if this is a non-owned auto.  That is, if the user resides with his parents, then the rental car may be deemed to be a non-owned auto and all the user need prove is that he had a reasonable belief that he had permission.  He did in this instance because the renter gave him permission.

Exceptions To Coverage Following The Vehicle

Permissive Use

A key element of coverage under the non-owned auto concept is the idea of permissive use.  Permissive use means permission where the user has a reasonable belief that he is entitled to use the vehicle. In general no permission means no coverage.

Consider an example. Father tells daughter that she is absolutely barred from driving the family car.  In spite of that daughter takes the keys and crashes the car.  Daughter is a family member while driving a covered automobile and is covered even though she does not have permission and does not even believe that she has permission.

Change the facts a bit and suppose that dad gives permission to daughter to drive the vehicle but says that there can be no alcohol consumption by anyone while driving the vehicle.  Boyfriend starts driving the vehicle after consuming alcohol.  Boyfriend had been granted permission by daughter to drive.  Under the omnibus clause any restriction on permissive use is invalid.  As such the “no drinking” bar is not a bar to coverage.  This applies even if we’re dealing with a rental car.  That is, the “no drinking” exclusion is likewise void.

Garage Policies

Garage policies are an exception to the general rule that coverage follows the vehicle.  Here coverage does not follow the vehicle.  The primary coverage is with the user.  If the user has no coverage, then the garage policy kicks in.  This only applies to liability coverage.  For instance UIM coverage would be available to the user.  This same principle applies in regards auto dealers’ loaner cars and test drive cars.  If the user has coverage then that coverage is primary.  If the user does not have coverage, then the minimum statutory limits applicable to the loaner/test car would apply.

i. Look at the Driver for Excess Coverage as a Named Insured 

If the coverage on the vehicle is not enough to satisfy the claim of P, then you need to look to the driver for two purposes:

(a) If this is a non-owned vehicle and then all of the potential coverage associated with a non-owned vehicle may apply.  

(b) To see if the driver is on-duty or otherwise acting as an agent or employee for someone else.  If that is the case, then that agency principle may invoke coverage.  For example if D is on his way to work and is deemed to be on-duty while he’s on his way to work because he is going to an offsite job, then whatever auto coverage the employer has, the employee likewise has.  That may be a source of a great amount of insurance coverage.

ii. Look at Who the Driver Lives with for Excess Coverage Based upon Family Member Coverage

Sometimes you have to literally follow the driver home.  By following the driver home, you may find additional coverage.  If the driver was driving a non-owned vehicle, then he may be insured under the policies issued to the relatives who live in that home with him.  

Examples

For instance assume that you are a traveling salesman.  Your employer furnishes a vehicle for you on a regular basis.  You are involved in a crash that causes injury and you’re at fault.  Your personal auto policy does not apply in that case.  

Take another example, you own a vehicle insured through Carrier #1.  Your son and daughter live with you.  Your daughter is driving the son’s car which is insured by Carrier #2.  The daughter does not own a vehicle.  She is involved in a crash for which she is at fault.  She is covered under the son’s policy but not under your policy since she was driving a vehicle owned by a family member and she is not a named insured.  The only named insured is you for liability purposes.  

Change that example a bit and assume that you are driving your son’s vehicle.  Since you are the named insured, the exclusion does not apply to you and therefore you have coverage under both your son’s policy which covers his vehicle and your policy which covers your vehicle. If the situation was reversed and your son was driving your vehicle, the outcome would be the same since he is a named insured under his policy.  

Change the facts again and imagine that daughter borrows a friend’s car on a regular basis.  Daughter is then involved in a crash that is her fault.  Daughter cannot obtain coverage under dad’s policy or under brother’s separate policy since the vehicle is not “non-owned”.  That is, it is provided to her for regular use.

4. Negligent Entrustment May Expand Coverage

In a negligent entrustment claim you may have double or perhaps even triple coverage.  If there is not only a named insured but also a spouse who negligently entrusted the vehicle, then they may each be entitled to the policy limits insuring the covered auto.  If the entrusted car is non-owned or a temporary substitute under the driver’s policy, then that policy may also provide excess coverage.  

5. Auto Liability Insurance Coverage-Who Pays and How Much?

Liability coverage may come in the form of either single limit or split limit policies.  A single-limit policy simply means that a fixed amount is defined on the Declaration page.  The Declaration page is the face page of the policy.  That single limit may be $500,000.  That means that the carrier will pay no more than that amount to either one claimant or multiple claimants.  However if your policy is a split limit policy, then that means that on the Declaration page the limits may be defined as being $100,000/$300,000.  What that means is that you have $100,000 coverage for each claimant or a total of $300,000 for multiple claimants.  

Other Insurance

The term “other insurance” in a policy must be looked at closely.  It defines how each insurance company will pay if a person is covered by more than one policy.  These other policies may be excess and their coverage may be pro-rated among the carriers.  For instance if you borrow a neighbor’s car which has limits of $25,000, you own two cars, each with $25,000 coverage issued by separate carriers.  You hurt P in a crash.  Your total coverage is $75,000.  If the judgment entered against you however is for $50,000, then the coverage on the car you were driving must be fully paid, but the coverage on your two vehicles will be pro-rated i.e., each will pay 1/2 of their limits.  

 

Contact Us For A Free Consultation

    Contact Us For A Free Consultation