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Car Accident Liability Coverage

Posted on August 5, 2022 by Brien Roche
Car Accident Liability 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.

The insurer will pay up to the limits of the policy 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 UM coverage, UM settlements and insurance in general see the links highlighted.
See Va. Code § 8.01-417 for the obligation of a carrier to disclose policy limits pre-suit.

Misrepresentations may be a bar to recovery. Misrepresenting the applicant’s address may be a bar. Brant v. Parisio, 27 Va. Cir. 339 (1992)  Failing to list all household members of driving age may be a bar. Portillo v. Nationwide, 277 Va. 193 (2009)

Specific Inquiries As To Car Accident Liability Coverage

In the following paragraphs I’ll try to lay down some specific rules as to coverage with exceptions that may apply.

1.  What State Law Controls

Policies that are issued out of state are controlled by the law of that state. This blogpost only addresses Virginia law.

2. Are You Dealing With An Accident?

In general only accidents are covered.  “Accident” and “occurrence” are synonymous. Utica Mutual v. Travelers, 223 Va. 145. That means that intentional acts are not covered.  Punitive damages may be covered if there is any ambiguity in the policy as to what damages means.  USAA v. Webb, 235 Va. 655 (1988)

3. Is the Vehicle an Owned Vehicle i.e., a Covered Vehicle?

The term “owned auto” is precisely defined.  It includes a trailer, a replacement or newly acquired auto for 30 days after purchase 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 or the same company.  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.

Coverage Follows The Car

The traditional rule in terms of liability coverage is that the coverage follows the vehicle.  What that means is that the coverage is literally stuck to the car.  That is the foundation of liability coverage in regards to automobiles.  The coverage on the vehicle is primary.

There are three exceptions to this rule that coverage follows the vehicle:

A. Lack of permissive use may create circumstances where coverage doesn’t follow the vehicle;

B. Garage policies. There are some rules that apply:

  1.  Coverage does not follow the vehicle.  The primary liability coverage is with the user.  If the user has no coverage, then the garage policy kicks in.
  2. The UM coverage under the garage policy is secondary to other coverage.
  3. UIM coverage of the garage policy is primary.The same principle applies in regards to auto dealers’ loaner cars and test drive cars.

C. Rental cars. If you do not buy coverage from the rental agency, then your coverage is primary for liability. Under the so-called “Graves Amendment” found at 49 U.S.C. 30106, a claim cannot be asserted against the rental company on a vicarious liability theory. Only a direct liability theory can be asserted against the rental company.

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.  The purpose of this expanded definition is to expand the coverage.

With a temporary substitute vehicle, the insurance on that vehicle is primary and the insured driver’s coverage is excess.

A rental car can be either a temporary substitute vehicle or a non-owned auto.

Rental car companies operating in Virginia must maintain the statutory minimum liability coverage. Virginia Code § 46.2-108(D). Liability coverage provided by a self-insured company is always primary to any other coverage regardless of any contrary provisions that may appear in a rental agreement. USAA v. Hertz, 265 Va. 450 (2003)  UM and UIM coverage provided by a self-insured company is secondary to any other available coverage. Virginia Code § 46.2-368(B)  Rental agreements frequently require that the renter indemnify the rental company against the renter’s negligence. If the rental vehicle is a temporary substitute, then the renter’s personal liability carrier is required to reimburse the rental car company for any payments the rental car company made to the injured party. Farmers Insurance v. Enterprise, 281 Va. 612, 621 (2011)

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, you may have several consequences:

  •  If the user resides with his parents, then the rental car may be deemed to be non-owned and all the user need prove is that he had a reasonable belief he had permission.  If so, then he has coverage under the parent’s policy since the rental car is non-owned.
  • The lack of authorized permission does not void the coverage for the passengers in spite of what the rental contract says i.e., they may have UM/UIM coverage.

4.  Operation, Maintenance and Use

The claim must arise from negligence in the operation, ownership, maintenance or use of the motor vehicle. See the blog post on UM coverage to further explain these terms.

5. Car Accident Liability Coverage-Is The Driver Insured?

Who is the insured? The insured is the person who, on the Declaration page, is identified as the named insured, a resident spouse and resident family member. Other people may also be expressly identified on the Declaration page as a driver, permissive user or resident. Unless stated otherwise, these people are not a named insured.

An insured also includes any persons using or responsible for the use of the insured vehicle, those with potential vicarious liability for the conduct of the insured and those with potential vicarious liability for a limited set of insureds while operating other vehicles with potential vicarious liability for the named insured, resident spouse or family member while operating a vehicle which is both not insured on the policy and not owned or hired by the person or organization.

To determine who is the insured:

A. Look at the Declaration.  That declaration is a statement by the insured as to what they have asked for, what they have represented to the carrier and what the carrier has given them.

B. The Named Insured is the person identified as such on the Declaration page.  That includes resident relatives who are in-laws. The named insured does not need permission to drive.

C. Listed Driver. This may include non-resident relatives who are listed as being drivers.  The 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. A listed driver could be a second class insured for UM/UIM.

D. Permissive User. Permission may be based on several indices: (1) express permission; (2) implied permission; (3) a reasonable belief of permission; (4) any attempt to restrict the manner of operation does not defeat permission The City of Norfolk v. Ingram, 235 Va. 433 (1988); (5) Any ambiguity in the exclusion; (6) permission by the custodian Gordon v. Liberty Mutual, 675 F.Supp 321(E.D.Va.1987)  Permission to use a vehicle for maintenance or repair does not imply that the permittee may use the vehicle for personal errands. Hartford Insurance v. Davis, 246 Va. 495 (1993)  An exception to the permission circumstance may arise in “emergency circumstances”.

In general no permission means no coverage.

If the vehicle is non-owned, then look at the resident relative’s policy to see how they define “permission”. It may be that permission may come from any “custodian” of the vehicle regardless of whether the custodian had permission.

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. But if dad told daughter she cannot grant permission to anyone else, then that second permittee is not a permissive user.
First permittee has permission and he grants permission to second permittee. Coverage upheld. Va. Farm Bureau v. Appalachian Power 228 Va. 72,77 (!984). However if first permittee is expressly told no one else can drive then there is no coverage for second permittee. State Farm v Geico 241 Va. 326,330 (1991)

E. Agency. The driver may be on-duty or otherwise acting as an agent or employee for someone else. If that is the case, then agency may invoke coverage. For example if defendant is on his way to work and he is deemed to be on-duty while he is on his way to work, then whatever auto coverage the employer has, the employee likewise may have. If there is no coverage, then at least there is vicarious liability of the employer.

F. Livery. In this day of 30-minute delivery, there frequently arise instances where people are using a private auto for delivery. That delivery may be of people or it may be of goods. If it is of people, then it’s clearly excluded. If it is of goods, it is probably also excluded and therefore no coverage. State Farm v. Old Dominion, 110 Va. Cir. 37 (Roanoke, 2022). There is an opinion from the Commissioner of Insurance however that appears to be to the contrary insofar as it relates to the delivery of goods.

6. If the Vehicle is Non-owned, That May Lead To Wealth Of Coverage

The best indicator of a non-owned vehicle may be the Police Report. If the report states that the owner is not the driver, that’s a good clue that there is a non-owned vehicle involved.

The non-owned automobile is now an exclusion. The named insured and resident spouse are saved from this exclusion. Trying to state the exclusion in positive language, non-owned auto coverage might be found to exist where:

(1)  The insured is using a vehicle not owned by him provided it is not furnished or available to the family for regular use with the exception of the named insured and resident spouse.

(2)  The named insured or resident spouse is using, maintaining or occupying the vehicle owned by or furnished for the regular use of the family.

The term “non-owned auto” is important.  The basic criteria for a non-owned auto are:

  • It is not owned by the driver;
  • The driver has other auto coverage;
  • Its use at the time of the incident is casual and infrequent.  Casual and infrequent has been found to mean as much as 10 different uses during a 2 month period State Farm Mutual Automobile Insurance Co. v. Smith, 206 Va. 280 (1965).  It is assumed that relatives living in the same household will be using each other’s vehicles on a regular basis.  Such usage means the vehicle is not “non-owned” unless the driver is the named insured or resident spouse using the vehicle owned by a family member.  The named insured and resident spouse are covered when operating vehicles owned or available for the regular use of their resident relatives. They are afforded the broadest coverage. Resident relatives are afforded slightly less coverage because they are not covered when operating vehicles that are not on the policy that are owned or available for the regular use of other family members.
  • The vehicle must not be a temporary substitute vehicle;
  • The non-owned auto is a private passenger auto or trailer;
  • The use is with permission of the owner;
  • The use is within the scope of that permission.

Some general rules that may be redundant of the above bullet points:

1. The purpose of this definition is to expand coverage.

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.  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.  If 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.

The named insured or resident spouse is covered when driving a non-owned vehicle of a resident relative.

2.  The liability coverage on the non-owned vehicle is primary. The driver’s coverage is secondary. If the driver owns two vehicles with separate policies or has access to multiple resident relative policies, then those policies are considered applicable at the same priority. Each insurer must pay that proportion that its liability limit bears to the total of all applicable limits.

3.  Stacking.

Stacking is only allowed where the insured is operating a non-owned vehicle and owns other vehicles insured on separate policies.

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. If that results in excess coverage, then the excess carriers pay on a pro rata basis.

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 because the use is regular.

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.

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.

7. Car Accident Liability Coverage-Is there Negligent Entrustment?

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.

8. Car Accident Liability Coverage-Scope of Coverage

A.  Minimum Limits

Liability coverage is the only form of coverage in Virginia that comes close to being required.  The minimum limits in Virginia are set forth in Va. Code § 46.2-472. You can choose to pay an uninsured motorist fee, in which event you may go without liability coverage.  Virginia does have a minimum coverage requirement if you buy insurance.

The minimum coverage for policies that went into effect on or after January 1, 2022 is $30,000. Anyone convicted of a drug or alcohol-related traffic offense must maintain double the liability coverage. Virginia Code § 46.2-316(B)

B. Single/Split Limits

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.

C. Multiple Defendants

An interesting question exists where you have vicarious liability.  Suppose your claim is against a driver and also the driver’s employer.  In that case you may have two (2) defendants.  The omnibus statute says that where you have one accident but more than one defendant covered by the policy then you may recover the per-person limit against each defendant.  You are subject however to the per-occurrence limit of the policy.  Does this mean that where you have a policy that is 100/300 and you have a driver and the driver’s employer liable that you can recover $100,000 against each?  Arguably you can.

D. 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.

This becomes especially important when you’re dealing with a temporary substitute or a non-owned auto. Typically those forms of coverage are excess. That coverage is going to be pro-rated among the different carriers.

E.  Interest and Costs

The family auto policy in Virginia defines damages as including pre-judgment interest. If however the pre-judgment interest puts the amount to be paid over the limits, then that amount over the limits need not be paid. Dairyland Insurance Co. v. Douthat, 248 Va. 627, 449 S.E.2d 799.  That applies for both liability and UM coverage.

Liability carriers do have to pay costs.  See Nationwide Insurance v. Finley, 215 Va. 700, 214 S.E.2d 129.  UM carriers do not have to pay costs.

F. Finding Coverage

There is a company by the name of ML Research Group located in Tempe, AZ that holds itself out as a specialty research firm with a focus on supplying a wide range of insurance information to attorneys.  Their website is https://mlresearchgroup.com.  They may be a potential resource to use.

Notice

Late notice is a policy defense only if there is prejudice to the insurer. If the insured provides no information to the insurer, then the carrier need not show prejudice. Where there is a lack of cooperation, the carrier has to show prejudice.

If the carrier intends to disclaim coverage, it is required to notify the claimant within 45 days of the discovery of the breach. This same notice must be given to the claimant within 45 days when the insurer executes a non-waiver of rights or a reservation of right. In any event the notice must be given not later than 30 days before trial. Liberty Mutual v. Safeco, 223 Va. 317 (1982)

Call, or contact us for a free consult. Also for more info on liability insurance see the Wikipedia pages.

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Car Accident Liability Coverage

Posted on August 5, 2022 by Brien Roche
Car Accident Liability 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.

The insurer will pay up to the limits of the policy 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 UM coverage, UM settlements and insurance in general see the links highlighted.
See Va. Code § 8.01-417 for the obligation of a carrier to disclose policy limits pre-suit.

Misrepresentations may be a bar to recovery. Misrepresenting the applicant’s address may be a bar. Brant v. Parisio, 27 Va. Cir. 339 (1992)  Failing to list all household members of driving age may be a bar. Portillo v. Nationwide, 277 Va. 193 (2009)

Specific Inquiries As To Car Accident Liability Coverage

In the following paragraphs I’ll try to lay down some specific rules as to coverage with exceptions that may apply.

1.  What State Law Controls

Policies that are issued out of state are controlled by the law of that state. This blogpost only addresses Virginia law.

2. Are You Dealing With An Accident?

In general only accidents are covered.  “Accident” and “occurrence” are synonymous. Utica Mutual v. Travelers, 223 Va. 145. That means that intentional acts are not covered.  Punitive damages may be covered if there is any ambiguity in the policy as to what damages means.  USAA v. Webb, 235 Va. 655 (1988)

3. Is the Vehicle an Owned Vehicle i.e., a Covered Vehicle?

The term “owned auto” is precisely defined.  It includes a trailer, a replacement or newly acquired auto for 30 days after purchase 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 or the same company.  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.

Coverage Follows The Car

The traditional rule in terms of liability coverage is that the coverage follows the vehicle.  What that means is that the coverage is literally stuck to the car.  That is the foundation of liability coverage in regards to automobiles.  The coverage on the vehicle is primary.

There are three exceptions to this rule that coverage follows the vehicle:

A. Lack of permissive use may create circumstances where coverage doesn’t follow the vehicle;

B. Garage policies. There are some rules that apply:

  1.  Coverage does not follow the vehicle.  The primary liability coverage is with the user.  If the user has no coverage, then the garage policy kicks in.
  2. The UM coverage under the garage policy is secondary to other coverage.
  3. UIM coverage of the garage policy is primary.The same principle applies in regards to auto dealers’ loaner cars and test drive cars.

C. Rental cars. If you do not buy coverage from the rental agency, then your coverage is primary for liability. Under the so-called “Graves Amendment” found at 49 U.S.C. 30106, a claim cannot be asserted against the rental company on a vicarious liability theory. Only a direct liability theory can be asserted against the rental company.

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.  The purpose of this expanded definition is to expand the coverage.

With a temporary substitute vehicle, the insurance on that vehicle is primary and the insured driver’s coverage is excess.

A rental car can be either a temporary substitute vehicle or a non-owned auto.

Rental car companies operating in Virginia must maintain the statutory minimum liability coverage. Virginia Code § 46.2-108(D). Liability coverage provided by a self-insured company is always primary to any other coverage regardless of any contrary provisions that may appear in a rental agreement. USAA v. Hertz, 265 Va. 450 (2003)  UM and UIM coverage provided by a self-insured company is secondary to any other available coverage. Virginia Code § 46.2-368(B)  Rental agreements frequently require that the renter indemnify the rental company against the renter’s negligence. If the rental vehicle is a temporary substitute, then the renter’s personal liability carrier is required to reimburse the rental car company for any payments the rental car company made to the injured party. Farmers Insurance v. Enterprise, 281 Va. 612, 621 (2011)

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, you may have several consequences:

  •  If the user resides with his parents, then the rental car may be deemed to be non-owned and all the user need prove is that he had a reasonable belief he had permission.  If so, then he has coverage under the parent’s policy since the rental car is non-owned.
  • The lack of authorized permission does not void the coverage for the passengers in spite of what the rental contract says i.e., they may have UM/UIM coverage.

4.  Operation, Maintenance and Use

The claim must arise from negligence in the operation, ownership, maintenance or use of the motor vehicle. See the blog post on UM coverage to further explain these terms.

5. Car Accident Liability Coverage-Is The Driver Insured?

Who is the insured? The insured is the person who, on the Declaration page, is identified as the named insured, a resident spouse and resident family member. Other people may also be expressly identified on the Declaration page as a driver, permissive user or resident. Unless stated otherwise, these people are not a named insured.

An insured also includes any persons using or responsible for the use of the insured vehicle, those with potential vicarious liability for the conduct of the insured and those with potential vicarious liability for a limited set of insureds while operating other vehicles with potential vicarious liability for the named insured, resident spouse or family member while operating a vehicle which is both not insured on the policy and not owned or hired by the person or organization.

To determine who is the insured:

A. Look at the Declaration.  That declaration is a statement by the insured as to what they have asked for, what they have represented to the carrier and what the carrier has given them.

B. The Named Insured is the person identified as such on the Declaration page.  That includes resident relatives who are in-laws. The named insured does not need permission to drive.

C. Listed Driver. This may include non-resident relatives who are listed as being drivers.  The 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. A listed driver could be a second class insured for UM/UIM.

D. Permissive User. Permission may be based on several indices: (1) express permission; (2) implied permission; (3) a reasonable belief of permission; (4) any attempt to restrict the manner of operation does not defeat permission The City of Norfolk v. Ingram, 235 Va. 433 (1988); (5) Any ambiguity in the exclusion; (6) permission by the custodian Gordon v. Liberty Mutual, 675 F.Supp 321(E.D.Va.1987)  Permission to use a vehicle for maintenance or repair does not imply that the permittee may use the vehicle for personal errands. Hartford Insurance v. Davis, 246 Va. 495 (1993)  An exception to the permission circumstance may arise in “emergency circumstances”.

In general no permission means no coverage.

If the vehicle is non-owned, then look at the resident relative’s policy to see how they define “permission”. It may be that permission may come from any “custodian” of the vehicle regardless of whether the custodian had permission.

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. But if dad told daughter she cannot grant permission to anyone else, then that second permittee is not a permissive user.
First permittee has permission and he grants permission to second permittee. Coverage upheld. Va. Farm Bureau v. Appalachian Power 228 Va. 72,77 (!984). However if first permittee is expressly told no one else can drive then there is no coverage for second permittee. State Farm v Geico 241 Va. 326,330 (1991)

E. Agency. The driver may be on-duty or otherwise acting as an agent or employee for someone else. If that is the case, then agency may invoke coverage. For example if defendant is on his way to work and he is deemed to be on-duty while he is on his way to work, then whatever auto coverage the employer has, the employee likewise may have. If there is no coverage, then at least there is vicarious liability of the employer.

F. Livery. In this day of 30-minute delivery, there frequently arise instances where people are using a private auto for delivery. That delivery may be of people or it may be of goods. If it is of people, then it’s clearly excluded. If it is of goods, it is probably also excluded and therefore no coverage. State Farm v. Old Dominion, 110 Va. Cir. 37 (Roanoke, 2022). There is an opinion from the Commissioner of Insurance however that appears to be to the contrary insofar as it relates to the delivery of goods.

6. If the Vehicle is Non-owned, That May Lead To Wealth Of Coverage

The best indicator of a non-owned vehicle may be the Police Report. If the report states that the owner is not the driver, that’s a good clue that there is a non-owned vehicle involved.

The non-owned automobile is now an exclusion. The named insured and resident spouse are saved from this exclusion. Trying to state the exclusion in positive language, non-owned auto coverage might be found to exist where:

(1)  The insured is using a vehicle not owned by him provided it is not furnished or available to the family for regular use with the exception of the named insured and resident spouse.

(2)  The named insured or resident spouse is using, maintaining or occupying the vehicle owned by or furnished for the regular use of the family.

The term “non-owned auto” is important.  The basic criteria for a non-owned auto are:

  • It is not owned by the driver;
  • The driver has other auto coverage;
  • Its use at the time of the incident is casual and infrequent.  Casual and infrequent has been found to mean as much as 10 different uses during a 2 month period State Farm Mutual Automobile Insurance Co. v. Smith, 206 Va. 280 (1965).  It is assumed that relatives living in the same household will be using each other’s vehicles on a regular basis.  Such usage means the vehicle is not “non-owned” unless the driver is the named insured or resident spouse using the vehicle owned by a family member.  The named insured and resident spouse are covered when operating vehicles owned or available for the regular use of their resident relatives. They are afforded the broadest coverage. Resident relatives are afforded slightly less coverage because they are not covered when operating vehicles that are not on the policy that are owned or available for the regular use of other family members.
  • The vehicle must not be a temporary substitute vehicle;
  • The non-owned auto is a private passenger auto or trailer;
  • The use is with permission of the owner;
  • The use is within the scope of that permission.

Some general rules that may be redundant of the above bullet points:

1. The purpose of this definition is to expand coverage.

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.  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.  If 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.

The named insured or resident spouse is covered when driving a non-owned vehicle of a resident relative.

2.  The liability coverage on the non-owned vehicle is primary. The driver’s coverage is secondary. If the driver owns two vehicles with separate policies or has access to multiple resident relative policies, then those policies are considered applicable at the same priority. Each insurer must pay that proportion that its liability limit bears to the total of all applicable limits.

3.  Stacking.

Stacking is only allowed where the insured is operating a non-owned vehicle and owns other vehicles insured on separate policies.

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. If that results in excess coverage, then the excess carriers pay on a pro rata basis.

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 because the use is regular.

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.

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.

7. Car Accident Liability Coverage-Is there Negligent Entrustment?

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.

8. Car Accident Liability Coverage-Scope of Coverage

A.  Minimum Limits

Liability coverage is the only form of coverage in Virginia that comes close to being required.  The minimum limits in Virginia are set forth in Va. Code § 46.2-472. You can choose to pay an uninsured motorist fee, in which event you may go without liability coverage.  Virginia does have a minimum coverage requirement if you buy insurance.

The minimum coverage for policies that went into effect on or after January 1, 2022 is $30,000. Anyone convicted of a drug or alcohol-related traffic offense must maintain double the liability coverage. Virginia Code § 46.2-316(B)

B. Single/Split Limits

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.

C. Multiple Defendants

An interesting question exists where you have vicarious liability.  Suppose your claim is against a driver and also the driver’s employer.  In that case you may have two (2) defendants.  The omnibus statute says that where you have one accident but more than one defendant covered by the policy then you may recover the per-person limit against each defendant.  You are subject however to the per-occurrence limit of the policy.  Does this mean that where you have a policy that is 100/300 and you have a driver and the driver’s employer liable that you can recover $100,000 against each?  Arguably you can.

D. 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.

This becomes especially important when you’re dealing with a temporary substitute or a non-owned auto. Typically those forms of coverage are excess. That coverage is going to be pro-rated among the different carriers.

E.  Interest and Costs

The family auto policy in Virginia defines damages as including pre-judgment interest. If however the pre-judgment interest puts the amount to be paid over the limits, then that amount over the limits need not be paid. Dairyland Insurance Co. v. Douthat, 248 Va. 627, 449 S.E.2d 799.  That applies for both liability and UM coverage.

Liability carriers do have to pay costs.  See Nationwide Insurance v. Finley, 215 Va. 700, 214 S.E.2d 129.  UM carriers do not have to pay costs.

F. Finding Coverage

There is a company by the name of ML Research Group located in Tempe, AZ that holds itself out as a specialty research firm with a focus on supplying a wide range of insurance information to attorneys.  Their website is https://mlresearchgroup.com.  They may be a potential resource to use.

Notice

Late notice is a policy defense only if there is prejudice to the insurer. If the insured provides no information to the insurer, then the carrier need not show prejudice. Where there is a lack of cooperation, the carrier has to show prejudice.

If the carrier intends to disclaim coverage, it is required to notify the claimant within 45 days of the discovery of the breach. This same notice must be given to the claimant within 45 days when the insurer executes a non-waiver of rights or a reservation of right. In any event the notice must be given not later than 30 days before trial. Liberty Mutual v. Safeco, 223 Va. 317 (1982)

Call, or contact us for a free consult. Also for more info on liability insurance see the Wikipedia pages.

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