At one time or another, most of you have let a friend borrow your car. Unfortunately, many of you probably weren’t thinking about insurance coverage as you handed over the keys. So what do you think, if your friend gets into an accident while driving your car, would your automobile insurance cover it?
As always, the first place to look is the insurance policy. Standard auto insurance policies have permissive use clauses that extend insurance coverage to those who had the owner’s permission to use the car. These clauses are intended to benefit and protect the general public and innocent victims of automobile accidents.
Though policy forms vary, permissive use (a/k/a omnibus) clauses are often incorporated into that part of the policy that identifies who is insured under the policy. For example, a policy may state that any person using the automobile is considered an ‘Insured Person’ if they have the owner’s permission to do so.
Permission to use an automobile can generally be either express or implied. Express permission must be of an affirmative character that is directly and distinctly stated, and clear and outspoken. Express permission cannot be merely implied or left to inference.
Implied permission, on the other hand, involves an inference arising from a course of conduct or relationship between the parties in which there is a mutual acquiescence or lack of objection which signifies permission. Implied permission is typically determined from the facts and circumstances in a particular case.
After establishing that the driver had permission to use the car, the next step is determining whether the driver’s use of the car was consistent with the owner’s permission. For example, if a car owner gave permission to drive to the local store, but the friend takes off on a cross-country trip, is this friend really driving with the owner’s permission?
There are generally three rules used by various states to determine whether a driver has exceeded the owner’s permission to use the car.
Conversion (Strict Construction) Rule: This rule requires that the automobile be used for a purpose reasonably within the scope of the permission given, during the time limits expressed and within the geographical limits contemplated by the owner and the driver. Any deviation, no matter how slight, will negate a driver’s permissive user status under the owner’s policy and there will be no coverage in the event of an accident. The friend cruising across the country would not be considered a permissive user in states adopting this rule.
Initial Permission Rule: Some states adopted the more liberal initial permission rule. Under this rule, if permission to use the automobile is initially given, the driver is considered to have the owner’s permission regardless of the manner in which the automobile is used. Since only the first use must be with the owner’s permission, any later deviations made by the driver, such as driving cross-country, are immaterial. For this reason, the initial permission rule is sometimes referred to as the ‘hell-or-high water’ rule.
Minor Deviation Rule: Some states have taken an intermediate approach by adopting the minor deviation rule. Under this rule, a driver can deviate from the scope of permission given by the owner and still be considered a permissive user as long as any deviation is not gross, substantial or major. In other words, this rule permits a slight deviation but condemns a major one. A material deviation, such as going cross-country, voids the initial permission, so if the friend gets in an accident in another state, he or she will not be considered a permissive user entitled to coverage under the owner’s auto insurance policy.
The next time a friend asks to borrow your car, take a minute to consider what might happen if there is an accident. As the owner of the car you will most likely be held liable for damages, so it’s a good idea to know whether you or your insurance company will be paying the bill.
If you have any questions or would like to discuss your insurance options, please contact us.
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