Lending a car to a friend or relative can result in a huge liability. Car owners will be on the hook for damages in case of an accident if they are found to be negligent in lending a car. You need to be aware of the legal and financial repercussions of loaning out your vehicle.
Every state has different rules about liabilities in the event of an accident when loaning out a car. The blog post will answer essential questions regarding legal obligations when lending a vehicle in the Bay Area.
Who is Liable If Someone Borrows Your Car in San Francisco?
A common misconception is that auto insurance follows the driver. It’s the other way around. Car insurance follows the vehicle!
An auto insurance policy of a vehicle, in general, applies to all the individuals in a household. This includes the partners, spouse, relatives, and roommates. Anyone outside the home is considered ‘a permissive driver’.
Permissive use is when the owner lends out the vehicle occasionally to a person outside the household. Whether the car is loaned out to the household family members of permissive drivers, the car owner will be held liable as per California state law.
What Happens If I Let Someone Borrow My Car and They Crash?
A car owner will be responsible for damages if the person to whom the car is lent crashes the vehicle that results in damage to the property or harms other drivers, passengers, or pedestrians. Your insurance premiums will go up when a claim is made for the damages.
As per the California Vehicle Code Section 17150, every car owner is liable for injury, death, or property damages due to the vehicle’s operation by any person who has been using it with expressed or implied permission of the owner. That means the victim will use the car owner’s insurance policy to recover the damages due to an accident caused by the permissive driver. In case the damages exceed the car owner’s policy, the driver who caused the accident policy will be used.
Vicarious Liability: Liability occurs when a person is responsible for the negligent actions of another. It happens when loaning out a car to another person who crashed the vehicle due to negligent acts.
A car owner’s policy will kick in instead of the friend or relative’s policy who has borrowed a car in the event of an accident.
In case of damages to your car, you can make a claim if you have collision coverage. Without collision coverage, you will have to pay for the repairs from your own pockets. However, a claim for collision coverage will also jack up the insurance premium.
Determining Actual Owner of the Vehicle
An important consideration when determining the legal liabilities due to an auto accident is who actually ‘owns’ the car. A car owner can avoid legal responsibility for a car accident by a person who had borrowed a car if shown that the actual owner was someone else.
Generally, the person or company named in the registration book of the vehicle and the insurance policy is the car’s actual owner. But a person whose name is mentioned in the policy and the registration book can deny ownership of the vehicle in the following circumstances.
- When another person or company was in possession, cared for, and claimed to be the vehicle owner.
- When someone else had the power or authority to sell the vehicle.
- When a vehicle was sold without changing the owner’s name on the certificate, the vehicle owner who had sold a car without adequately transferring it can still be on the financial hook in case of an accident.
Knowing legal liability in the above cases can get a bit muddy from the legal context. You need to contact a professional personal injury attorney to determine legal liabilities for an accident when loaning a car to someone else.
When Does Insurance Cover If You Let Someone Borrow Your Car?
A person who borrows a car will be covered if mentioned in the policy. For instance, if a roommate or a neighbor is mentioned in the policy, the insurance company will pay for the damages.
An important thing to note is that adding drivers may result in increased premiums. This is the case if a young driver or a person with a spotty driving record is added to the policy. However, adding a driver with an excellent driving record can result in reduced premiums.
Moreover, you should also note that California is one of the eight states where reduced coverage limits are allowed in case of an accident by a permissive driver. If a driver who is not the car owner crashes, the coverage will be reduced to state legislation’s minimum level.
California Vehicle Code Section 17151(a) limits the permissive liability to $15,000 for the injury or death of a person and $30,000 in case of injury or death of more than one person. Moreover, the limit for property damage liability is $5,000. That means that if you let your friend drive the vehicle who subsequently crashes the car, you won’t have to make payments above the limit set by the state.
However, permissive liability is applicable only if the driver uses the car for personal benefit. A car owner will be responsible in case the driver acts for the owner’s benefits.
Examples of Permissive Liability
Suppose you have loaned out your car to a friend who wants it to run an errand or party with friends. In this case, the state’s permissive liability restriction will apply, and the owner’s liability will be limited. The car owner will not have to pay more than the liability limits set by the state.
Another example is when you have loaned out your car to a driver who uses it to earn an income through a ridesharing program. The car owner in this example also will be liable up to the permissive liability limit.
A third scenario is if you have loaned out your car to run an errand for you. In this situation, you will be responsible for the maximum damages if the driver crashes the vehicle.
Can I Drive Friend’s Car with My Insurance?
When you borrow a car, your friend will be taking the vicarious liability described in the preceding sections. Your friend will be liable for both bodily injury and property damages. Your friend’s insurance company will pay for the damages due to an accident for which you were at fault.
However, when you borrow your friend’s vehicle without permission, you will have to pay for the damages incurred due to an accident. You will have to pay for property damages and compensate the victim for injuries due to the accident.
Another important point regarding liability when driving a car owned by another is whether you had taken the car for some personal reasons or doing an errand of the car owner. You would not be liable for damages if you were asked to do some errands by the car owner.
How Does the Liability Coverage Work When Loaning Out a Car?
The car owner’s insurance company will generally pay for third-party damages and bills due to an accident. The coverage, as mentioned previously, follows the vehicle regardless of the driver of the car. The injured party will file a claim against the car owner instead of the driver.
However, an insurance company can deny coverage under certain conditions. The damages should be included in the insurance coverage. If the damages are not mentioned in the policy terms and conditions, the car owner will have to pay the expenses out of pocket.
Physical damage coverage is a complicated matter. You must contact an experienced personal injury attorney who has experience dealing with car accidents when the vehicle is loaned out to another.
When a car is loaned out to another person, your physical damage coverage also transfers to another person. But some insurance companies specifically mention in terms of an agreement that the coverage does not apply if the name of a driver is not mentioned in the policy. In this scenario, you will have to pay for damages in the event of an accident by the driver to whom you have loaned your vehicle.
If the car that is loaned out to another is not insured, the collision and comprehensive liability coverage will follow the driver instead of the vehicle. The driver who had crashed the car will be legally responsible for paying for the damages due to the accident.
Penalties for Driving an Uninsured Vehicle
Apart from paying for damages, the driver who crashed an uninsured vehicle of another will also have to pay penalties. The penalties are strict in most states, including California.
- Suspension of license
- Pay fines not exceeding $1,000
- Suspension of vehicle registration
- Reinstatement fees
- Community services
- Vehicle impoundment
Individuals who are guilty of driving an uninsured vehicle in the state for the second time will face harsher penalties.
Tips When Loaning Out Your Car in California
Due diligence is essential when loaning out the car to another. Here are some questions you should ask when loaning out your vehicle to minimize the risk of liabilities due to an accident.
Do you have a valid driving license?
The first thing you need to make sure of is that the driver has a valid driving license. If the driver is from abroad, you should check the local requirements for the driving license. A driver who is a foreign national may have to apply for an International Driving Permit to drive in the US legally.
Moreover, you should also make sure that the driving license is valid for the type of vehicle. If you are loaning out a commercial vehicle, you need to ensure that the driver has the appropriate license to drive the car.
What is the intended use of the vehicle?
Another important question when loaning out a car to another is to determine the vehicle’s intended use. You must check the car insurance policy if the driver uses the car for commercial activity, such as a ridesharing program.
Your policy will not cover liabilities in case of an accident of a car that is used for commercial purposes. You need to apply for a policy covering commercial vehicles when loaning out the vehicle to another who will use it for ridesharing or other activities to generate income.
Does the driver have a safe driving record?
You should not loan out a vehicle to someone who does not have a clean driving record. Look at the state records to find out if the driver has any past conviction for reckless driving. You will be liable if you loan out your vehicle to a driver who has a record of driving under the influence (DUI).
Does the driver intend to use the car out of the border?
Before loaning out your car to a driver, you should ask if the person intends to drive the vehicle out of the border. Find out if the driver has any plans of driving the car into Mexico or Canada.
Customs officials may impound a vehicle if the driver does not show the car registration documents. So, you must provide a letter to the driver that states that you are permitting the driver the vehicle across the border.
Contact a Personal Injury Attorney
You must contact a personal injury attorney for complex cases involving car accidents in San Francisco, California. An experienced attorney will provide expert counsel to minimize the liabilities due to an accident when you have loaned out your car to another.
Phoong Law can help you if you face liabilities when loaning out your car to another. We have a team of experienced personal injury lawyers who can offer you sound legal advice regarding a car accident case. Contact us today for a free initial consultation.