This is an extremely important question. However it’s a question that many motorcycle and car owners fail to ask until after an accident. So – here’s a guideline to assist you to be sure you’re not stuck!
Many insurance customers assume that all “other operators” are handled in the same manner – but that is incorrect. In general, there are two very different “other operator” types – household residents and permissive use operators. And who that “other driver” is makes a significant difference whether or not your insurance covers them after an accident.
Permissive use generally applies to a driver that rarely or occasionally operates your vehicle. This can include a neighbor borrowing your truck to haul a piece of furniture, you have houseguests that borrow the car for a date night, or lend a friend your bike for the day to see how he likes it. Your insurance covers these drivers automatically – at the policy limits you have chosen.
But you do need to be aware of some potential pitfalls. You still pay the policy deductible, and any at-fault surcharges will be applied to your policy. I’ve seen more than a few friendships ruined when a vehicle is borrowed, damage occurs, and the “friend” is unable or unwilling to reimburse the vehicle owner for the damage caused – let alone the increased insurance cost.
Your vehicle policy is the primary policy, if your guest is insured, their policy may provide secondary coverage benefits. But if you’ve chosen low limits, and your guest is not insured, you can be sued for additional damages.
Household Residents and Regular Operators are looked at in a completely different manner. All auto insurers require that you disclose ALL licensed drivers that share your household – even if they do not operate your vehicle. This disclosure is required so that the insurer can accurately calculate the “risk” in your household. Consider it this way – persons that live with you have access to your keys and can operate your vehicle at any time. In order for insurance to cover these other drivers, you must have notified the insurance company of their presence.
Other drivers can include other family members – spouses (yes I regularly encounter customers that do not list their spouses on their policies!), children and in-laws, parents – etc. Live-in companions – boyfriends and girlfriends, fiancée, and their children must also be declared. Roommates – any licensed drivers that live with you MUST be disclosed. In addition, if someone regularly operates your vehicle you should advise your company or agents. We see this often with elderly parents whose children drive them to errands and doctor’s appointments. Or perhaps you lend a car to a friend or family member for a few months when they are between cars.
Gathering the driving information on these folks up front is not only required, it’s also a good idea for the vehicle owner. Since motor vehicle reports are run, it gives you the opportunity to determine if you REALLY want this person to have access to your vehicle. It can be a big surprise to find your significant other has accumulated more speeding citations than Mario Andretti, or has racked up multiple DUI’s or at-fault accidents. Having this information up front allows you to address potential problems in advance – and maybe even decide NOT to allow them to operate your vehicle.
Insurance companies handle additional operators in a variety of ways. They may be listed as “Rated” operators – which means the driver has benefits as a regular operator under your policy. If the driver has their own car and insurance, you may opt to list them as “Non-rated”. This option means your insurer understands they primarily operate their own vehicle, but are covered for an occasional use of yours. The third option is to EXCLUDE – meaning the insurer is aware of their presence, you (and they) agree the driver will not operate your vehicles, and you are not surcharged for their driving record issues. There is no coverage for an excluded driver on your policy.
Consider the Michigan case of Dewley vs. Pioneer State Mutual Insurance. Pioneer State policy holder Robert Woodyard was living with his girlfriend Tiffany Lynn Dewley and regularly let her drive his car. Dewley was injured in an auto accident while driving Woodyard’s car, and Pioneer State declined benefits for her injuries under the policy. The court determined that Woodyard had a duty to disclose Dewley as an operator on his policy and failed to do so. It was determined that Dewley had a poor driving record and would have been ineligible for coverage had the company known of her presence. In essence Woodyard had committed “Silent Fraud” by failing to disclose a material fact about his insurance usage giving the company grounds to deny her benefits under the policy.
If you are found to have an undisclosed operator in your household, you insurer may have the right to cancel your policy, deny payment for claims caused by that operator, and you may be sued for insurance fraud. Saving a few dollars by not paying for another operator may seem appealing, but you are gambling every time a non-disclosed driver uses your vehicle. It’s best to address these issues up front to avoid nasty surprises after an accident.
Karen Diehl operates Diehl Insurance with husband Eric. They agency specializes in motorcycle insurance for motorcycles and collector cars in Ohio, Kentucky and Indiana.
