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When your friend crashes your car: The rules of auto liability

Read the Spanish version: Cuando un amigo tiene un accidente con tu carro: Normas de responsabilidad civil con automóviles

If you drive your car and cause an accident, your car insurance will pay for the damages you cause, as defined in your policy. If your friend drives and crashes your car, you may assume that he -- and his car insurance -- will pay for damages. In fact, you are on the hook. Here are a number of accident scenarios and what you can expect to happen.

Scenario No. 1: Your friend drives your car and causes an accident with minimal damage to your car only.

If you loan your car to a friend, he damages your car and both of you have car insurance, normally your insurance will pay, under collision coverage, and you'll have to pay your deductible. The reason? Most auto insurance policy insures your vehicle plus you, any relative or anyone else who uses your car, if the use reasonably is believed to be with your consent.  Insurers refer to people you allow to operate your car as permissive drivers.

Scenario No. 2: Your insured friend drives your car and causes an accident with a lot of damage.

Let's say the accident your friend causes results in serious bodily injury to others and property damage. Liability coverage consists of two parts: bodily injury liability and physical damage liability.  Liability insurance follows a car first and driver second.  That means the car owner's policy covers the driver and all passengers in the other vehicle for bodily injury. The car owner's liability also covers property damage caused by his or her car. Liability insurance also covers the cost of your legal fees in the event that you are sued.

But if the damage exceeds your insurance liability limits, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage won't pay for damages beyond the limit for which you are insured.

If your liability limits are not enough to cover all the damages inflected on the other party, your friend's auto policy may be looked at secondary coverage. Cases in which you and your friend's insurance policies share the cost of the accident are known as "pro rata." For example, say your friend causes $22,000 in property damage while driving your car. You have $10,000 in property damage coverage and your friend has $25,000; total coverage available is $35,000.  Typically, in pro-rata cases, your insurance would pay the up to your limits, $10,000 and then have the other party look to your friend's insurer for the remaining $12,000. However, some insurers will pay the entire amount of damages and then seek compensation from your friend's insurer to recover the amount not covered by your policy.

If your friend was injured and has on his auto policy personal injury protection (PIP), he would claim against his policy for this.  PIP is different and follows a driver first and car second, meaning if he didn't have PIP and you did, then he could claim against your PIP coverage.

Scenario No. 3: Your uninsured friend drives your car and causes a lot of damage.

Lending your car to an uninsured friend can land you in a world of hurt. In this case, your uninsured friend has put you in a really bad spot. If the damage your friend causes exceeds your policy limits, the injured party can come after you for medical and property-damage expenses. 

Scenario No. 4: Your unlicensed friend drives and crashes your car.

Letting a friend that doesn't have a valid license, either without one altogether or under suspension, is a bad idea.  Many car insurance policies include an exclusion of coverage if the driver of your vehicle doesn't have a valid license. And if he doesn't have a license, it's doubtful he'd have auto insurance. This would leave you and your friend responsible for any damages he caused in an accident.  You can say it wasn't you driving, but car owners have vicarious liability for anyone they allow to use their vehicle. Basically, this means you can be held liable along with the driver for their actions behind the wheel.

Scenario No. 5: Your friend drives your car without your permission and crashes it.

You're not likely to be held accountable for the damages because your friend borrowed your vehicle without your knowledge. In this case, your friend's insurance (assuming he or she has it) will kick in first. If your friend is uninsured, you'll probably need to use your collision insurance to cover the damages to your own vehicle and your liability insurance may cover damage to others' property.

Bear in mind that insurance companies will assume a friend has permission to use your car unless there are clear indications that you denied permission, such as a drunken friend who drives away in your car without your knowledge or authorization. Someone you know using your car without your permission is termed "unauthorized use" instead of theft and usually means your insurer will not pay for damages if that person is in an accident in your vehicle. You may have to make a report with the police on the unauthorized use if the person does crash and you don't want your auto insurance policy used for claims (since these claims can affect your future rates).

Scenario No. 6: Your car is stolen and then crashed.

If the thief crashes into someone or something, you won't be held responsible for the damages done to other people and their property, but you probably will have to use your comprehensive insurance to pay for the damage to your car. Don't count on the thief having auto insurance, let alone enough money to spring for repairs and medical expenses. Even if the thief is caught and has insurance, his company won't pay for damages resulting from his criminal act.

Before allowing anyone to drive your vehicle, think about the consequences.  If the driver is unlicensed, it can keep your insurer from paying for accidents -- and in some states get you cited by police.  Your auto policy follows your vehicle, so claims that arise from a friend wrecking your car will go on your policy and affect your future car insurance rates.  Think about that before handing over the keys to your car.

If you've been paying higher rates after an accident your friend caused, it my be wise to compare top-rated auto insurance companies to see which ones might give you a lower rate.

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