During a family visit, your 21 year-old grandson asks to borrow your car. You know him to be safe and conscientious and he is just to go to the local mall. You have all of the necessary insurance and you remember from conversations over the years with your insurer that occasional guests are insured while driving your car. You would have preferred he not asked but the pressure is on and you hand him the keys telling him to drive safe.
A short while later the police call. He has been in a serious crash and thankfully is uninjured. They advise you that his out-of-province license had actually been suspended. Apparently he had overlooked paying a few tickets back home. They further advise your 2-year-old car is probably a write-off. There were also injuries in the car he hit and there is a chance they will be seeking damages from you.
From an insurance perspective, this is a nightmare. First, as the car was being operated by someone "not authorized by law", you have just given up coverage on the vehicle i.e. no collision insurance. The cost to repair, or the entire value of the vehicle if written off, will be entirely at your expense. Further, had your grandson sustained injuries, he would not be covered under all of the accident benefit provisions.
Second. If there is a lawsuit from the injured third-parties, it is directed at the owner of the vehicle – you! Further, if the eventual judgment e.g. $2,000,000 exceeds the limit of your liability insurance e.g. $1,000,000, you will be responsible to pay the 2nd $1,000,000. House? Savings? Potentially gone! Higher liability limits, and the corresponding "underinsured motorist protection" would have helped and are extremely important regardless of who is driving your car! Consider $2,000,000 as a minimum these days.
Finally, if it could not get any worse, you now have an "at-fault" rating on your insurance record…even though you were not even the driver! When, or if, you go to purchase a new vehicle and arrange new insurance, there may be a considerable increase in your premium.
This sad but fictitious tale just serves as an important reminder. It is your vehicle that is insured and this insurance is subject to all of the terms, conditions, and exclusions, as spelled out in the actual policy document*. When you lend your vehicle you are effectively lending your insurance. Use caution when doing so. Make sure the driver is properly licensed and ensure you are comfortable with the consequences in the event of such an incident.
Attention business owners – This applies to employee drivers as well.
*In Ontario refer – http://www.fsco.gov.on.ca/english/forms/autoforms/endorsement/default.asp
The Insurance Advisors @ Guthrie Insurance Brokers Ltd
Toronto – (416) 487-5200 Richmond Hill – (905) 313-8481
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