Who’s Liable When You Loan Your Vehicle and There’s an Accident?



Most people have loaned their vehicle to a friend or relative at one point or another. It’s a generous thing to do for someone close to you who you trust, and it’s certainly a common practice. But as you hand the keys over, you may have a flash of worry: What if they get in an accident? What if my car gets totaled, or what if they get hurt?

Most of the time, however, you brush it off. After all, that would never happen … right?

When Someone Else Has an Accident in Your Car

Unfortunately, situations like this do occur. You lend your car to a roommate or sibling, and then you get that dreaded call: there’s been an accident with your car. But you weren’t the driver.

Naturally, you’ll have a lot of questions. Are you liable for the damages? Whose insurance will cover them? Who will pay for the driver’s injuries or injuries to any other parties involved?

The first thing that you should do in this situation is contact an attorney. A skilled attorney who has experience with motor vehicle accidents can help you determine whether you need to be concerned about liability and what you can do to protect yourself and your finances.

But in the meantime, here’s what you need to know: Unfortunately, there is no single answer to the question: Who is liable when you loan your car to someone and they have an accident?

The reasons is that multiple factors influence liability and who pays what in these situations. These are the factors that you’ll need to consider:

Living Situation

If the person you loan your car to is a member of your household, this may mean that you’re in the clear — meaning that your insurance plan will most likely cover that individual just as it would cover you if you had gotten into the accident.

If this is the case with your particular insurance policy, remember that you will still need to provide evidence that the person you loaned the car to is an actual resident who lives at your address. In other words, if your cousin from Michigan is visiting for a month, this may not mean that they are actually considered a member of your household. If you want, however, you can always add someone like this to your insurance if you know that they will be driving your car.

Driving Permission

This is important: Did you give permission for the other person to drive your vehicle? This is often a factor in determining who will be held liable. If someone you don’t know steals your car and crashes it, for example, this will automatically mean that you won’t be held liable. You will, on the other hand, be liable for using your own insurance to pay for damages to your own vehicle.

Driver Exclusions

Members of your household can generally drive your car and be considered on your insurance as a legal driver. But in some cases, vehicle owners might opt to exclude specific drivers from their insurance plans so that they would not be covered if they used your car and had an accident.

These excluded individuals might be members of your household that you don’t trust to drive their car, friends that you have loaned your car to in the past but who you no longer trust, or someone else. If one of these people gets in an accident in your vehicle, your insurance policy may not cover the damages incurred, and you may be held liable.

Fault in the Accident

Naturally, who was at fault in the accident also has some bearing on the situation and who will be held responsible for damages. If your driver was not at fault, then most likely the insurance plan of the other party involved will cover your damages.

Your Insurance Coverage

Before you hand the keys over to anyone, be sure to review your insurance plan to determine what kind of coverage you have. If you neglect this review prior and an accident does occur, review your plan immediately. All policies are different, so you may or may not have coverage for specific events like this one. Check with your policy.

Limits on Insurance Policies

In some cases, if the accident was especially severe, the damages incurred may go over the amount of money that your insurance company will pay out. In these cases, it is possible that the driver of your car has insurance that could make up the difference and fill in gaps. For this to be applicable, however, the insurance policy of the person you loaned the car to must have a policy that covers a borrowed vehicle.

Again, there is no single formula for determining who is liable in a situation where an accident occurred with a loaned car. Many times, a specific factor will override the others. For example, even if the driver who loaned your car was a member of your household, if they were intoxicated, you might still be liable for the damages.

When It’s an Employee Driving Your Car

It’s important to remember that the situation is much different if it is an employee of yours who drove your car and got into an accident.

This is an area of law called imputed negligence or vicarious liability, which essentially states that one party can possibly be liable for misconduct committed by another party if the two parties have a specific relationship — such as an employer–employee relationship. In these cases, if your employee was performing duties associated with their job while the accident occurred, you would likely be held liable for any negligent driving that they committed and that led to the accident.

Talk to a Personal Injury Lawyer

Because of the uncertain nature of accidents involving a loaned car, factors and laws can become extremely confusing, and you may not know where to begin after the incident. At this point, it’s essential to remember that just because you were not the driver in the accident, it doesn’t mean you won’t be somehow held liable for the damages. And in some cases, if pedestrians or individuals in your car or another car were injured seriously, this can mean that you’ll be held responsible for paying possibly thousands of dollars for something that you did not directly do.

That’s why it’s extremely smart to contact a reputable attorney right away after an accident like this. A lawyer who is experienced in personal injury law and has a keen understanding of motor vehicle accident cases can help you immensely. They will start by looking at your case and assessing the insurance policies involved. They can then discuss your options with you and help you save as much as possible under these unfortunate circumstances.

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