Why You Should Never Loan Your Vehicle to a Friend

Many people do it, and in most cases, there is no harm done. It’s still an extremely risky thing to do, however.

We’re talking about loaning your vehicle to a friend – or even a family member if they are not specifically listed on your auto insurance policy as being authorized to operate the vehicle. If you allow someone who is not on your policy to drive the vehicle and they are involved in the accident, it is you as the vehicle’s owner – not the driver – who bears liability.

In the end, this could wind up costing you big bucks – and depending on the circumstances, your insurer may not even cover the loss.

I’m Not Covered?
In simple terms, yes – if you have “named driver” coverage and the friend is not named on the declaration sheet. In this case, if you handed over the keys and gave the friend permission to take the vehicle and s/he subsequently caused an accident, then your insurer has no legal obligation to pay you anything.

If you do plan to lend your vehicle out to a friend, you should contact your insurer beforehand. It is possible to get a policy that will cover anyone who operates the vehicle, or purchase a rider that will cover liability when said friend is operating the vehicle, although such additional coverage may be expensive.

You may also wind up suffering a number of negative consequences.

What Is “Vicarious Liability”?
In most states, the “owner” of the vehicle is presumed to be the person(s) listed on the title. Under the legal doctrine of vicarious liability, the owner of the vehicle is held liable for any accident that occurs when a second party is driving the vehicle. Even if this is covered under your insurance policy, you as the owner will wind up paying any deductibles. Furthermore, the accident will go on your driving record, meaning your insurance rates will most certainly go up – possibly by a substantial amount.

What if my Car is Stolen?
The key here is consent – or at the very least, acquiescence. For example, if an unauthorized person said to you, “Hey, I’m going to take your car to the store” and you did not explicitly say “no,” you gave that person your legal consent (in legalese, this is called qui tacet consentit).

Normally, if your car is taken without your knowledge or consent – i.e. stolen – then you would not be held liable for any accident caused by the thief, provided that you report the vehicle as stolen as soon and possible. However, this can sometimes be a gray area; you may want to check with your insurer to make sure theft is covered as well as an attorney should this occur.