Vicarious liability refers to a situation where one person is liable for the actions of someone else. It applies to auto insurance in situations where the car is owned by one person and being driven by another individual. Car owners need to understand that if they decide to lend out their vehicle, they are also allowing that person to use their insurance as well.
If the borrower is involved in an at-fault accident while behind the wheel of the car, the owner’s insurance company will be used to pay for the personal injury and property damage claims made by the occupants of the other vehicle. If the accident occurred in a tort state for car insurance purposes, accident victims have the right to sue the at-fault driver and the vehicle owner to collect damages. The claim will be settled and the vehicle owner will likely be paying higher rates for his or her coverage for a few years following the incident.
Unless a car owner feels confident that a prospective borrower is going to be very responsible behind the wheel and not take any unnecessary risks, he or she should not take a chance on lending out the vehicle. The owner can offer the other person a ride if he or she doesn’t feel comfortable about lending it (and his or her car insurance coverage) out.