“We’re in a quandary about a situation that is probably not at all uncommon these days. When we are working on renewing personal lines accounts, we send each insured a short list of questions, asking if there have been any changes, new exposures, etc. One of the questions deals with any changes in who resides in the household. One of our personal auto insureds called us to say that her daughter graduated from college this past spring, now lives in another state, but still has custody of the auto she drove while in college. It is titled to both the daughter and her mom, and is still declared on the mom’s Personal Auto Policy (PAP). The daughter is listed as a driver in the mom’s policy."
“Our insured added that her daughter’s boyfriend has moved in with her, since he is having trouble finding a job."
“We are concerned about potential coverage gaps, as well as how the PAP and Personal Umbrella underwriters will view this change. We want to get our ducks in a row in preparation for working with the insured, and the underwriters. The obvious solution to us is for the daughter to simply get her own PAP and have the car re-titled in her name. However, the mom says the car is still financed. And if the daughter gets her own PAP with the title still in both names, that probably creates more problems than it solves. Since the mom has an umbrella, the PAP has $500,000 liability limits, so if the daughter insures that auto while it is jointly titled, that could cause a coverage gap for her mom. Would the Joint Ownership endorsement solve the problem?”
Call me Old School, but I think that joint titling anything is a bag of insurance snakes, and that goes double for jointly titling a car with a non-resident relative. Here are my thoughts on the coverage issues.
Assume Jill is your insured, Jillette is her daughter, and Bob is Jillette’s live-in boyfriend. Jill has an ISO (Insurance Services Office) PAP, which insures Jill’s Ford Explorer, and the jointly-titled Ford Taurus, which Jillette has. All coverage commentary and form excerpts below are ISO. Non-ISO proprietary forms may be different.
Excerpt from ISO Personal Auto Policy:
PP 00 01 01 05
Part A – Liability
B. "Insured" as used in this Part means:
1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".
2. Any person using "your covered auto".
3. For "your covered auto", any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.
4. For any auto or "trailer", other than "your covered auto", any other person or organization but only with respect to legal responsibility for acts or omissions of you or any "family member" for whom coverage is afforded under this Part. This Provision (B.4.) applies only if the person or organization does not own or hire the auto or "trailer".
Situation #1: Jillette is driving Bob’s car.
1. Jillette is an insured in Bob’s PAP, as a permissive user.
2. If Bob’s PAP is non-ISO, it may exclude undeclared resident operators. ISO has no such exclusion.
3. Jillette is not an insured in Jill’s PAP, since she is no longer a resident family member. Therefore, Jillette only has Bob’s limits available, and receives no coverage from Jill’s PAP or umbrella. This applies for all coverages for Jillette under Jill’s PAP, except when Jillette is in the Taurus.
4. Also, if Jill was struck as a pedestrian by an auto, she would have no Medical Payments or Uninsured Motorists coverage from Jill’s or Bob’s PAP, because she does not have “family member” status in either auto policy.
5. The fact that Jillette is declared as a driver in Jill’s PAP has no effect on coverage.
Situation #2: Bob is driving Jillette’s Taurus.
1. Bob is an insured in Jill’s PAP as a permissive user. While Jill probably did not give Bob expressed permission to drive the Taurus, this would not automatically prohibit Bob from being an insured. Note that the term “permissive user” is something of a misnomer. The actual coverage grant for non family-member drivers is “Any person using ‘your covered auto’.” [See “Insured B.2” in excerpt above.] And the exclusion applies to anyone “Using a vehicle without a reasonable belief that that ‘insured’ is entitled to do so. This Exclusion (A.8.) does not apply to a ‘family member’ using ‘your covered auto’ which is owned by you.” So unless Jill has expressly told Bob he is not allowed to drive the Taurus, he is an insured in Jill’s PAP, and possibly her umbrella as well.
2. The fact that Bob is an insured in Jill’s PAP is good news for Bob, but not necessarily good news for Jill. This highlights one of the biggest disadvantages of joint titling an auto, especially when the auto is not garaged at the named insured’s residence: Jill has no control over who might operate the Taurus. And this could cause her to be named as a defendant in a lawsuit. But, at least Jill’s PAP will provide coverage for her, although it could cause a large claim to be paid by her PAP.
3. Jill might ask your agency to run Bob’s MVR, in part because he might drive the Taurus, which is a valid concern for Jill, and also because Jill might want to “check-up” on Bob, as most any parent would. However, because MVRs are protected under federal privacy laws (the Fair Credit Reporting Act - FCRA, for example), agencies must be very careful about pulling MVRs and similar protected information. In my view, I do not think the agency has a valid legal reason to run Bob’s MVR. And even if they did, I absolutely do not believe they have any legal right to share it with Jill.
I have read about adverse E&O cases where agency staff provided MVRs to third parties that had no legal right to them, such as in Jill’s case. There have even been cases where agency staff people have run MVRs on people they were dating, or on ex-spouses during child custody proceedings. In one case, the agency had to pay a $250,000 judgment.
Conversely, the insurer might have a right to review Bob’s MVR, as a part of underwriting drivers on a vehicle they insure.
Here are some possible solutions:
Option #1: Get the Taurus retitled into Jillette’s name, and she gets her own PAP.
I agree with you – this is by far the best option. Where the Taurus is still being financed, that presents a hurdle, but in many cases, refinancing can be arranged.
Option #2: Write a PAP with both Jill and Jillette as Named Insureds.
This is a plausible second choice, but one complication in this situation is that Jill also owns a Ford Explorer which she drives. So a PAP would have to be written on both the Explorer and the Taurus, naming both Jill and Jillette as Named Insureds. Where no market the agency has will do this, the only option would be to write a PAP in Jill’s name covering the Explorer, and write a separate PAP in both their names, covering the Taurus. In this case, it would be critical to clone the limits, terms, and conditions, and preferable write both policies with the same insurer.
For insurers that follow ISO rules for PAP eligibility, autos owned jointly by non-resident relatives must be written on a separate policy, using the Joint Ownership endorsement.
Option #3: Add Jillette as an Additional Insured to Jill’s PAP.
ISO has no Additional Insured endorsement for PAP. This is primarily because the definition of “insured” for liability includes broad coverage for omnibus insureds. For example, if Jill was using her Explorer on behalf of her employer and caused an at-fault accident, she is an insured under B.1., and her employer is an insured under B.3. [See PAP excerpt above.]
Some non-ISO auto markets have proprietary “additional insured” provisions or endorsements, while other markets have similar provisions for “additional interests.” The coverage afforded the additional person varies with the specific form, and the extent of protection is often limited to vicarious coverage only. In essence, this is no substitute for Jillette being a Named Insured in her own PAP.
1. I commend your agency for contacting insureds during the renewal process. Procedures such as this are good for business, as well as good E&O loss control measures.
2. We know that getting the car titled in Jillette’s name is the best option, but since it is financed, it cannot always be done. Therefore, the agency must be clear about possible gaps in coverage if other options are selected by the insured. And as always, maintaining good documentation about communication with the insured and the insurer is vital.
Last Updated: March 25, 2016