“Can I borrow your car?” Everybody has asked, most everyone has obliged, and most of the time the car is borrowed and safely returned without incident. But what happens if the car is returned damaged? Worse yet, what happens if the borrowed car is involved in an accident that injures others?
California legislation provides some answers to these questions. Under California Vehicle Code Section 17150, “Every owner of a motor vehicle is liable and responsible for death or injury to person or property resulting from a negligent or wrongful act or omission in the operation of the motor vehicle, in the business of the owner or otherwise, by any person using or operating the same with the permission, express or implied, of the owner.”
Without question, the owner of the car is responsible for damages caused by the borrower, and this is true whether the driver causes an accident by changing lanes or purposely rams another vehicle. So, as the owner of the vehicle, what do you do in such a situation? You look to your own insurance carrier to cover the loss, and for the most part this would be correct. In California, insurance policies generally follow the vehicles, and thus, in our situation, the loss occasioned by the borrowed vehicle would be covered under the owner’s insurance policy, subject to its exclusions and coverage limits. These drivers are considered “permissive drivers.” And you should always read your insurance policy to ensure that “permissive drivers” are covered and that there are no exclusions that could adversely alter such coverage.
Additionally, in our hypothetical accident, the owner’s risk could be limited with some caveats. California Vehicle Code Section 17151 limits the owner’s liability to the minimum insurance policy required in cases where the owner of the vehicle is only liable due to the ownership interest. Simply, if the owner carries the minimum insurance required in California, which is $15,000 per person, $30,000 per occurrence, and the policy covers “permissive drivers,” and the liability is solely based on vehicle ownership, then the owner will not face any additional exposure beyond the policy limits of $15,000/$30,000. However, this statutory limitation does not always apply.
The limitation on liability is applicable when the owner’s liability is based solely on vehicle ownership, which is not always the case. In order to circumvent the statutory limitation, a showing of negligent entrustment of the vehicle is required. So what does that mean? It means the person seeking compensation must show that the owner knew or should have known that the driver was incompetent or unfit to drive. Negligent entrustment is a somewhat difficult theory to prove; but it serves as a caution to those loaning their vehicle to others; i.e. avoid loaning your vehicle to a person with a poor driving record, an intoxicated person, someone who has a suspended license, multiple DUIs, and so on. If negligent entrustment is shown, the owner may be liable for damages that exceed their insurance coverage, which places their personal assets at risk.
The borrower of a vehicle is met with an entirely different set of risks. While California provides the owner of the vehicle with a statutory limitation on liability, no such limitation is afforded the driver. Additionally, many auto policies, regardless of limits, drop the coverage to the statutory limit in a “permissive driver” instance and leave the borrower of the vehicle to protect themselves. In such a case, you may believe the car you borrowed has a large insurance policy, only to find out that the policy drops to the minimum coverage once it is borrowed. At that point, if the injured’s damages exceed the minimum amount, you (the car borrower) will be left to cover the excess damages. There is no way of knowing what the policy on the borrowed car covers, so the best and only way of protecting yourself is to ensure that you have a sufficient insurance policy. If you are insured, you will be protected by your insurance coverage under the “temporary substitute auto” provision. Again, you should read your policy and know what is and is not covered.
If you have adequate coverage, and are not lending your vehicle to an incompetent driver, you should be able to affirmatively respond to or ask, “Can I borrow your car?” Just remember to plan ahead, make sure you’re not determining your coverage when tossing or receiving the keys, and never give your keys to the village idiot or town drunk.
Aaron Moore is an attorney with Maire & Burgess with a practice emphasis on civil litigation. He is a Shasta High graduate, and studied at UCLA, Boston University School of Law, and University of Central London prior to returning to the Northstate. He may be reached at Maire & Burgess, 2851 Park Marina Drive, Suite 300, Redding, CA 96001 (530) 246-6050, or amoore@maire-law.com.
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