Insurance lawyer Steve Gursten answers this common question about what happens with a car accident in a borrowed car
Today I’d like to share another common question I receive from people who call my law office. They’ve been in a car accident — BUT the car accident occurs in a car they’ve borrowed from a friend or family member.
Everyone is panicking. They want to know who will be responsible, and what they will have to pay. So here is the question:
Q. If I allow someone to borrow my car and they become involved in a car accident, what happens?
A. Since I practice law in Michigan, I am answering this as a Michigan attorney. If you live in another state, you should talk to a licensed attorney in that state experienced with traffic accidents. In any civil lawsuit filed for injuries and pain and suffering damages resulting from the crash that the driver who borrowed your car causes, both of you can be sued.
Even though you are being sued as the owner of the vehicle and your name will be on the complaint, understand that this is really more of a legal fiction (in most cases). This is because if you have insurance, your own insurance company will hire a lawyer, defend the lawsuit, pay all legal costs and expenses, and ultimately (in most cases) pay a settlement within your insurance policy limits.
You are being added to the lawsuit because Michigan has an owner’s liability statute. The public policy of this law is to also hold vehicle owner’s responsible for who they let use and drive their car.
The reason your name and not the insurance company appears on the complaint is because in Michigan, as in all other states, we do not allow a jury to know that there is insurance that will be paying the verdict. So juries are not told there is insurance available or about the policy limits.
In addition, the driver of the borrowed car will also be a party in the lawsuit and face the same exposure.
So the issue becomes, is the driver who borrowed the car insured or not?
If the driver of your vehicle has No Fault insurance, then just like with you as the owner, the matter will be turned over to the driver’s car insurance company and the claim will be defended the same way. If the driver does not have insurance, then the driver risks his or her own personal exposure and his or her assets, just as it would if you as the owner of the car are not insured.
There are two other areas of Michigan law where someone who is injured by the driver of your car is entitled to help: the Michigan mini tort, and our first party No-Fault law. I’ve summarized our third-party pain and suffering law above in this answer.