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Can You Insure A Car You Don’t Own?

April 21, 2020 by Steven M. Gursten

Can You Insure A Car You Don't Own?

You can insure a car you don’t own in Michigan. The auto No-Fault law doesn’t require that auto insurance be personally purchased by a vehicle’s owner. If there’s a valid No-Fault policy on a vehicle – regardless of who bought it – then the owner will be considered “insured” if injured in a car accident.

Why does this even matter? If a person is determined to be “uninsured” (i.e., lacking the auto insurance required by the auto No-Fault law) at the time of a motor vehicle accident, then the consequences are extreme. Under Michigan’s auto law, he or she loses all legal rights to receive No-Fault insurance benefits, and even the right to sue the wrongdoer driver who causes the crash for pain and suffering compensation and other economic damages.

As an auto accident and auto No-Fault insurance lawyer, I’ve been asked this question a number of times as auto insurance rates have continued to climb. As No-Fault car insurance has become more and more unaffordable for drivers, this question of whether someone can insure a car they don’t own has been asked with increased frequency. For many people who cannot afford to insure their own car, this is their only option other than to drive illegally without any insurance. When this happens, they look to family, loved ones and friends for help with paying their vehicle insurance.

It’s not uncommon for people to want to try to help by purchasing an auto insurance policy for someone who’s struggling financially. The question is: can you do it? Can you insure a car you don’t own?

Fortunately, the law allows people to insure another person’s car even if they do not own it. This serves public policy by protecting other innocent drivers on our roads and gives someone who may be struggling financially the peace of mind of knowing they will be “insured” as required by the auto No-Fault law in this state if they’re injured in a car accident. Being an owner that is covered means you will receive No-Fault benefits to pay for medical bills and lost wages. It also means you retain the legal right to bring a lawsuit and to sue the at-fault driver for pain and suffering compensation and other economic damages.

An uninsured driver is unable to collect auto No-Fault insurance benefits such as medical bills and lost wages and is unable to sue an at-fault driver for his or her injuries under Michigan’s auto law, even when the uninsured driver is 100% innocent of fault or wrongdoing for the collision and no matter how catastrophic his or her injuries may be. Driving uninsured essentially gives an at-fault driver immunity for hurting you.

Can you insure a car that is not in your name in Michigan?

You can insure a car that is not in your own name in Michigan. Michigan’s auto No-Fault law requires that a vehicle’s owner “maintain” No-Fault auto insurance on the vehicle. But it doesn’t require that the policy be personally purchased by the owner. It can be purchased by someone whose name is not on the title. 

This important point was clarified by the Michigan Supreme Court in Dye v. Esurance (#155784, July 11, 2019) where the justices held that a car accident victim was “insured” as required by the No-Fault law by an auto insurance policy purchased for his vehicle by a non-owner.

Specifically, the Dye ruling stated:

“We therefore hold that an owner or registrant of a motor vehicle involved in an accident is not excluded from receiving no-fault benefits when someone other than that owner or registrant purchased no-fault insurance for that vehicle because the owner or registrant of the vehicle may ‘maintain’ the insurance coverage required under the no-fault act even if he or she did not purchase the insurance.”

Before Dye, Michigan courts had not fully understood the legal requirements of the No-Fault law in regards to insuring a car you do not own. Prior court decisions were misinterpreting the law by holding that No-Fault insurance policies were valid only if purchased or obtained by vehicle owners and that vehicle owners injured in a motor vehicle collision would be deemed “uninsured” and, thus, ineligible for PIP benefits and injury compensation under the No-Fault law if the auto insurance policy covering their vehicle had been purchased by a non-owner.

This erroneous interpretation originated with the Michigan Court of Appeals in the 2014 published opinion in Barnes v. Farmers Insurance Exchange.

Because the Barnes rule was “contrary to the plain language of the no-fault act,” the justices in Dye overruled Barnes.

NOTE: Just because a person’s name is not on the title of a vehicle does not necessarily preclude him or her from being considered an “owner” of the vehicle. An “owner” for purposes of Michigan’s No-Fault law can be anyone who has “the use of a motor vehicle . . . for a period that is greater than 30 days.” (MCL 500.3101(3)(l)(i)

What do auto insurance companies think about policies being purchased by someone other than a vehicle’s owner?

When it comes to insuring a car for someone other than the vehicle’s owner, insurance companies look at this “non-owner’ scenario as a win-win for them. One auto insurance company makes money by selling a policy that will potentially protect no one and that will yield no claims. And another insurance company would then use the Barnes case I mentioned above to avoid having to pay No-Fault benefits by claiming the victim was still “uninsured” and, thus, ineligible for No-Fault PIP benefits because the policy on his or her car was purchased not by him or her – the vehicle’s owner – but by a non-owner.

Thanks to the Michigan Supreme Court’s ruling in Dye, insurance companies can no longer do this to people who were trying to fulfill the spirit, the intent, and the public policy behind why we insure cars and other vehicles.

In addition to the portion of the ruling I quoted above, the justices in Dye also ruled:

  • “Because MCL 500.3101(1) does not prescribe any particular manner by which no-fault insurance must be maintained, we will not read into the statute a requirement that the insurance be purchased or obtained by a vehicle’s owner or registrant.”
  • “[D]etermining whether no-fault benefits are available to an injured person does not depend on ‘who’ purchased, obtained, or otherwise procured no-fault insurance.”
  • “Thus, we conclude that the language of MCL 500.3101(1) does not require an owner or a registrant of a motor vehicle to personally obtain no-fault insurance.”

Significantly, the Michigan Supreme Court has reinforced its ruling in Dye by reversing two Michigan Court of Appeals rulings that had relied on Barnes to deny No-Fault benefits to crash victims because the No-Fault auto insurance policies covering their vehicles had been purchased not by themselves but by non-owners. (See Alani v. GEICO (COA unpublished, 1/30/2018, #334061)(reversed in an October 29, 2019, order by the Michigan Supreme Court, #157368); Erika Easter v. Progressive Marathon (COA unpublished, 3/20/2018, #335815)(reversed in a December 11, 2019, order by the Michigan Supreme Court, #157692))

Additionally, in Howard v. Progressive (COA unpublished, October 15, 2019, #343556), a case that was handed down after Dye, the Michigan Court of Appeals relied on Dye to rule that “there is no merit in [the auto insurance company’s] contention that [the crash victim] is barred from receiving no-fault benefits merely because his wife, Eula, purchased the no-fault policy” on the vehicle owned by the collision victim.

UPDATE: On April 23, 2020, the Michigan Court of Appeals ruled in a published opinion that you can insure a car that you don’t own in Michigan. In Memberselect v. Flesher (#348571), a unanimous panel of judges upheld the validity of an “automobile liability insurance” policy that was purchased by the vehicle owner’s mother to cover the vehicle owned by her adult son – who did not live with her. Reasoning that the mother had a “sufficient insurable interest” in the “well-being of her adult child,” the court explained that “the interest of a parent in an adult child’s welfare” includes “such aspects as being covered for potential injury, being protected from financial ruin from injuring another, even the avoidance of civil infraction or other legal penalties for driving while uninsured . . .”

How does an injured owner get No-Fault benefits if a non-owner purchased his vehicle’s auto insurance?

This is a great question. The law as I’ve discussed above makes clear that a motor vehicle owner is “insured” at the time of a car accident even if the auto insurance policy covering his or her vehicle was purchased by a non-owner.

However, the fact that the vehicle owner is deemed covered for purposes of the No-Fault law’s mandatory insurance requirements does not answer the question of which auto insurance company is going to pay for his or her No-Fault benefits.

That determination will be made based on the No-Fault law’s “priority” rules. Based on the “priority” rules, the injured owner’s options would include (in the following order):

  • First – Filing a claim for No-Fault benefits through the auto insurance policy in which the injured owner’s “spouse” is the “named insured.” (MCL 500.3114(1))
  • Second – Filing a claim for No-Fault benefits through the auto insurance policy in which the “named insured” is a “relative” of the injured owner who lives in the “same household” as the injured owner. (MCL 500.3114(1))
  • Third – Filing a claim for No-Fault benefits through the Michigan Assigned Claims Plan. (MCL 500.3114(4))

Normally, the first order of “priority” for a car accident victim to claim No-Fault benefits is the auto insurance policy in which he or she is “named” as the “named insured.” (MCL 500.3114(1)) But that is not possible when the policy covering an injured owner’s vehicle was purchased by a non-owner because then the “named insured” on the policy will be the non-owner. However, depending on the circumstances, the injured owner may be able to claim under the policy if the “named insured” is a spouse or a resident relative.

Need help? Call Michigan Auto Law first

If you have been injured in a car accident and the insurance company is questioning whether you were insured because your policy was purchased by someone whose name is not on the vehicle’s title, call toll free anytime 24/7 at (800) 777-0028 for a free consultation with our experienced auto accident attorneys. You can also get help from an experienced auto accident attorney by emailing [email protected] or you can use the chat feature on our website.

Can You Insure A Car You Don’t Own?

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