Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

My older son, 23, is acquiring his first car. He has picked it out and will be paying for it himself (altho I'm transferring a part of the purchase price to his checking account). Title will be in his name and he will be buying the insurance (that is, the car won't be on our family policy). My son has his own apartment, and hasn't spent more than a few days at homes in a few years. He is still in college, but is also working. As of right now we provide more than half of his support, some which I'm sure will go towards car expenses.

Our state follows the Family Car Doctrine, which provides:
Liability under the doctrine is incurred (1) when the vehicle is owned, provided, or maintained by a parent, (2) for the general use, pleasure, and convenience of family members, (3) and at the time of the accident the vehicle is being driven by a member of the family for whom the vehicle is maintained, (4) with the express or implied consent of the parent
My understanding of the FCD as applied to the above facts is that my son's car will not be a "family car."

Here's my question: If there is an accident with my son's car and an injured person claims against me under the FCD (correctly or not) will my homeowner's insurance and umbrella cover the defense and any liability?

I think the answer to this question is yes because homeowner's insurance generally covers personal liability, even not related to the home.

I've asked my insurance agent this question, but haven't received an answer.

Thoughts?
bgf
Posts: 2085
Joined: Fri Nov 10, 2017 8:35 am

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by bgf »

It's not possible to answer this question without copies of your policy and knowledge of your state law. I would rely on your agent and make sure you get the answer in writing. My gut is that your company would provide you a defense and seek a dismissal of you in any lawsuit filed against you. It depends on the insurance company (some do more than others for their insureds), the policy terms, and state law.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

No. Your homeowners will not cover it. Auto claims are always excluded from home/renters policies.

Will your auto cover it? Maybe, they'll certainly start and adjudicate the claim.
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

Lee_WSP wrote: Sat Apr 10, 2021 5:05 pm No. Your homeowners will not cover it. Auto claims are always excluded from home/renters policies.

Will your auto cover it? Maybe, they'll certainly start and adjudicate the claim.
The auto exclusions in my homeowner's policy are:
f. bodily injury or property damage arising out
of the ownership, maintenance, use, loading, or
unloading of:
...
(2) a motor vehicle owned or operated by or
rented or loaned to any insured; or
and
g. bodily injury or property damage arising out of:
(1) the entrustment by any insured to any person;
(2) the supervision by any insured of any person;
(3) any liability statutorily imposed on any insured;
or
(4) any liability assumed through an unwritten
or written agreement by any insured;
with regard to the ownership, maintenance, or
use of any aircraft, watercraft, or motor vehicle
not covered under Section II of this policy;
Neither of these would apply to my son's car, except possibly (g)(3) and the Family Car Doctrine is not statutory law, it's common law. (Plus "bodily injury or property damage arising out of...any liability statutorily imposed on any insured" doesn't even make sense.)

BTW insured is defined as the named insured and any relative living with us.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

If you don't agree with me, you're most certainly welcome and should consult an attorney in your state.
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

Lee_WSP wrote: Sat Apr 10, 2021 7:01 pm If you don't agree with me, you're most certainly welcome and should consult an attorney in your state.
I am an attorney in my state. My question is more about insurance coverage and any practical experience of Bogleheads.
oldfort
Posts: 2781
Joined: Mon Mar 02, 2020 7:45 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by oldfort »

Why are you worried about the FCD, when according to you it doesn't apply?
User avatar
MP123
Posts: 4084
Joined: Thu Feb 16, 2017 2:32 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by MP123 »

I have a hard time believing that an auto policy would cover your vicarious liability for a vehicle that you neither owned nor were operating. Where does that stop? But maybe.

It seems like it might fall under homeowners, but maybe excluded.

When I asked my agent about this same situation (and same state, I think) a few years ago I was unable to get a definitive answer. They said it was a gray area, and "it depends". Not super comfortable.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

The family car doctrine (as I understand it) basically implies ownership of the vehicle either through actual ownership or implied ownership (maintenance).
simplextableau
Posts: 436
Joined: Wed Oct 05, 2016 9:20 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by simplextableau »

Not quite the same, but I knew a guy who was sued for a car accident in which he wasn't involved. As in the plaintiff's lawyer only had a name for the driver, so he picked one of the listings out of the phone book and sued him. The lawyer guessed incorrectly.

So the guy calls his insurer and explains the situation. They basically said that's great, you weren't driving, and by the way because you've confirmed that you weren't involved, there's no coverage and no defense provided. He had to hire a lawyer out of pocket to get the case dismissed.
User avatar
MP123
Posts: 4084
Joined: Thu Feb 16, 2017 2:32 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by MP123 »

Lee_WSP wrote: Sat Apr 10, 2021 8:32 pm The family car doctrine (as I understand it) basically implies ownership of the vehicle either through actual ownership or implied ownership (maintenance).
Yes, and I think there may also be some question of ownership around OP gifting a portion of the purchase, even if their name isn't on the title. At least that was mentioned to me.

But whether FCD applies or not I think the question is what (if any) coverage would pay to defend.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

MP123 wrote: Sat Apr 10, 2021 8:56 pm
But whether FCD applies or not I think the question is what (if any) coverage would pay to defend.
Agreed, but the way homeowners policies are written, I'm 99.7% sure that it's going to be denied as an exclusion unless it's a very poorly written policy, after which, I'm sure they'll update all the contracts.
talzara
Posts: 4745
Joined: Thu Feb 12, 2009 6:40 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by talzara »

MP123 wrote: Sat Apr 10, 2021 8:15 pm It seems like it might fall under homeowners, but maybe excluded.
Lee_WSP wrote: Sat Apr 10, 2021 9:51 pm Agreed, but the way homeowners policies are written, I'm 99.7% sure that it's going to be denied as an exclusion unless it's a very poorly written policy, after which, I'm sure they'll update all the contracts.
Homeowners insurance policies always exclude motor vehicle liability.

This what the ISO HO-3 policy says. Coverage E is liability, and coverage F is medical payments. All homeowners insurers have similar language in their policies.
SECTION II – EXCLUSIONS
A. "Motor Vehicle Liability"
1. Coverages E and F do not apply to any "motor vehicle liability" if, at the time and place of an "occurrence", the involved "motor vehicle":
a. Is registered for use on public roads or property;
jbmitt
Posts: 657
Joined: Mon Jul 14, 2008 1:00 am

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by jbmitt »

If you were wrongfully brought in, I would think your auto insurer and umbrella policy would respond. Generally the duty to defend is broader than the duty to indemnify.

I’d guess that they’d quickly get out a reservation of rights and formally try to deny the claim and tender it back to your son’s insurance.

Assuming he has sufficient limits, that would seem like the path of least resistance.
User avatar
gwe67
Posts: 1364
Joined: Mon Dec 23, 2013 8:52 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by gwe67 »

cowdogman wrote: Sat Apr 10, 2021 7:17 pm
Lee_WSP wrote: Sat Apr 10, 2021 7:01 pm If you don't agree with me, you're most certainly welcome and should consult an attorney in your state.
I am an attorney in my state. My question is more about insurance coverage and any practical experience of Bogleheads.
Best reply ever.
VTI 48%, VXUS 12%, BND 40%
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

gwe67 wrote: Sun Apr 11, 2021 2:11 pm
cowdogman wrote: Sat Apr 10, 2021 7:17 pm
Lee_WSP wrote: Sat Apr 10, 2021 7:01 pm If you don't agree with me, you're most certainly welcome and should consult an attorney in your state.
I am an attorney in my state. My question is more about insurance coverage and any practical experience of Bogleheads.
Best reply ever.
He who represents himself has a fool for a client.
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

cowdogman wrote: Sat Apr 10, 2021 6:47 pm
The auto exclusions in my homeowner's policy are:
f. bodily injury or property damage arising out
of the ownership, maintenance, use, loading, or
unloading of:
...
(2) a motor vehicle owned or operated by or
rented or loaned to any insured; or

cowdogman wrote: Sat Apr 10, 2021 3:14 pm
Liability under the doctrine is incurred (1) when the vehicle is owned, provided, or maintained by a parent, (2) for the general use, pleasure, and convenience of family members, (3) and at the time of the accident the vehicle is being driven by a member of the family for whom the vehicle is maintained, (4) with the express or implied consent of the parent
Circling back to this since you are a lawyer. I've bolded the relevant quotes and I think you can connect the dots.

The only remaining question as to the source of the liability is what exactly "provided" means (I'm not an expert in this particular area of the law so will not hazard a guess, but I think the plain meaning is clear), but it's clear that homeowners insurance is not meant to cover it and any coverage would be through some loophole you'd exploit.
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

MP123 wrote: Sat Apr 10, 2021 8:15 pm I have a hard time believing that an auto policy would cover your vicarious liability for a vehicle that you neither owned nor were operating. Where does that stop? But maybe.

It seems like it might fall under homeowners, but maybe excluded.

When I asked my agent about this same situation (and same state, I think) a few years ago I was unable to get a definitive answer. They said it was a gray area, and "it depends". Not super comfortable.
Yes, it's an uncommon question. Not surprised by your agent's response--I'm expecting a similar unhelpful answer from my agent.

Homeowner's policies do generally cover personal liability, whether associated with the home or not. General personal liability coverage is one of the benefits of a homeowner's policy. My policy (as currently drafted) does seem to cover vicarious liability (if non-statutory--a strange distinction/choice of words I admit) related to motor vehicles not owned/used by the "insured."

If I were more worried about the application of the FCD I think the solution would be to have the car in my name and insure it myself, and thereby assure the application of the umbrella--a bizarre result IMO. And I'm guessing my son would strongly object--as he should. I am however going to suggest he get high limits.
User avatar
MP123
Posts: 4084
Joined: Thu Feb 16, 2017 2:32 pm

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by MP123 »

cowdogman wrote: Sun Apr 11, 2021 4:42 pm If I were more worried about the application of the FCD I think the solution would be to have the car in my name and insure it myself, and thereby assure the application of the umbrella--a bizarre result IMO. And I'm guessing my son would strongly object--as he should. I am however going to suggest he get high limits.
Yes, I think owning and insuring it yourself would be the only sure way to guarantee that you were covered. But that's not really palatable to either party.

We ended up with my child getting a high limit on their insurance, high enough that pursuing a claim against me based on FCD (with unclear coverage on my part) wouldn't be too tempting, hopefully. Obviously, if they only had state minimum coverage there might be a greater need to come after parental insurance/assets.

After a few years it became a non-issue, so there's that to look forward to...
User avatar
Lee_WSP
Posts: 10401
Joined: Fri Apr 19, 2019 5:15 pm
Location: Arizona

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Lee_WSP »

While there seems to still be disagreement about whether the underlying auto or homeowners covers this situation, what is the wording of a basic umbrella policy? What about a personal liability policy?
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

MP123 wrote: Sun Apr 11, 2021 5:17 pm
cowdogman wrote: Sun Apr 11, 2021 4:42 pm If I were more worried about the application of the FCD I think the solution would be to have the car in my name and insure it myself, and thereby assure the application of the umbrella--a bizarre result IMO. And I'm guessing my son would strongly object--as he should. I am however going to suggest he get high limits.
Yes, I think owning and insuring it yourself would be the only sure way to guarantee that you were covered. But that's not really palatable to either party.

We ended up with my child getting a high limit on their insurance, high enough that pursuing a claim against me based on FCD (with unclear coverage on my part) wouldn't be too tempting, hopefully. Obviously, if they only had state minimum coverage there might be a greater need to come after parental insurance/assets.

After a few years it became a non-issue, so there's that to look forward to...
Sounds like we're in alignment, and actually I wouldn't care about taking title and adding to our insurance.

My son is 23, has had his own place for a couple years, lives in a different city, has a job, has never really needed a car but wants one now. Vicarious liability should not, in a perfect world, be an issue just because I fund part of his expenses. It's too bad our state law is so broad/vague on this topic.
boglerdude
Posts: 928
Joined: Fri Jul 10, 2015 1:28 am

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by boglerdude »

They could try (and fail) to argue he's a member of your household because of the financial support.

Max his policy and yours and get 1M umbrellas. Liability insurance is cheap. And dash cams.
User avatar
Harry Livermore
Posts: 1937
Joined: Thu Apr 04, 2019 5:32 am

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by Harry Livermore »

Nothing to add, just a post to editorialize:
Any plaintiff, lawyer, judge, or insurer who pursues or puts up with the nonsense involved in claiming that someone who happens to be related to a party to a suit is somehow magically liable for damages should be locked up in the loony bin. A 23 year old adult who lives on his own and buys, maintains, and insures his own vehicle, connected to his parents by love and DNA only, should have to wonder if dad's on the hook for some creepy suit?
Cheers

PS- Thank you for starting this thread, Cowdogman. Our oldest graduates college soon and I will advise him to be the maximum coverage possible when he purchases his own car. Which I probably would have done anyway.
chipperd
Posts: 1674
Joined: Sat Sep 24, 2011 5:58 am
Location: here and now

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by chipperd »

Harry Livermore wrote: Mon Apr 12, 2021 5:20 am Nothing to add, just a post to editorialize:
Any plaintiff, lawyer, judge, or insurer who pursues or puts up with the nonsense involved in claiming that someone who happens to be related to a party to a suit is somehow magically liable for damages should be locked up in the loony bin. A 23 year old adult who lives on his own and buys, maintains, and insures his own vehicle, connected to his parents by love and DNA only, should have to wonder if dad's on the hook for some creepy suit?
Cheers

PS- Thank you for starting this thread, Cowdogman. Our oldest graduates college soon and I will advise him to be the maximum coverage possible when he purchases his own car. Which I probably would have done anyway.
+1 on both paragraphs, as we have one ready to graduate next year as well. Also, what a sad situation that one would need to be even considering this type of legal fallout.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
User avatar
Topic Author
cowdogman
Posts: 2070
Joined: Sat Dec 16, 2017 6:44 pm
Location: Washington State

Re: Liability Associated with Son's Car: Homeowner's Insurance and Umbrella

Post by cowdogman »

Postscript: My son ended up getting high liability limits and adding a $1M umbrella on top. The umbrella is costing him $20/month.
Post Reply