For years, I have written extensively about how to insure the auto liability exposures of teenagers (and other resident family members). Here is one such article:

Kids’ Kars Revisited

This article is currently public and links to several other related articles, though they are password protected and can only be accessed by members of the Big “I”. I recommend that you read the article above before continuing with this article.

Most of the cited articles originated from real-life coverage and claims situations where someone, most often an attorney or financial planner, recommended that a resident family member, usually a child, be insured on their own personal auto policy (PAP) rather than the PAP of their parents or head of household. This is almost always VERY bad advice.

The premise of such recommendations is frequently that a family member such as a child has little or nothing in the way of assets and income to attach if they are liable, so the suggestion is that they insure the vehicle they own and/or use on their own minimum limits PAP. One problem with this is that, while the child has little on no assets or income today, they likely will over the coming decades and those future financial resources can likely be accessed in a lawsuit.

Another reason for the suggestion to remove a family member from the parents’ PAP is sometimes that the family is located in a state without a parental liability statute, so the parents allegedly have little or no potential liability. This point is particularly stressed when the child is 18 years of age or older, the premise being that the parents, without a parental liability statute, are insulated from lawsuits against the child. This is a ludicrous and dangerous presumption.

The reality is that there are MANY ways to allege liability beyond someone’s status as a parent. That became apparent most recently when Ashley Gold, an attorney at Wood Stabell Law Group, PLLC, brought the following case to my attention where a parent was held liable for negligent entrustment in an accident involving an adult child:

Carman v. Kellon

I wrote about another case over seven years ago where a 33-year-old defendant was under the influence of near-lethal amounts of drugs and alcohol when she got behind the wheel of a truck owned by her parents. She crossed the center line and struck the plaintiff, a 17-year-old high school senior, head-on. The jury found the parents responsible for negligently entrusting this vehicle to the defendant who had a long history of drug abuse, rehab, and several car accidents. The decision totaled $1.2 MILLION.

My recommendation is that, wherever possible, all resident family members should be insured under a single PAP (and umbrella). The reason is that most PAPs exclude liability coverage for the use of vehicles furnished or available for the regular use of family members unless that vehicle is declared on the subject policy. In other words, if the parents are successfully sued for an accident involving a resident family member whose auto is insured under a separate PAP, the parents’ own PAP likely does not cover them.

If it is impossible for all family members to be insured under one PAP, then all PAPs in the household should be as identical as possible and carry the same high liability limits. Needless to say, an umbrella is also recommended.

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information