Woodland Hills personal injury attorney Barry P. Goldberg is often confronted with attempts by families to side-step paying insurance premiums by allowing a family member to “borrow” a vehicle. Later they contend that the use was occasional or intermittent in order to access liability coverage as a permissive user. The families are able to own an “insured” vehicle and register it without paying the outrageously high premiums for a young driver—very understandable, but too risky!
Most auto insurance policies issued in California contain the exclusion of coverage for regular use of vehicles not included in the policy, sometimes called “drive other cars” or “additional insured automobile” provisions. The exclusion is intended “to prevent abuse, by precluding the insured and his family from regularly driving two or more cars for the price of one policy.” (Highlands Ins. Co. v. Universal Underwriters Ins. Co. (1979) 92 Cal.App.3d 171, 176 (Highlands) Emphasis added.) The provision is “intended to provide coverage for occasional use of other nonowned cars without requiring payment of additional premiums. For obvious reasons, coverage was not intended to include the regular use of other cars because insurance companies would necessarily bear an increased risk without receiving a related increase in premiums. Specifically, the exclusion serves to prevent a situation in which the members of one family or household may have two or more automobiles actually or potentially used interchangeably but with only one particular automobile insured.” (Interinsurance Exchange, supra, 148 Cal.App.3d at pp. 1137-1138; emphasis added.)
This purpose of preventing abuse is a crucial factor in determining whether the exclusion from coverage applies in a particular case. (Interinsurance Exchange, supra, 148 Cal.App.3d at pp. 1137-1138; Highlands, supra, 92 Cal.App.3d at p. 176.)
Exclusive use for a limited period of several weeks has been applied with differing results. In Highlands, supra, 92 Cal.App.3d 171, the Court held there was no coverage under the non-owned auto provision of the driver’s insurance policy, where the owner gave the car to the driver six weeks before the accident, with no limitation on its use, for purposes of a potential sale to the driver. The driver delayed buying the car while he waited for arrival of special tires he ordered. (Id. at p. 174.) Highlands held there was no coverage because there were no limits on the driver’s use, and the situation exactly fit the purpose of the exclusion to prevent abuse by allowing habitual use of non-owned cars without paying insurance premiums. (Id. at pp. 176-177.) Highlands, supra, 92 Cal.App.3d at p. 176, distinguished Truck Insurance Exchange v. Wilshire Insurance Co. (1970) 8 Cal.App.3d 553, 561, which held the trial court could reasonably infer the test-driver’s use of the car for several weeks before deciding whether to buy it was for a limited period of time, restricted to a reasonable geographical area, and for a limited purpose.
In Interinsurance Exchange, supra, 148 Cal.App.3d 1128, a teenage girl who lived with her mother was involved in an accident while driving her father’s pickup truck. (Id. at pp. 1130-1131.) The mother’s insurer sought a declaration that coverage was excluded. The trial court concluded the truck was available for the teen’s regular use, and therefore there was no coverage under the non-owned-auto clause. (Id.) The appellate court reversed, holding that under the undisputed facts and the established rules of construction, the father’s pickup truck was not available for his daughter’s regular use, because it was used primarily by the father in his business (though he also had other vehicles) and was not available to the girl whenever she “ ‘wanted, needed, or desired’ ” it, and the girl did not possess a set of keys, and she could use it only with her parents’ consent, limited in time, geographical area and function, and the truck was not actually or potentially used interchangeably with any other family car owned or used by the mother. (Id. at pp. 1137-1138.)
In Pacific Auto Ins. Co. v. Lewis (1943) 56 Cal.App.2d 597, 599-601 (Pacific Auto) a car salesman, who had his own car, was allowed to use his employer’s demonstrator cars for business purposes, as were other employees. The salesman sometimes used one of the cars for personal purposes but always within the San Diego vicinity. (Id. 56 Cal.App.2d at p. 599.) The employer did not encourage personal use but permitted it for employee morale. (Id.) On one occasion, the employee asked for, and received, special permission to drive one of the cars to Pomona on a personal matter. He got into an accident on the way to Pomona. (Id. at pp. 599-600.) The appellate court held the car was not available for the employee’s regular use so as to exclude coverage under the employer’s insurance policy. “It is unnecessary to hold that the words ‘regular use’ as used in these policies referred to an exclusive use. But ‘regular use’ reasonably suggests a principal use, as distinguished from a casual or incidental use. [Citation.] Assuming that the use of such a car may be regular without being exclusive, there are other elements which may be considered in determining the meaning intended by the rather broad and not very explicit language used in these policies to set forth the exception to the coverage otherwise provided. Whether an automobile is furnished by another to an insured for his regular use may reasonably depend upon the time, place and purpose for which it is to be used. (Pacific Auto, supra, 56 Cal.App.2d at pp. 600-601, emphasis added.)
Sometimes parents argue that limitations on use make the accident outside the exclusion. However, “A parental admonition by a non-owner of an automobile to a minor not to drive that automobile which is actually possessed and controlled by that minor does not render it unavailable for his regular use. It simply makes the minor’s use of the automobile subject to parental discipline.” (Allstate Ins. Co. v. Thompson (1988) 206 Cal.App.3d 933, 941 (Allstate).)
In sum, our office recommends that an insured family not try to outsmart the insurance company by allowing a young family member to drive a car without being specifically insured. Because of the extraordinary expense associated with young driver premiums, we always recommend that the parents and the young driver meet with an independent insurance agent to be certain about coverage and to explore equitable insurance programs for young drivers.