Borrowed Car Accidents: Who Pays?

By Ty McDuffey, J.D. | Legally reviewed by Katrina Wilson, Esq. | Last reviewed July 19, 2024

You love borrowing your sister's sports car. It's so much faster than your reliable but boring commuter hybrid. She doesn't need to worry about an auto accident because you are always careful and have full auto insurance coverage, right? Except this time, your history of defensive driving didn't work out. You were involved in a three-car collision, and her sports car received substantial property damage.

You might be wondering who pays in a borrowed car accident scenario. The simple answer in most states is: let's hope your sister has an excellent car insurance policy.

Car Insurance Follows the Car, Not the Driver

There is a popular myth out there that car insurance attaches to the driver. In fact, the opposite is true. As long as the vehicle owner has coverage, generally speaking, it will follow the car in most accident cases. The owner's car insurance is the primary coverage that would apply if a crash occurred. The driver's insurance would act as secondary insurance if necessary.

Keep in mind that state law typically covers insurance matters, so be sure to check with your local jurisdiction's Department of Insurance to learn more about an accident claim.

Keeping with the above example, if your sister has adequate coverage and you were the cause of the accident due to negligence or some other reason, your sister's liability coverage would pay for the other driver's damage and possibly injuries up to the policy limit. Your sister would file the claim and have responsibility for any resulting deductible. If her coverage isn't enough, that's where yours might cover the rest (assuming you have insurance).

Excluded Drivers

There are two main scenarios where the owner of the vehicle may not have liability for damages caused by a driver of a borrowed vehicle:

The driver is specifically excluded from the insurance policy
The driver took the car without the owner's permission (and got into an accident)

Let's start with the first case: an excluded person named on the policy gets into an accident in your car.

When you initially apply for car insurance, you are asked to list everyone in your household. Some car insurance policies cover every household member, while others may only cover licensed members. Why would a person be excluded from an insurance policy? Perhaps they have a poor driving record or a prior driving under the influence (DUI) conviction and including them jacks up your insurance premium rates.

Some states, such as Michigan and New York, don't allow for excluded drivers. In most cases, however, if the excluded driver gets into an accident in your car, they will become liable for any resulting damages.

If you take your sister's car for a joyride without her permission and get into an accident, she likely won't have liability for your criminal actions. However, if your sister allows you to borrow her car and she is aware you are intoxicated by drugs, alcohol, or a combination of both, she may have both civil and criminal liability. If your sister knowingly allows an unlicensed driver to take the wheel of her car and that person gets into an accident, she will also likely have liability.

Negligent Entrustment

Negligent entrustment refers to a situation in which a car owner allows another person to use their vehicle, despite knowing that this driver is unfit or incompetent to operate the vehicle safely. This could be due to the driver:

Having a history of reckless driving
Being unlicensed
Being intoxicated at the time of permission; if an accident occurs, the car owner may have liability as they negligently entrusted their vehicle to an unsafe driver

The concept of negligent entrustment extends the realm of liability beyond the at-fault driver to the vehicle owner. The rationale behind this is that if the car owner had not negligently provided the vehicle to an incompetent or unfit driver, the accident might not have occurred. In some states, the plaintiff in a negligent entrustment case must prove that the owner knew or should have known about the driver's incompetence.

Bodily Injury Liability

Bodily injury liability is a type of coverage that's part of a standard auto insurance policy. It pays for costs associated with injuries to the other party in a car accident for which the policyholder is at fault. Such costs can include:

Medical bills
Legal fees
Pain and suffering
Lost wages due to time off from work for recovery

In the context of a borrowed car accident, the car owner's insurance policy is generally the primary insurance that kicks in. This means their bodily injury liability coverage would be the first to pay for the other party's medical expenses up to the policy's limit. However, if the damages exceed the owner's policy limits, the driver's insurance may be able to cover the remaining costs, assuming the driver has their own insurance coverage.

Permissive Use

Permissive use refers to a scenario in which the owner of a motor vehicle gives explicit or implied permission to another individual to use their vehicle. Most auto insurance policies extend coverage to permissive users. This means if you borrow a friend or family member's car with their permission and get into an accident, their insurance coverage generally will be the primary coverage that applies.

However, not all liability insurance policies include permissive use coverage, and even those that do, may have restrictions or limits. The specifics of permissive use coverage vary by insurance company and policy, as well as state law. Permissive use typically doesn't apply if the vehicle was taken without the owner's permission at the time of the accident.