Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insurance...

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UPDATED: Jul 14, 2021

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There are many ways to save money on auto insurance, and excluding a driver is one such way. However, you can get into a lot of hot water if an excluded driver gets into an accident while driving your car.

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There are not many options with positive outcomes if an excluded driver gets into an accident in your vehicle. The easiest and safest option is to never allow an excluded driver to use your vehicle.

Definition of an Excluded Driver

When you purchase car insurance, you are expected to add every household member to your policy who will be driving your car with any regularity. Neglecting to add a driver increases the chance of having your claim stalled or denied.

However, there may be a driver in your household who has such a bad driving record that adding that driver to your policy will cause your premiums to skyrocket. This driver might have a suspended license, multiple driving infractions, or a DUI. In an effort to keep your auto insurance premiums affordable, you can add a clause to your auto insurance agreement that excluded that driver from coverage under your policy.

An excluded driver’s auto accidents will not be covered by your policy, thus the driver’s poor record will not be taken into account when calculating your premiums.

The down side is that you, the policyholder, will still be generally liable for damages along with the excluded driver who causes an accident while in operation of your vehicle.

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Tort Insurance versus No-Fault Insurance

The National Association of Insurance Commissioners (NAIC) divides auto insurance into tort or no-fault, and each state is one or the other. In simplistic terms, tort insurance is an at-fault system whereby the at-fault driver is liable for damages from an accident; in a no-fault system, a driver’s auto insurance will usually cover damages despite which driver is at fault. Visit the state map here.

This an important distinction if an excluded driver has gotten into an accident in your car. If you live in a tort state, which is most common, then the liability is yours and the excluded driver’s for an accident. Your insurance will not cover any damages to your vehicle, the other driver’s vehicle, any injuries or any property damage. Under tort insurance, you can be sued for any and all damages.

No-fault insurance is slightly different, but the auto insurance laws vary from states to state, so it is best to investigate the insurance laws for your particular state. Information can be found at your state’s department of insurance website, such as New York’s Department of Financial Services. Generally, in no-fault states, the other driver’s auto insurance will cover the damages caused to their vehicle by an excluded driver. However, that is no guarantee that you will not be sued, and the damages to your vehicle, property or injury will not be covered.

What Your Insurance Will Want You to Do

When you agreed to an excluded driver clause, you were essentially promising that the excluded driver would never drive your car, even in an emergency situation. To prove that you did not break that promise by allowing the excluded driver to drive your vehicle, your insurance company will want you to file a police report against the excluded driver for vehicle theft.

This essentially cancels your liability for the accident if your vehicle was stolen. However, if you did give the excluded driver permission, and it can be proven, then you might face criminal charges for filing a false police report.

Your Options

Obviously, it is in your best interest to never allow an excluded driver to operate your vehicle under any conditions. However, if you do, your options are limited.

To protect yourself from the costly liability of a car accident that can include vehicle damage, personal injury and injury to property, your only option is to file a police report for the theft of your vehicle.

If you are unwilling to file a police report against an excluded driver because they are a family member or a friend, or you are unable because you gave them permission, then you should prepare yourself for possible litigation in court, an assessment of you liability in terms of money, and garnishment of your wages or seizure of your property to pay for the accident.

Your best hope is that the other driver’s car insurance will cover their car’s damages and that you can fix your vehicle out of your own pocket. Also, be prepared to be dropped by your insurance company if they get wind that you allowed an excluded driver to operate your vehicle and to look for a new company.

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