A personal auto policy client owns a car, which is titled in her name, and she gives the vehicle to her stepdaughter to drive. The stepdaughter lives with her mother in another state and has a driver's license in that state. 

Q: How should the PAP for the vehicle be written?

Response 1: I'm not totally clear if the car is being temporarily driven by the stepdaughter or she has it indefinitely. Regardless, the policy named insured should be the stepmother, since she is the owner of the car. 

Some carriers require all regular drivers or drivers living at the residence to be listed on the policy. I recommend you notify the carrier about the driver and the state she lives in. Be prepared. Depending on the carrier, you may get non-renewed or have to write a separate policy for the state where the stepdaughter lives.

From a risk management perspective, I would advise the stepmother this is a bad decision and could fall in the category of “no good deed goes unpunished." I don't know the age of the stepdaughter, but the stepmother is risking her assets for a younger driver and has no control of the situation. As the owner of the car, the stepmother will be responsible if the stepdaughter is involved in a serious at-fault accident.

Response 2: There are a couple of complexities here. First, the car is titled in the stepmom's name, but a non-household person is driving it. Not every insurer will be willing to write a policy in that situation.

The other problem is the vehicle laws of each state. If the car is garaged in another state, it could be a requirement to register it in that state and meet that state's insurance requirements. You should check with your carriers to see if any of them are willing to write in that state—and also make sure you're licensed to write business in that state.

The insured should title the vehicle in the stepdaughter's name, or at least co-title with the stepmom as the other person on the title, so the stepdaughter can obtain a policy where she lives. If the stepmom wants to pay for the insurance, she can still do that.

Response 3: The PAP should be written in the name of the person on the title. Then, list the stepdaughter as a named driver with a complete explanation to the respective carrier of record. I'd also suggest an umbrella, along with a named non-owner policy for the driver in another state.

Response 4: As always, in these situations, ask the insurance carrier how it wants the PAP written to protect all parties and get its answer in writing. The stepmom's policy would not provide coverage for the stepdaughter's use of that car because of the furnished or available for regular use exclusion.

As a producer, I would want to see a policy with both the stepmom and stepdaughter as named insureds. However, you should tell the insurance carrier where the car is and how it's being used and ask how it wants it handled. Trying to DIY this question without sharing this essential info with the insurer is a direct path to an errors & omissions lawsuit.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.