InSurOp-Ed: Auto Insurance and Resident Adult Children

This post first appeared on Mr. Wilson’s blog, Insurance Commentary, on January 16, 2019.

Although I retired from the Big “I” in 2016, I still participate in their Virtual University’s “Ask an Expert” service as a volunteer faculty member. Just this morning, we received the following question from an Iowa agent:

“I have a client who is 22 years old and just graduated with her Bachelors degree. She is planning on moving back home with her parents in a couple of months and will be going to a different college (near her parents’ home) to get her Masters degree. She has purchased her own vehicle registered under her name only and would like to get an auto policy of her own so she would no longer be on her parents’ policy.”

The agent asked four questions. I’ve listed them below with my responses. But first of all, when coverage questions are submitted to this service, we ask for the complete ISO form number(s) or, if not ISO forms, a searchable PDF of the proprietary form. No forms were provided with this question, which tells me the agent doesn’t understand the fundamental RTFP! Doctrine. You simply cannot answer coverage questions without knowing what policy form is the basis for the question. That being said, below are the agent’s questions and my responses.

“If she has her own PAP and causes injury or death to another, can her parents still be held liable since she will be living in their home?”  

Whether her parents can be held liable is a legal question. Can her parents be sued? Yes, and they possibly will, depending on the circumstances. The question is, IF they are sued, do they have coverage under their auto policy and umbrella? We don’t know the answer to that because we don’t have a copy of their policies. There was a case in my state where an adult daughter’s resident parents were held liable for their daughter’s vehicular homicide because of her past history of alcohol and drug abuse and their failure to properly supervise her.

If we’re talking about an ISO PAP, that policy does not cover claims arising from the use of an auto unless it is a “your covered auto.” In that case, they are, at best, probably covered only by her policy and it’s likely that she will only have an auto policy (no umbrella) with lower liability limits.

“Would the parents need to be listed on her policy?” 

It depends on what the policy says. If it’s an ISO PAP, they are automatically liability insureds under her policy for their vicarious liability for her use of the auto.

“How would this affect the parents umbrella policy?”

We have no way of knowing without examining that policy. If it’s a “following form” excess policy, they quite likely have no coverage.

“Is there an age at which adult children living at home must acquire their own personal auto policy?”

Considering only ISO forms, it is usually better for all family members living in the same household to be covered by one policy IF the carrier will do that. The reason is to avoid the potentially huge coverage gap alluded to above. I’ve written in more detail about this here.

When my son graduated from college, he lived at home for a couple of years while working to save money. He bought his own car and our family personal lines carrier allowed us to add the auto to our personal lines package, endorsed to cover his ownership interest in his own car. This gave him access to high auto liability limits under our auto and umbrella policies. Not all insurers will do that. If this arrangement isn’t possible, then everyone living in the same household should have policies with coverages and limits that are as identical as possible in case one family member is sued for the actions of another family member.

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Bill Wilson

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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.

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