What happens if an excluded driver on my car policy has an auto accident and my insurance has denied the claim?

If you give your car to someone who is specifically listed as an excluded driver on an insurance policy, and she or he is involved in a car accident, your insurer does not have to pay costs related to that accident. Since your insurer denied the claim, you are personally liable and responsible for repairs to the other car and any personal injury claims of the occupants of the other vehicle. That’s what “excluded” means, after all: that person is excluded from being covered on your insurance.

What is an excluded driver on a car insurance policy?

If one of the drivers listed on your policy shows risky driving behaviour, you’ll likely see your premiums increase. In this case, you may be wondering if you should exclude them from your policy. So, what does an excluded driver mean?

The excluded driver definition says that ‘an excluded driver is a person in your household who has been explicitly excluded from coverage under your car insurance policy’. Their name will appear as “excluded” on your auto policy, and they won’t be insured to drive any vehicles on your policy.

An excluded driver in insurance means that this driver on your policy can raise the cost of your premiums because of their poor driving record. So, if you list excluded drivers who insurance companies see as high-risk, you will certainly see an increase in the premiums you pay, regardless of your own record.

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Why would I exclude a driver from my policy?

All licensed drivers in a household are usually insured on the same policy, which means that all members probably need to be listed. Every member of your household who’s driving your car creates a risk for the auto insurer. This is why insurance companies want to know who is licensed in the household.

The only members of your household who might not need to be listed on your policy are licensed drivers who don’t drive your car, drivers who have their own insurance policy and a household member who doesn’t have a driving license.

Not all states allow policyholders to exclude household members from their insurance. In most states, if a member of your household will no longer be driving your vehicle, you can exclude them from your policy.

Why would a household member’s driving record affect my car insurance premiums?

If you have a household member who needs to be listed on your policy, but you don’t want, you may have the option to exclude them. Usually, the main reason for excluding a driver from your policy is to save money or keep your policy with the same insurance company.

Sometimes, you might not want a family member covered on your policy because their status might impact your insurance premiums. For example, if a household member has a recent history of tickets or accidents, you have an option to include them at a higher premium or exclude them to keep your rates low.

You also may want to exclude them because they do not meet the insurer’s requirements. For example, a driver with multiple incidents on their driving record may not be eligible for coverage. In order to keep your coverage, you may have to exclude this driver.

What happens if an excluded driver causes a collision?

Based on the severity of your injuries, you might want to take legal action against the excluded driver and/or the vehicle owner. It’s best to have a qualified attorney by your side to review your situation and give you advice on whether you should file an insurance claim or an excluded driver lawsuit.

How does an excluded driver’s insurance work?

Remember, an insurance policy is a contract. As with any contract, the obligations of each party (e.g. your insurer) are those stated in the contract—no more and no less. If the contract by its terms specifically disclaims or denies certain obligations, then there is no need to do those things. So if the policy states that the insurer does not need to pay for accidents involving a certain person because they are excluded, the insurer does not need to pay.

This news will not make you happy. Not only is the named excluded driver not covered, but you also are not covered since the policy is in your name. You are liable to the extent the excluded driver was liable since a car’s owner is responsible for the actions (and accidents) of those whom he/she allows driving his/her car.

Therefore, you may have to pay out of your own pocket for the property damage to the other car and any bodily injuries suffered by the occupants. Assuming you do not voluntarily pay these amounts (or settle the case for some mutually agreeable amount), you can be taken to court and sued for the other party’s losses, injuries, and damage.

What happens when you exclude a driver?

When you buy car insurance, you have the option to add a named driver exclusion as an endorsement attached to the policy. It will specifically state that a named household member who uses your insured vehicle will not have insurance coverage while driving the car.

Such an exclusion applies generally in situations where the individual has less than a stellar driving record, is irresponsible, drives on a suspended license, has a plethora of speeding tickets, has a DUI or drug conviction, or has health conditions that impair driving. Underwriters view these drivers as adding additional risks, and hence capable of creating serious losses.

Excluding a driver can save you money by reducing your premium, but as the old saying goes, “there ain’t no free lunch”—you “pay” for your savings by accepting the risk that if the excluded driver has an accident in your vehicle, you will personally have to pay for it.

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Case Studies: Excluded Driver and Denied Insurance Claim

Case Study 1: Excluded Driver Causes an Accident

In this case study, John’s auto insurance policy includes his sister, Lisa, as an excluded driver due to her poor driving record. Despite the exclusion, John allows Lisa to borrow his car, and she gets into an accident. When John files an insurance claim, it is denied because Lisa is an excluded driver. As a result, John is personally liable for the costs of repairs and any personal injury claims arising from the accident.

Case Study 2: Excluded Driver Collides With Another Vehicle

In this case study, Sarah’s car insurance policy lists her teenage son, Michael, as an excluded driver. However, Michael takes Sarah’s car without her knowledge and is involved in a collision with another vehicle. Sarah’s insurance claim is denied due to the exclusion, leaving her responsible for the property damage and injuries caused by her son’s actions.

Case Study 3: Excluded Driver With a Suspended License

In this case study, Emma excludes her roommate, Mark, from her auto insurance policy because Mark’s license is suspended. Despite the exclusion, Mark drives Emma’s car and causes an accident. When Emma files a claim with her insurance company, it is denied due to Mark’s status as an excluded driver. Emma must personally cover the expenses resulting from the accident, including property damage and medical bills.

The Bottom Line

Now that you’ve learned the excluded driver’s meaning, you should know that the named driver exclusion is not the same as “permissive use.”

If offered by your insurer, permissive use provides coverage for those times you temporarily lend your car to someone who is not listed on your auto policy and he or she causes an accident. Permissive use coverage does not apply, however, if the driver has been explicitly excluded from your auto policy.

To repeat, if the driver who is specifically listed by name as excluded on your existing auto policy takes the car out for a spin, with or without your permission, there is no coverage whatsoever should an accident happen. Moreover, you as the policyholder are not covered and can be held personally responsible for any damages caused to others in the accident. This can be catastrophic financially, should the injury result in death or long-term disability.

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