My friend's son is unable to get a loan on a car (due to very bad
credit and judgments against him), so he is leasing his
stepfather's car from him. The stepson has his own insurance on the
car, but it's pretty limited coverage. If the stepson gets
into a bad accident, like killing someone in that car, could the
stepfather and his wife (co-owner) be sued and possibly lose their
It's more risky than most realize to loan out your car, whether
it's to a friend for one day or a long-term period like your friend
is doing with his stepson.
As the owners of the car, the mother and stepfather could
potentially be held responsible for damages and injuries that are
in excess of the stepson's
liability coverage limits
. When you are the owner (or co-owner) of a car, most state laws
are written so that you have vicarious liability for those that use
it. This means the owner has the same liability as the driver.
So, if the stepson is in a fatal accident and the damages and/or
injury expenses surpass the car's limited coverage, it's very
possible that your friend will be sued (along with the stepson) for
any medical and funeral expenses and property damage costs that
exceed the car's low liability limits.
Being sued does put your assets at risk, though it doesn't
necessarily mean the mother and stepfather would lose their home.
For particulars of how their assets and future earnings could be
affected, if a lien could be put against them, etc., your friend
should contact a liability lawyer to discuss the situation and
specific state laws.
One thing that the stepfather can do to help protect him and his
wife is to require the stepson to carry industry recommended
liability limits of $100,000 per person for
bodily injury liability
, $300,000 per accident for bodily injury and $50,000 for
property damage liability
coverage (written as 100/300/50).
If they do require the stepson to carry these higher limits,
they should ask to be listed on his policy as
, so they will receive notifications if the policy limits are
changed or is canceled.
Your friend may also want to talk to his current insurance
company about obtaining an umbrella policy, to protect the family's
assets even further.
An umbrella policy would supply liability coverage beyond the
limits of their auto and homeowners policies and should cover
defense costs if they are sued. They'd have to see if this car
could be placed under an umbrella policy with their other assets
(house, cars, boats, etc.), since they own it, but it's not
currently in their possession.
Costs vary, but umbrella coverage is usually inexpensive for the
protection it gives (typically a million-dollar policy can be
purchased for around $200 to $300 a year); because umbrella
coverages only kick in once your auto and/or homeowner policy
limits have been exhausted.