Question

Christie temporarily lends her car to her friend, Matt. Subsequently, Matt is involved in an accident while driving Christie’s car. Matt and Christie have personal auto insurance policies with liability insurance limits of $80,000 and $40,000, respectively. The courts awarded a liability judgement of $60,000 against Matt. How much will each insurance policy pay?

A. Matt's insurance is primary and will cover the entire $60,000.

B. The policies will split the losses on a pro-rata basis, with Matt's and Christie's insurers covering $40,000 and $20,000, respectively.

C. Christie's insurance is primary and will cover $40,000. Mark's insurance is excess and will cover the remaining $20,000.

D. Each policy will pay $30,000.

Answer 1

Liability insurance coverage on a personal auto policy follows the driver no matter whose vehicle is being operated, provided it is an eligible vehicle. Liability coverage protects the insured (i.e., follows the driver) when the insured operates a vehicle owned by someone else. In such a situation, they will still usually be covered under their own auto insurance policy.

In general, insurance coverage for an insured driving someone else’s vehicle is the coverage he carries for his own vehicle. The driver’s personal coverage will apply in most cases when driving a vehicle he does not own.

In the case given, Matt is involved in an accident while driving his friend's Christie car. Hence, Matt's personal auto liability coverage will kick in first. The total liability amount as per judgment is $60,000. Matt's personal liability coverage is limited to $80,000 which is sufficient to cover.

So, the correct answer is "A. Matt's insurance is primary and will cover the entire $60,000."