This has come up a few times lately in my personal injury cases so I thought I would discuss it with you. Here is the scenario: Bob is driving his Aunt Sally's car. Bob is 25 and has an insurance policy. Sally is 43 and has an insurance policy as well. If Bob rear ends Paul, which policy pays for Paul's personal injury damages?
This is an interesting question and one which doesn't have an easy answer. (And one which most attorneys do not know the answer to!) The first answer is to read the policy. Most policies will have a provision explaining what happens when there is more than 1 policy in effect. The options are simple:
1. A policy may say that it is primary. This policy will pay first up to the policy limit.
2. A policy may say that it is excess. This policy will pay only after the other policy pays.
3. A policy may say that it shares on a pro-rata basis. This means that each policy pays based on its share of the limits. A few examples:
A. If each policy has a $100,000 policy limit, than each policy pays 50% of the claim.
B. If Bob's policy is $50,000 and Sally's policy is $100,000, then Bob's policy pays 1/3 of the claim and Sally's policy pays 2/3 of the claim.
C. If Bob's policy is $300,000 and Sally's policy is $100,000, then Bob's policy pays 75% and Sally's policy pays 25%.
When you are driving a friend's car, or a friend is driving your car, is pays to see which policy is going to pay for the damages if someone is involved in an accident.