In our last general meeting, the question was asked, “What questions should be asked prior to insuring a vehicle for a person who is not the registered owner.” There was a dead silence of at least 30 seconds and someone muttered, “……who owns the vehicle?.” Yep…..that’s one of the questions but it became frightening obvious that a potential problem awaits and will occur, if it hasn’t already. There are a number of insurers who will allow a vehicle to be insured by someone other than the registered owner, if fact, Drive Insurance allows the policy to be written in the driver’s name. Almost all of the other carriers require that the registered owner sign the application and exclude himself/herself. But this is only part of the potential problem that exists and I hate to discourage this kind of business but am simply asking producers to protect themselves from unnecessary lawsuits. What if the registered owner owns a business or a home and has substantial assets. Do you ask the client about the finances of the registered owner or just write the deal, collect the broker fee and move on to the next policy? I would suggest you learn a bit more about the owner because if this subleased vehicle’s driver totals it and causes bodily injury to others, guess who is going to get sued? As a licensed agent/broker you possess the obligation of fiduciary responsibility and a court of law would ask you why you didn’t insure the auto with higher limits of liability since the registered owner owns assets? Any if you say you didn’t know that he had assets, you become subject to an inquisition about your negligence in this case. The point I am making, is to ask a few more questions before you close the deal. The carrier doesn’t really care about the limits, because you sold the policy and you are on the hook for the transaction. Here is an example. Grandma Edna buys a car for her favorite nephew,  Pugsly. One day, pitiful Pugsly clips Uncle Fester at a bus stop and goes to the hospital with severe injuries. Once the attorney is contacted, the investigation begins and it is very clear who is at fault. The bills are over $100,000 at this point and Uncle Fester has not even begun rehabilitation yet and heaven forbid he was still part of the work force because then you have lost wages liability, not to mention several other categories. Once the 15/30/10K limits have been exhausted, the responsibility will shift to the registered owner of the automobile, Grandma Edna who owns a $1,500,000 property she owns outright in Saratoga(she bought it in 1962 for $45,000 and its been paid off for years). Hopefully, Edna can tap into her underinsured motorist coverage on her policy but it’s uncertain and maybe it’s still not enough to cover this loss. You see where I am going with this. I have never heard of this occurring and have only seen one claim where the liability loss exceeded the coverage($70,000 loss on a 15/30/10k policy) but the insured owned very little and had no real assets other than the car. But, it could happen and you have to decide if it is worth the deal, based on the odds and your comfort with your E & O carrier.

So now that you see the dark side of subleasing, here’s how to CYA(I know that a few of you don’t know what that means but I’m sure you will ask). Once you see the registration is not in the client’s name, ask the following.

1)I notice the name is different on this registration. Who is this person? Is he/she a relative?

2)Does the owner of the car know that you are getting insurance for it now?

3)Does the owner of the car own a home, business or have assets?

4)Does the owner want to drive this vehicle as well?

I am sure you could think of a few more but don’t make it a major issue or you will scare them off. If the owner has assets, you should ask for the number to verify the information and ask them if they realize that the driver is only insuring it with the state minimum liability limits(in addition to any other coverages). And lastly, if the owner doesn’t care about the liability coverages, you should have a form which states:

“I, Grandma Edna, fully understand that Pitiful Pugsly, is insuring the vehicle that I own with the following coverages, 15/30/10K Liability and 15/30/CDW Uninsured Motorist and $500/500 Comprehensive and Collision Coverages. I also understand that if an accident occurs and the policy limits are exhausted, I may be responsible for the balance.” This form should make Grandma Edna insist on a higher level of coverage(more money in your pocket) such as 50/100/50K or higher. Even if you have to cut your broker fee a little to match the original quote, I would do it because I know that this client will not want to shop my policy do to its complexities.

Here’s a final question that I would ask all of you marketing representatives to find the answer to – just to satisfy our curiosities. If a policy in written in the driver’s name and not the owners, what happens if the auto is totaled(full coverage was originally purchased) and a check has to be sent. Who gets the check? The named insured or the excluded registered owner or the bank? What keeps the driver of the vehicle from collecting the check and disappearing? Maybe this has never occurred but I doubt it. Please let me know what you find out. Final thought: don’t stop writing these policies but just think it through and CYA with an extra form and a phone call. You don’t want to use that E & O policy you just paid a fortune for.