Personal Injury

Liability Law and Loaning Your Car

From the family car to the company truck, here's what you need to know about liability after an accident involving a loaned vehicle.

As the owner of a motor vehicle, you may be surprised to find out that you may be legally responsible for a car accident even when you're not driving. In this article, we’ll look at some situations that could trigger this kind of liability, including:

  • when an employer asks an employee to use a car for a business reason
  • when a family member borrows the car, and
  • when a vehicle owner knows a driver is reckless or unlicensed, and lets that person drive anyway.

Keep these points in mind when you’re deciding whether to let someone borrow your car -- whether it’s a friend, a family member, or an employee -- or if you're facing a personal injury claim over a loaned vehicle.

When an Employee Uses a Company Vehicle

Under a legal concept known as “vicarious liability,” an owner of a motor vehicle who's also an employer can be liable for his or her employee's negligence in causing a car accident if:

  • the employee was driving the owner's vehicle while doing something related to the employee’s job (in the "course and scope of employment," in other words), or
  • the employer knows -- or could reasonably be expected to know -- that the employee is an unlicensed, incompetent, or reckless driver.

First, it must be shown that the driver was in fact an employee of the vehicle owner, and not an "independent contractor." Without the employer-employee relationship, there is typically no vicarious liability.

Similar to the employment context, a vehicle owner might be vicariously liable when the driver and owner were members of a "joint venture" or "joint enterprise" at the time of the accident. A joint venture or joint enterprise exists when the owner and the driver have agreed to use the vehicle for some activity -- for example, a business deal -- and both have a say in deciding how the vehicle is going to be used, such as deciding the route to be traveled and sharing the costs of the trip.

When a Family Member Borrows the Vehicle

Many states hold the parent or head of a household liable when a family member (usually a minor child) is involved in an accident while driving the parent's vehicle with the parent’s permission. For example, in California, parents may be held liable for up to $25,000 for the medical expenses of anyone hurt as a result of their child’s negligent acts while driving, if the vehicle was used with the parent's permission. And in a number of states, including Florida, liability extends to a parent or guardian who signed a minor’s application for a driver’s license.

In addition, if a parent knows that his or her child has particularly dangerous propensities when it comes to driving, but the parent continues to give the child the keys to the family vehicle anyway, the parent could be on the legal hook for any car accident that the minor causes.

Incompetent, Reckless or Unlicensed Drivers

If an owner of a vehicle loans a vehicle to another person they know is incompetent, reckless or unlicensed, they may be held liable for any injuries and other damages if that person ends up causing a car accident.

In order to be liable in this situation, at minimum the vehicle owner must have given express or implied permission for the other person to use the vehicle, and the vehicle owner must have known of -- or been on notice of -- the person’s incompetence or recklessness (or the fact that they are unlicensed) beforehand.

Who is the "Owner" of the Vehicle?

Another factor to consider is: Who actually “owns” the vehicle in the eyes of the law? The answer may not be as clear-cut as you think. And there's no better way to avoid being held vicariously liable for a car accident than being able to show that you weren’t the actual owner of the vehicle.

Many states presume that the person named on the vehicle's registration card and on the insurance policy is the owner of the vehicle. However, depending on the specifics of the law in your state, this kind of presumption may be overcome if you can show that:

  • another person acted as the vehicle owner because they were in possession of, cared for, or claimed to own the vehicle; and/or
  • another person acted as the vehicle owner because they had the authority or power to sell the vehicle.

Finally, when a vehicle has been sold to someone else without a proper bill of sale, or without a required change in the name of the owner on the certificate of title, the person who is in possession of the vehicle may also be considered an owner of the vehicle. But in situations like this, it can get pretty muddy from a legal standpoint. Usually, the person who sold the vehicle may still be on the financial hook (at least in part) if they failed to properly transfer the vehicle and release themselves from liability.

Questions For Your Attorney

If you're meeting with a personal injury attorney (you can find one using our tool below) after an accident involving a loaned car, here are a few points of discussion to consider:

  • If I’m vicariously liable for a car accident, does that mean the driver who actually caused the accident doesn’t have to pay anything?
  • I didn't know about my employee's bad driving record. How does that affect my liability as an employer?
  • Will my car insurance policy cover the car accident, even though my teenager was driving?

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