One situation insurance lawyers see often is where a person is involved in an accident with another driver and the other driver is at fault. When it comes to making a claim against the insurance company for the other driver, you find out the other driver does not have coverage due to wording in the insurance policy. Or maybe that situation happens to you. So what is the law in the situations.
Named drive exclusions are common. That is where a policy specifically excludes a named person or driver. This is most common in households where there is a young driver such as a son or daughter who, because of the increased risk, the insurance company will charge a much higher premium, so the parent has the child excluded rather than pay the high premium. The problem arises when the child drives the car anyway and gets involved in a wreck. There will be no coverage.
However, an insurance driver may not exclude drivers by class, i.e., a “all unlicensed drivers.” Texas Transportation Code, Section 601.076 says:
REQUIRED TERMS: OWNER’S POLICY. An owner’s motor vehicle liability insurance policy must:
(1) cover each motor vehicle for which coverage is to be granted under the policy; and
(2) pay, on behalf of the named insured or another person who, as insured, uses a covered motor vehicle with the express or implied permission of the named insured, amounts the insured becomes obligated to pay as damages arising out of the ownership, maintenance, or use of the motor vehicle in the United States or Canada, subject to the amounts, excluding interest and costs, and exclusions of Section 601.072.
Keep in mind that a policy may be issued which covers only the listed drivers, as long as the insurer makes some specific disclosures. These disclosures are found in the Texas Insurance Code, Section 1952.0545:
REQUIRED DISCLOSURE REGARDING NAMED DRIVER POLICIES; PERSONS IN INSURED’S HOUSEHOLD. (a) In this section, “named driver policy” means an automobile insurance policy that does not provide coverage for an individual residing in a named insured’s household specifically unless the individual is named on the policy. The term includes an automobile insurance policy that has been endorsed to provide coverage only for drivers specifically named on the policy.
(b) Before accepting any premium or fee for a named driver policy, an agent or insurer, including a county mutual insurance company, must make the following disclosure, orally and in writing, to the applicant or insured:
WARNING: A NAMED DRIVER POLICY DOES NOT PROVIDE COVERAGE FOR INDIVIDUALS RESIDING IN THE INSURED’S HOUSEHOLD THAT ARE NOT NAMED ON THE POLICY.
(c) Before accepting any premium or fee for a named driver policy, an agent or insurer, including a county mutual insurance company, must receive a copy of the disclosure described by Subsection (b) that is signed by the applicant or insured.
(d) An agent or insurer, including a county mutual insurance company, that delivers or issues for delivery a named driver policy in this state shall specifically include in the policy and conspicuously identify on the front of any proof of insurance document issued to the insured the required disclosure under Subsection (b).
(e) The agent or insurer shall require the applicant or insured to confirm contemporaneously in writing the provision of oral disclosure pursuant to Subsection (b).
An Experienced Insurance Law Attorney can help with questions explaining particular situations.