Insurance question - umbrella policy

[Rick]

[QUOTE=Dinsdale]
Regarding the first, it is my understanding that the car owner’s car insurance follows the car. I don’t understand, however, why the owner’s personal liability insurance (or personal assets in the absence of an umbrella policy) would similarly follow the car.

Regarding the second, if the employee is driving in the course of business, the principal would be liable for the negligence of their agent. If the company car was simply a perk, then I would assume the company’s liability would be based on their owning and insuring the car.
[/QUOTE]

We seem to have some miscommunication going on here.
[What follows is what is still stuck in my brain from when I was licensed in the insurance business 30+ years ago. See a licensed agent in your location for proper current local knowledge]
Personal liability excludes automobiles. Check your homeowner’s policy’s exclusions.
An automotive liability policy follows the car in California (and I think most other, if not all other states)
An umbrella policy sits over the top of all of your other liability policies and does cover both personal liability and auto liability.
If you were not liable when someone borrowed your car, then why does the auto insurance company extend the coverage? Think about it.
From Gfactor’s post above

Any negligence or willful misconduct of a person under the age of 18 years when operating a motor vehicle upon the highways is imputed to the parents

IANAL and all that, but if I am reading that correctly if your teenager is at fault in an accident and say totals a brand new Mercedes to the tune of $150,000, both your teenager and you are on the hook for the $150 grand. Further we will assume that you have both an auto policy and an umbrella policy. The physical damage limit on the auto policy is 100K and the umbrella has a floor of 100K. You auto policy pays the first 100 the umbrella pays the last 50. If you don’t have coverage that goes that high, (no umbrella) then start selling assets. You still owe the money. The debt is not cancelled just because you don’t have coverage. The judgment is against you and your teenager, not against the insurance company. Their only part of this is that they have agreed that in return for a premium they will indemnify you if you have a loss. The loss is yours, not theirs.

In my second example, the employee was driving home from work. He was not using the car in his course of business. The owner of the car (My company) was sued for a 7-figure amount.

[Gfactor]

Ok. I happen to be at the law library right now. I’m looking at the relevant section of the Illinois law digest in Martindale-Hubbell. Here is what it says:

Liability of owner for negligence of another is dependent on relationship of principal and agent or master and servant and has not been extended by statute. But proof of ownership is prima facie proof of agency. (8 Ill.2d 468, 134 N.E.2d 311) Family purpose doctrine has not been adopted. Mere relationship of parent and child does not fix liability on parent even though car is family car, but fact of agency must be present. (342 Ill. 266, 174 N.E. 371).

I hope that’s clear.

[Rick]

I’m sorry but it is not clear to my 15 watt brain, and seems to be in conflict with what you bolded back in post #6.
Can I have the English translation of your last post, using small simple words?

[Dinsdale]

Rick, earlier he was citing a Wis statute.
Here he is citing IL caselaw expressly declining to extend similar liability in IL.

I’ll check the cites and their progeny, Gf. Given the volumes cited, they weren’t exactly issued yesterday.

BTW, the premium more than doubled, from $180 to over $400.

Rick, IAAL, tho admittedly ignorant of insurance law. But your line of reasoning does not make much sense to me either legally or as social policy. Do you really think that if you lend your neighbor your car and he accidentally hits a pedestrian, that injured party ought to be able to not only go after your car insurance but also your house and other assets? Of course anyone can sue anyone for anything. But as your second example indicates, that doesn’t mean they will collect.

But I will be looking into this further and will report back whatever I find.

[Gfactor]

[QUOTE=Rick]
I’m sorry but it is not clear to my 15 watt brain, and seems to be in conflict with what you bolded back in post #6.
Can I have the English translation of your last post, using small simple words?
[/QUOTE]

Post #6 is WI law. At that point, I thought the OP was in WI. A few posts later, he asked about IL law, which is what I just posted. You bet they are different–in conflict? Not in the sense you mean.

And see,

[QUOTE=Dinsdale]
Interesting, Gf.
I failed to find anything similar in a quick scan of the IL stats on Westlaw, but that doesn’t mean it doesn’t exist. Researching state law is not my fave activity..
[/QUOTE]
(Emphasis added.)

[Rick]

[QUOTE=Dinsdale]
Rick, IAAL, tho admittedly ignorant of insurance law. But your line of reasoning does not make much sense to me either legally or as social policy. Do you really think that if you lend your neighbor your car and he accidentally hits a pedestrian, that injured party ought to be able to not only go after your car insurance but also your house and other assets? Of course anyone can sue anyone for anything. But as your second example indicates, that doesn’t mean they will collect.

But I will be looking into this further and will report back whatever I find.
[/QUOTE]

I agree with what you are saying about the neighbor. But with that said, if I were on a jury I would look much differently at you loaning your car to a neighbor cause his is in the shop, and a your teenager getting drunk and doing severe damage to people and property.

About the second example, the injured party’s case was very weak. (Read non-existent) Facts were two cars got into a rear ender. Our employee then hits the second (now stopped) car. The driver of the first car claimed that our employee hit the second car and drove it into her car. At trial the driver of the second car testified that he hit the first car and then our employee hit him. It is obvious that the driver of the first car was after the deep pockets of our company. This was borne out at trial by counsel referring to the other driver by name and our employee as "The Volvo” Also the injuries were somewhat suspect. One of the doctor’s files had the notation "Brain injury HA! HA! written in the margin. (Yes this came up and he was questioned about it) The jury saw through BS, and kicked her ass out of court.

[doreen]

[QUOTE=Dinsdale]

Rick, IAAL, tho admittedly ignorant of insurance law. But your line of reasoning does not make much sense to me either legally or as social policy. Do you really think that if you lend your neighbor your car and he accidentally hits a pedestrian, that ?

[/QUOTE]

It may not be good social policy- (or it might be- somehow I think requiring insurance to get a driver’s license or no insurance rquirement at all would work less well), but it makes sense. If I lend my car to the neighbor and he gets into an accident, why would my car insurance cover it unless I am also liable because I own the car? If I lend my neighbor a saw and he injures someone with it, my insurance doesn’t cover it. The insurance follows the car when the liability follows the car.

This part

injured party ought to be able to not only go after your car insurance but also your house and other assets

is almost backwards- it’s not that the injured party can go after your assets as well as your insurance. It’s that the injured party is entitled to try to collect damages from you, and if you have enough liability insurance to cover the damages, you get to keep your assets.

[tygerbryght]

Dinsdale, I think there’s an excellent chance that the insurance agent may have accidentally introduced a red herring into the situation. Your umbrella policy is the cap on all your coverage, remember?

Like Rick, my insurance experience is many years ago. However, I worked mostly for companies, in underwriting departments. Companies don’t make a practice of explaining underwriting and rating decisions to their agents, unless there’s a specific reason.

The actuaries, et al, who decided that their company needed higher premiums may have been basing it on their perception of liability under your homeowner’s policy. Has there been an instance in your state of teenagers who exposed their parents to massive liability through a party or other activity in the home (with or without parents’ sanction)? How about crime rates in your town/neighborhood? Any chance of a burglar getting caught/injured in the act and sueing you (it happens)? Bizarre legal cases can have disproportionate effects on some kinds of insurance. An umbrella policy is mostly casualty, although it’s usually tied to property coverage.

Is your agent an independent agent (represents multiple stock insurance companies; not mutuals)? If I were you, I’d ask him for quotes from another company, or ask another agent to quote my insurance portfolio. If your agent does represent a mutual (e.g., State Farm, Allstate), he’s less likely to be aware of his company’s underwriting decisions/philosophy than if he represents stock companies. In the latter case, an agent with many years’ experience, in good odor with the company (usually a function of how much business he gives the company; pick a large agency for a quote), might be able to get an explanation of the real reason why they’ve hiked the premium.

[Rick]

[QUOTE=doreen]
If I lend my car to the neighbor and he gets into an accident, why would my car insurance cover it unless I am also liable because I own the car? If I lend my neighbor a saw and he injures someone with it, my insurance doesn’t cover it. The insurance follows the car when the liability follows the car.
[/QUOTE]

This is a good point that doreen brings up. I seem to recall a standard exclusion in liabability policies is that the policy does not have to pay anything you are not legally required to pay. Or it could be that I didn’t get enough sleep last night. Not sure which.

[Gfactor]

[QUOTE=doreen]
is almost backwards- it’s not that the injured party can go after your assets as well as your insurance. It’s that the injured party is entitled to try to collect damages from you, and if you have enough liability insurance to cover the damages, you get to keep your assets.
[/QUOTE]

It’s exactly backwards. The touchstone of liability insurance is, well, liability. Here is an example from a Massachusetts automobile insurance policy. I picked it because it was the first policy I found when I Googled:

Under this Part, we will pay damages to people injured or killed by
your auto in Massachusetts accidents. **The damages we will pay
To Others are the amounts the injured person is entitled to collect for bodily
injury through a court judgment or settlement. We will pay only if you
or someone else using your auto with your consent is legally
responsible for the accident. ** The most we will pay for injuries to one
or more persons as a result of bodily injury to any one person in any
one accident is $20,000. Subject to this $20,000 limit, the most we
will pay for injuries to two or more people as the result of bodily injury
to two or more people in any one accident is $40,000.

(Emphasis added.)
http://www.aib.org/PPInfo/Policy/7thEdition.pdf

The bolded text is the insuring clause. It outlines the basic conditions upon which the insurer will be liable. The insurer’s duty to indemify begins once liability is established.

Notice that the insurer’s liability is not necessarily coextensive with the amount of the insured’s liability. The policy limits for this part are italicized in the quoted material. The insured could easily be liable for over $20,000. If so, the insured has what we call excess liability.

The insurer has another duty. The duty to defend. The duty to defend is broader than the duty to indemnify. It covers false and frivolous cases as well as excellent ones. Again, the policy explains:

We have the right to defend any lawsuit brought against
Defend You And anyone covered under this policy for damages which might be
Our Right To Settle payable under this policy. We also have a duty to defend any such lawsuit, even if it is without merit,

So far so good, right?

But what happens if you are getting sued for $500K?

but our duty to defend ends when
we tender, or pay to any claimant or to a court of competent
jurisdiction, with the court’s permission, the maximum limits of
coverage under this policy. We may end our duty to defend at any
time during the course of the lawsuit, by tendering, or paying the
maximum limits of coverage under the policy, without the need for a
judgment or settlement of the lawsuit or a release by the claimant.

:eek:

Suddenly you’ve got no more insurance coverage, and you are forced to pay your own lawyer to defend you at trial to boot.

Umbrella coverage is one way of dealing with excess liability. An umbrella policy covers liability above the policy limits of primary insurance. It also fills in some of the gaps in coverage.

[Rick]

[QUOTE=Gfactor]
It’s exactly backwards. The touchstone of liability insurance is, well, liability. Here is an example from a Massachusetts automobile insurance policy. I picked it because it was the first policy I found when I Googled:
[/quote]
I don’t understand, this is what I have been trying to say, see my last post above.

The bolded text is the insuring clause. It outlines the basic conditions upon which the insurer will be liable. The insurer’s duty to indemify begins once liability is established.

Notice that the insurer’s liability is not necessarily coextensive with the amount of the insured’s liability. The policy limits for this part are italicized in the quoted material. The insured could easily be liable for over $20,000. If so, the insured has what we call excess liability.

Exactly.

The insurer has another duty. The duty to defend. The duty to defend is broader than the duty to indemnify. It covers false and frivolous cases as well as excellent ones. Again, the policy explains:

So far so good, right?

But what happens if you are getting sued for $500K?
:eek:

Suddenly you’ve got no more insurance coverage, and you are forced to pay your own lawyer to defend you at trial to boot.

Umbrella coverage is one way of dealing with excess liability. An umbrella policy covers liability above the policy limits of primary insurance. It also fills in some of the gaps in coverage.

Well if you are sued for 500K part of it would depend on what your policy limits are, and how good the other guys case was. I can tell you this, we were told the fastest thing known to man was an insurance company writing a check when:
[ul]
[li]Insured was drunk at the time of the accident[/li][li]Insured had state mandated minimum coverage[/li][li]There was death, extensive property damage, or severe injury.[/li][/ul]
The tip of the pen would break the sound barrier, as the check was signed.
Buying high liability limits or an umbrella is what we used to refer to as buying a better lawyer. You got 15/30/5, you get the rookie. However if the company is on the hook for a million or more, you get a partner. Or maybe the guy in the corner office.
As far as I understand it, if you are liable the insurance company will pay up to policy limits. They have the option to just pay off without your consent. They owe you right of defense, unless they pay off policy limits, then you are on your own. If the judgment exceeds the policy limits you still owe the money. I think we all agree on this. What seems to be the question still up in the air is: Is a parent liable for the acts of their minor child in IL?

BTW if you could you explain the words agent and agency as they apply to parents and children in your post about IL law? I don’t understand the usage here.
Thanks

[Inigo_Montoya]

[QUOTE=Rick]
As far as I understand it, if you are liable the insurance company will pay up to policy limits. They have the option to just pay off without your consent.
[/QUOTE]
You make it sound so…dirty. To clarify, if you kill someone and you’re carrying limits that ain’t even gonna begin to cover the damages, why would an insurer waste your time with asking whether or not you mind if they fling the paltry 25k you agreed to buy? You hooked yourself for a lot more than that when you did the wreck, consider the payment a favor. Says I.

If you’re fighting a war with a revolver, pop your 6 rounds and hit the freakin’ deck you know?

[Dinsdale]

I guess full disclosure requires that I admit my bias that in a great percentage of personal injury cases, the injured party views their (mis?)fortunate incident as an opportunity to make money.

In litigation it appears to my jaundiced eye that far more often the question is not “how much do I need to make me whole,” but “how much can I get.”
For practical purposes, you would far rather be hit by an insured driver than an uninsured, unlicensed thief in a stolen car. Given the choice, you would rather be hit by a rich driver than a poor one. Probably best would be to be hit by an employee of a thriving business driving a company vehicle in the course of business.

While I’m no huge fan of insurance companies, I certainly will not lay on their doorstep the entire blame for this attitude I perceive.

Just wanted to explain the bias behind my word choice of “going after” insurance.
Like I said, I’ll look into this further. The premium isn’t due for a while.

[Rick]

[QUOTE=Inigo Montoya]
You make it sound so…dirty. To clarify, if you kill someone and you’re carrying limits that ain’t even gonna begin to cover the damages, why would an insurer waste your time with asking whether or not you mind if they fling the paltry 25k you agreed to buy? You hooked yourself for a lot more than that when you did the wreck, consider the payment a favor. Says I.

If you’re fighting a war with a revolver, pop your 6 rounds and hit the freakin’ deck you know?
[/QUOTE]

It is a subtle but inportant difference, between your homeowner’s, and other personal liability policys and a professional liability policys. On a personal policy the company can pay off if they feel this is the cheapest route for them even if they might prevail in court. If it is cheaper to write a check then fight a dubious claim they can write the check. On a professional liability policy (malpractice / errors and omissions insurance) since your professional reputation is on the line, they can only settle with your say so.
I sat on a jury once on a legal malpractice case that was completely groundless and probably would have been cheaper to pay off then fight. But fight they did, and they did prevail.
Dinsdale I agree 100% about what you are saying about people not wanting to be brought back to whole, but rather to be improved by liability cases. See the details of the case I mentioned above, this lady was looking for the brass ring so she could move out fo the double wide. It did not matter that she had no damages, it was free money since it came from the insurance company. :rolleyes: This is a huge problem here in the US. I will be damned if I know the answer, but IMHO this does need to change.

[Gfactor]

[QUOTE=Rick]
I don’t understand, this is what I have been trying to say, see my last post above.
[/QUOTE]

I was agreeing with you, mostly anyway. You did say it was a policy exclusion, instead of part of the insuring clause, but that’s a pretty minor difference.

What seems to be the question still up in the air is: Is a parent liable for the acts of their minor child in IL?

The answer appears to be: sometimes.

BTW if you could you explain the words agent and agency as they apply to parents and children in your post about IL law? I don’t understand the usage here.
Thanks

You get that I was quoting Martindale-Hubbell, right? So I was quoting someone else who was summarizing a couple of cases. Frankly, I’m not sure I fully understand the usage.

Anyway, the basic idea is this: There’s a concept in law called principal and agent (master and servant is a similar concept that deals with employers and their employees). If I permit you to act on my behalf, I’m a principal and you are an agent. Principals are generally (very generally) liable for their agent’s torts. Before states adopted the family car doctrine and owner’s liability statutes, a vehicle owner’s liability for accidents caused by permissive users of the vehicle was pretty much limited to principal and agent law. The quoted material says three things:

1. There is no statutory owner’s liabilty provision.
2. There is no family car or family purpose doctrine.
3. Liability is based on principal and agent doctrine. But agency is presumed if the plaintiff can show ownership and permissive use.

If not for the presumption, the plaintiff would have to prove agency as part of the case in chief. In most cases, this would be difficult.

Now turning to the cases cited by the Illinois digest author, we can see that they are sort of weak authority:

8 Ill. 2d 468; 134 N.E.2d 311; 1956 Ill. LEXIS 277 is Joseph Parrino et al., Appellees, v. Margaret Landon:

It involved a default judgment. The defendant didn’t answer the complaint and then tried to contest the judgment on appeal. Not surprisingly, he lost. The Complaint alleged that he let his sister drive his car and she crashed it. The appeal involved a technical argument about whether the complaint properly notified the defendant that he was being sued based on his vicarious liability for his daughter’s actions. The court found that because agency law was the only possible basis for liability, the defendant had adequate notice:

It is unquestioned that, as a matter of evidence, mere proof of one defendant’s ownership of an automobile driven by another defendant is prima facie proof of agency, which if not rebutted will support a judgment for plaintiff, insofar as the proposition of agency is concerned.

---

Defendant urges that no charge of misconduct on his part has been averred. Similarly he must know, by entire absence of expression, that he is not charged with knowingly permitting and entrusting his automobile to be driven by one unfit and unskilled thereby creating a hazard and danger to persons rightfully on the public highways. Therefore the only reasonable conclusion must be, since he knows of his joinder in the suit as a codefendant and that a judgment for damages was sought by plaintiffs against him by reason of his sister’s negligent conduct, that a vicarious liability is asserted against him. Knowing, presumptively, that the family-purpose doctrine affords plaintiffs no basis for recovery, he should also presumptively know that other normal types of vicarious liabilities exist in this State as a result of a principal-and-agent or master-and-servant relationship. The fact that ultimately defendant might clearly establish his freedom from liability for the reason that the vicarious relationship did not exist is of no importance so far as principles of pleading are concerned.

This is all dictum, of course, but probably an accurate summary of Illinois law in 1956.

*White v. Seitz *, the other case cited previously, summarizes Illinois law very well, but it was decided in 1930:

That a parent is not liable for the tort of his minor child merely from the relation; that the owner of an automobile who merely permits another to use it for his own purposes is not liable for the negligence of the person so using it; that the owner of an automobile is not liable for an injury occasioned by the negligent use of the machine by his servant if the servant was at the time at liberty from the service of his master and not engaged in doing his master’s business but was pursuing his own interests exclusively; and that the relation of master and servant is not established between the owner of an automobile and his minor son by the mere fact that the father purchased the machine for the pleasure of the family and that he permitted his son to use it for his own pleasure.

The Martindale-Hubbell digest, which is edited every year, says this is still the law. I don’t know if that is true or not.

[Rick]

I have a friend that has been a staff counsel for a large insurance company. I shipped a link to this thread over to them, and asked for an opinion. Here is what I got back.

I suspect the quick answer is that it isn’t that the policy is meant to cover the parents’ vicarious liability for their teenagers’ torts, it is that the teenagers themselves qualify as insureds on the policy in their own right, since they are a family member resident in the Named Insureds household. That means that if they cause an accident they have coverage up to the limits of the policy; the policy’s coverage would not be capped at whatever the parents’ liability might be statutorily capped at.

This does add a new wrinkle, and would tend to justify the increase in premium since the teenagers are insured in their own right. For the $250ish additional premium this seems like not a bad deal IMHO.

[Gfactor]

[QUOTE=Rick]
I have a friend that has been a staff counsel for a large insurance company.
[/QUOTE]

Sounds like he nailed it.

[Dinsdale]

Looks like I’ll need to read the policy.
I had been under the impression that the umbrella insured only the spouse and I. Strikes me as a little wierd in that, if I did not have the umbrella, I would not be automatically liable for my kids’ negligence (oter than carrying them on our auto insurance).
I’ll have to see if I can exclude them as insureds under the umbrella.
Doesn’t make much sense to me for me to assume liability that I otherwise wouldn’t have. As I said, to the extent they have limited assets and minimal jobs, they are largely judgment-proof.
Thanks, Rick - and thank your friend.

[Rick]

I also asked about Dinsdale question about loaning a car to the neighbor vs your teenager driving it. Here is the response (it’s across a couple of e amils so bear with me:

[My friend]In California the liability of the owner of a vehicle when he loans his car to someone else is capped at $15k, but that doesn’t mean that the INSURER’s liability is capped at that.

[Rick’s response]Not sure if I understand the last part. If my liability is capped at 15K why would the insurer’s liability be higher? ::: scratches head:::

[My friend]Because anyone who drives your vehicle with your permission is a permissive user and is covered under the insurance policy. In the “who is an insured” section, one of the definitions of “insured” includes a permissive user.

And anyone who is a family member who is resident in your household is covered under the policy. That’s spelled out in the “who is an insured” section, too.

The discussion, at least as far as I read it last night, was confusing liability with insurance. The liability of the owner of the car may be capped, at least in California (that is probably not a universal truth across 50 states). However, the owner of the vehicle is not the only person who is covered under the insurance policy.

If I drive your car, with your permission, your insurance policy will cover me. In California, your liability as the owner is capped at 15k if I have an accident, unless I was obviously drunk or something when you gave me the keys. If you have a $100,000 policy, and I cause $150,000 in damages, your insurance policy is only gonna pay $100,000. That leaves $50,000 for the plaintiff to get from you and me, but he can get only $15,000 from you as the driver.

In the case in the OP, the poster isn’t thinking straight about what the policy covers. He is thinking only about his own liability, and doesn’t understand why his policy premium should go up now that there are teen drivers. What he doesn’t get is that the teens are also insured under the policy, and it’s their potential liability that has increased the premium, not his.

The OP is talking about an excess policy – umbrella I think he called it. Ask him to read and post what the “Who Is An Insured” section says.

I think this explains it. Dinsdale Can you post the contents of the who is insured clause of your umbrella policy?

BTW Gfactor thanks for explanation on Agent /Agency.
Oh and exclusion vs insuring clause thing? You are correct of course, but in my defence I took that exam in 1978. I am amazed that I recall as much as I do.

[Inigo_Montoya]

I suspect the quick answer is that it isn’t that the policy is meant to cover the parents’ vicarious liability for their teenagers’ torts, it is that the teenagers themselves qualify as insureds on the policy in their own right, since they are a family member resident in the Named Insureds household. That means that if they cause an accident they have coverage up to the limits of the policy; the policy’s coverage would not be capped at whatever the parents’ liability might be statutorily capped at.

Well yeah, but that brings us back to: what’s a teenager got in the way of assets that need a $Million in protection*? How effective is a judgement against a minor? If the kid kills a breadwinner and is found liable for tons of money but only has the 100/300/50 on mom & dad’s policy, and mom and dad are legally bulletproof–why bother?

• I loathe this method of planning, but that’s a different matter