Here’s a typical and all too familiar scenario. Months or years after your divorce, you hand the car keys to your minor child, who negligently wrecks the car and seriously injures another motorist. You promptly turn the claim into your insurer, thinking that your child is covered under your auto policy, only to be shocked that the insurance company denies the claim. And now both you and your child have been sued by the injured driver for thousands in medical bills and lost wages, and you are facing the prospect of personal liability – and possibly bankruptcy.
There are two principal reasons why the insurance company might deny the claim: your child is neither a “named insured” nor a “resident relative” under the policy. If your child is not a “named insured” listed in the policy, the policy will usually still provide coverage for “resident relatives” of the household.
But here’s the problem: with flexible parenting arrangements and written agreements that do not specify “residency” issues, where is your child actually residing? In one parent’s home? Or both? Or even at a third home if time is spent living with grandparents? The question is: is there anything you can do to ensure that your minor children will be covered in a future accident under one or both parents’ insurance policies?
This accident scenario has been frequently litigated. Courts examining this issue have focused on what constitutes “residing” with a particular parent for purposes of satisfying the “resident relative” requirement of the insurance policy. One factor courts will look to is the language of the divorce or dissolution decree or visitation agreement. For example, if the agreement provides that the minor “alternately resides with each parent under a custody or visitation arrangement,” it may carry persuasive weight as to whether the minor was a resident of one or both homes.
Some courts have recognized the concept of “dual residency” for purposes of meeting the “resident relative” requirement, and have rejected the notion that a minor can only “reside” in one home. Courts that have adopted a dual residency standard have realized that the concept of a minor’s “dual residency” is a frequent reality in divorce situations.
Litigation aside, there are two simple and important steps you as a parent can take now, BEFORE A CRASH EVER OCCURS, to ensure your children are covered under your auto policy. The first is to contact your agent, in writing, and notify him or her that your child will be driving the vehicle(s) on occasion, and ask that your child be listed as a named insured under your policy. The second step you can take is to make sure your divorce or separation agreement expressly states that your child will be alternately residing with each parent. These simple steps will greatly reduce or even eliminate any opportunity for your insurance company to deny a claim in the future.
As an attorney who represents auto accident victims, the unholy trinity of (1) a divorce; (2) a minor causing a serious crash; and (3) litigation over whether the minor was covered as a “resident” under unclear insurance policies or divorce decrees, is an all too familiar scenario. But if you think that this is not a real problem on your radar screen, I invite you to do two things after reading this article. The next time you’re driving somewhere, take notice of how many young drivers are talking on cell phones or texting while driving. And when you get home, look at how much you’re paying for auto insurance. Either one of those facts just might move you to take action to make sure your policy works to protect you, given what you’re paying for it every year!