Literally, permissive use occurs when one person allows another person to use something they legally possess. In the case of a personal automobile this means that a vehicle owner permits (allows) another person to drive their vehicle. However, from an insurance perspective, the fact that a driver has the permission of the owner to drive a vehicle does not necessarily mean that the permissive user or vehicle will have the same coverage, if any, as the named insured. If I allow my son to drive my vehicle is he a permissive user? Literally yes, he has my permission; however if he is listed on my policy we do not refer to him as a permissive user but rather as a listed driver. With respect to insurance, a permissive user usually refers to a person not listed on the policy who is using a covered vehicle with the consent of the owner. From the standpoint of coverage, the difference between being a listed driver and a non-listed permissive user is often significant.
If there is an accident involving a non-listed driver, the critical question quickly becomes, “Is there coverage for a permissive use driver and if so, under what circumstances?” To answer it is important to understand the definition of terms used in an automobile insurance policy. Here are a few you might see that may impact whether there is coverage:
- Named insured
- Named driver
- Permissive user
- Excluded driver
- Vehicle owner
- Registered owner
Each of these terms may be defined specifically in the policy, and different coverages may apply. Generally, the named insured and any listed (included) driver will have all of the coverages afforded by the policy, subject to several listed exclusions (e.g. drunk driving.) An excluded driver is not afforded any coverage. Unfortunately, “Permissive User” is difficult to specifically define in the policy definitions due to numerous possible interpretations and coverage requirements based on specific use scenarios that must be evaluated in the context of other language in the policy.
A permissive user may be afforded coverage, but limitations usually apply. Here are a couple examples of limitations:
- No coverage for a permissive user who is a member of the household and not a listed driver
- No physical damage coverage for a permissive user under the age of 25
When a claim is reported with a driver who is not listed on a policy, there are a number of questions that are asked to determine if there is coverage. These questions are intended to determine if the driver is a regular user (frequency of use and access to a vehicle may make a difference) and should have been listed on the policy, a permissive user with respect to possible insurance coverage, or a non-covered driver.
- Did the owner give the driver permission to drive the vehicle?
- How far was the vehicle driven?
- Where does the driver live?
- Is the driver a relative of the named insured?
- How many times has the driver used this vehicle before?
- Does the driver keep a set of keys for the vehicle?
- Does the driver have keys readily available?
- Does the driver have to ask each time he/she uses the vehicle?
- Where is the vehicle stored?
- Who is responsible for maintenance of the vehicle?
There is no single question that will make the permissive user determination. The combination of answers to these questions and the circumstances of use will determine whether the driver is a permissive user and what coverage or exclusions may apply.
An interesting scenario occurs when the named insured has a child who is away at school. Is it required that they be listed on the policy to obtain coverage when they are home? Why should a premium be paid for the student when they are not
around to drive a vehicle much of the time? Depending on the policy language and the definitions of “relative” and “resident,” coverage may or may not be denied if the student is not listed on the policy.
What does this mean to producers? It is critical that producers understand the terms of the policies for which they submit applications, discuss with the applicant all members of the household and their possible use of a vehicle, and determine all potential drivers of the vehicle to understand who should be listed on the policy. No producer wants to have an E&O exposure because they didn’t have a conversation with the named insured when the policy was purchased. When in doubt, producers should strongly encourage their insureds to list all possible drivers on the policy.