Auto Insurers: Exclusion Policies Explained

Auto insurance companies can implement exclusion policies, which are clauses that void coverage under specific circumstances. Exclusions are a way for insurance companies to define what is and isn't covered in a car insurance policy. These exclusions are typically listed in the policy and can vary depending on the level of coverage. While not all states allow exclusions, they are commonly used to omit high-risk or unsafe drivers from a policy to avoid increased premiums.

Named driver exclusion

A named driver exclusion is a clause in an auto insurance policy that states that an individual listed on the policy will not be covered if they are driving a vehicle. This means that any other drivers of the insured vehicle who are not named on the policy will not be covered in the case of an accident or injury.

A named driver exclusion is usually attached to a policy when there is a problem driver in the household who has access to an insured vehicle. A problem driver could be someone with a suspended license, a DUI conviction, or multiple accidents. In some cases, an insurer may request that the driver be excluded and will cancel your policy if you don't comply. This happens when the driver in question doesn't meet the company's underwriting standards. In other cases, a policyholder may choose to exclude a driver to avoid having their insurance rates affected by that person's bad driving record.

If an excluded driver operates the vehicle and gets into an accident, they and the car owner can be held personally responsible for any damages caused. The car owner has vicarious liability for anyone they allow to drive their car. The insurance on the car will not cover the accident, and the expenses will be the responsibility of the driver and the car owner.

It's important to note that not all states allow driver exclusions, and in some states, you cannot exclude your spouse. Excluding a driver from your insurance policy means they are not covered by your insurance in any circumstances.

Family member exclusion clause

A Family Member Exclusion Clause is a clause within an auto liability insurance policy that states that the insurance company will not cover personal injury damages claimed by one member of a family against another member of the same family while both are occupying the insured vehicle. This type of clause is an attempt to prevent fraud where two members of the same family might collude to cause an accident so that the passenger can make a liability claim against the driver for damages.

The rationale behind the family member exclusion clause is to prevent fraudulent or collusive intra-family lawsuits for insurance benefits. This type of clause is common in the state of Ohio and was previously common in Texas. However, in the case of National County Mutual Fire Insurance Co. v. Johnson in 1993, the Texas Supreme Court held that to the extent the family member exclusion purported to deny a family member's claim within the minimum liability insurance limits required by Texas law, such exclusion was invalid. The Court found that the exclusion prevented a specific class of innocent victims, those related to and living with the negligent driver, from receiving financial protection under an insurance policy, which was contrary to the express legislative mandate.

Despite this ruling, insurers in Texas may still sometimes purport to deny claims in their entirety under the family member exclusion. It is important to note that, under Texas law, a family member may make a claim against a relative's motor vehicle liability insurance for injuries received in an accident caused by that relative's negligence up to the minimum liability limit provided under Texas law. As of 2017, this limit was $30,000 for each injured person, up to a total of $60,000 per accident, and $25,000 for property damage per accident.

In Ohio, there is a wrongful death exception to the family exclusion. As of March 22, 2013, the Ohio Legislature passed a law entitling the "owner or operator of a motor vehicle an action for wrongful death" and prohibiting intrafamily liability exclusions in automobile policies in a claim or suit for damages under Ohio's wrongful death statute.

Intentional act exclusion

Auto insurance companies can deny coverage for injuries caused by the "intentional acts of the insured". This is known as the "intentional act exclusion". This exclusion applies to acts where the insured intended to cause injury or damage, and only in cases where the insured did not intend to cause harm may coverage be available.

The "intentional act exclusion" is a clause within insurance policies that exempts the insurer from paying for injuries or damage caused on purpose. This helps insurers reduce the risk of fraud and saves them money. However, it can also harm the victims of purposeful accidents.

For example, if someone experiences road rage and sideswipes another vehicle, they have committed an intentional act. They are clearly liable and at fault for the damage to the car and any personal injuries the occupants might suffer. However, if their car insurance has an intentional act exclusion, their insurer may not have to pay liability coverage to the victims. In this case, the victims may be unable to file a claim with the liable driver's insurance company and may have to pursue other avenues of compensation, such as their own insurance policies or legal action against the driver.

The determination of whether an act is intentional or not depends on the specific facts of the case. The insured's conduct and the natural and probable consequences of their actions are considered when making this determination. For example, a jury found that a driver who, in a fit of jealousy, drove their vehicle over a tent, acted recklessly rather than intentionally, and their insurance policy covered the injuries suffered by the occupant of the tent.

Some states have established the intentional act exclusion by statute. For example, the California Insurance Code provides that "an insurer is not liable for a loss caused by the willful act of the insured". However, other states have established it through common law or case law. While some courts have rationalized that providing insurance coverage for intentional acts goes against public policy, others have argued that injured parties should be compensated when the intentional tortfeasor has an insurance policy.

In conclusion, the "intentional act exclusion" in auto insurance policies means that coverage may be denied for injuries or damage caused by the insured's intentional acts. This exclusion can complicate the insurance claim process for victims of purposeful accidents and may require them to pursue alternative avenues of compensation.

Medical payments exclusions

An auto insurance company can have exclusion policies, and medical payments exclusions are one such type. Medical payments coverage, also known as MedPay, is an additional coverage option for auto insurance policies in most states. It is mandatory in some states and optional in others. MedPay helps pay for medical bills resulting from injuries caused by a car accident. This coverage can be used regardless of who is at fault for the accident.

There are, however, certain exclusions to MedPay coverage. It does not include medical treatment that is unrelated to the accident, replacement services (such as housekeeping, yard work, or childcare), or medical expenses for any parties in other vehicles involved in the accident.

In the event of an accident, MedPay can cover expenses such as hospital visits, nursing services, ambulance and EMT fees, health insurance deductibles and co-pays, surgery, X-rays, and dental procedures. The coverage limits typically range from $1,000 to $10,000, depending on the state and insurer. It is generally recommended to carry coverage equal to your health insurance deductible so that MedPay can be used to cover out-of-pocket medical expenses.

While MedPay is not offered in every state, states that do not offer it typically have personal injury protection (PIP) coverage available instead. PIP is available in "no-fault" states, while MedPay is offered in states without "no-fault" laws. PIP may cover additional expenses that MedPay does not, such as lost wages or childcare for essential services.

Owned-but-unlisted vehicle exclusion

An Owned-but-Unlisted Vehicle Exclusion is a clause in an auto insurance policy that exempts from coverage any vehicles that an insured person owns or uses regularly but does not own, but which they fail to list as insured vehicles on the insurance policy declaration. In other words, if you own a car or regularly drive a vehicle that you don't own, and it is not listed on your insurance policy, your insurance company may not cover any accidents or damage to that vehicle.

The more vehicles an insurance policy covers, the higher the premium will be. So, some drivers might choose not to list all their vehicles when taking out insurance to save money on premiums. While this could save them money, if they have an accident in an unlisted vehicle, their insurance company may not cover the costs of repairs or any liability claims.

For example, say Bill owns two cars: a 2002 Volvo and a 2010 Prius. He takes out insurance for the Volvo but doesn't tell his insurer about the Prius. If he then has an accident in the Prius, the damage to both vehicles won't be covered by his insurance company because he should have listed the Prius on his policy.

In one case, a woman applied for auto insurance and was instructed to list all household members aged 15 or older. One of the clauses in the policy warned that it may not provide coverage for unlisted drivers. Despite living with her boyfriend, she didn't list him on the application. Later, her boyfriend was driving her car with her permission and collided with another car. The insurance company filed a petition seeking a ruling that it wasn't obligated to provide coverage because the boyfriend wasn't a listed driver under the policy. The Court of Appeals held that the unlisted driver exclusion in this case was not void for public policy reasons, regardless of the injured parties' access to other insurance.

In another case, the Supreme Court of Pennsylvania upheld an unlisted resident driver exclusion in an automobile insurance policy. The insured's girlfriend lived with him but was not listed as a driver on his policy. After she was involved in an accident while driving his car, the insurance company argued that it had no duty to defend or indemnify her in the resulting personal injury lawsuit. The Court agreed, stating that requiring an insurer to provide coverage for an unlimited number of permissive users would result in an increase in insurance costs as insurers would be forced to insure unknown risks.

Frequently asked questions