Nonowned Auto Coverage
for a Neighbor's Auto?

Q

This question concerns a claim where the insured's son was asked by a neighbor to take the neighbor's car to a car wash. While driving that car to the car wash, the son ran into another vehicle, heavily damaging both cars.

We are mostly concerned with the damage to the neighbor's car because the neighbor does not have any physical damage coverage on his car. He wants our insured's personal auto policy to pay for the repair. This doesn't seem right. The neighbor gets physical damage coverage without paying for it.

What do you think?

Michigan Subscriber

A

The physical damage coverage under the personal auto policy applies to any nonowned auto, a defined term. The situation you describe makes the neighbor's car a nonowned auto as defined; that is, a private passenger auto not owned by or furnished or available for the regular use of the named insured or any family member, while in the custody of or being operated by the named insured or any family member. There is no applicable exclusion, so your insured's PAP will pay for the damage to the neighbor's car even though he has no such coverage on his own auto policy. Besides, the son is responsible for the damage to the car. The liability section of the insured's PAP does not apply because of the care, custody, or control exclusion, so it is appropriate for the damage to be covered by the physical damage insuring agreement.

Of course, the physical damage coverage is excess with respect to a nonowned auto, but this is excess over any other collectible source of recovery. Since the neighbor has no physical damage coverage, there is no other collectible source of recovery. This makes your insured's PAP the primary insurance.

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