Limiting the Sale of Named Driver Policies in Texas
Auto insurance policies can be confusing and complex. Many people are confused—and sometimes even misled—about the extent of their coverage. For example, many Texas drivers would be surprised to learn that their insurance policies would not cover a motor vehicle collision if a household resident is behind the wheel during the accident.
Named Driver Policies Allow for Gaps in Coverage
Most standard automobile insurance policies cover the owner and anyone using the owner’s car with permission, including family and other household residents. Some insurance companies—particularly those that serve customers with lower incomes—sell policies known as “named driver policies.” By default, these policies do not provide coverage for residents who live with the vehicle owner; in fact, they only provide coverage for the owner and those household residents specifically named on the policy. Thus, if a car owner allows a household resident (like a spouse, a parent, or a teenage driver) who is not specifically named on the policy to use the vehicle and that driver is involved in a collision, the insurance company could—and most likely would—deny coverage under a named driver policy.
While named driver policies are often less expensive (because by default they exclude from coverage the group of people most likely to use the vehicle), the negative effects of these policies can be far-reaching. If the insurance company denies coverage because the driver was a household resident but was not specifically listed on the policy, the owner may not be able to take advantage of first-party benefits under the policy. So, for example, if the owner has not finished paying off the car, the owner may be unable to take advantage of collision coverage. As a result, the owner may have to continue paying the car note even though the car does not run, the owner cannot afford the repairs, and the insurance company denies the claim. In addition, the owner and the driver may not have the liability coverage they expected the owner’s insurance would provide following a collision. This means the victim may be unable to recover losses from the owner or the driver. It also means the owner and driver may be personally responsible for the victim’s losses.
HB 259 Limits the Sale of Named Driver Policies in Texas
In May, our Texas Legislature passed HB 259, which is designed to limit the sale of named driver policies, and Governor Abbott signed the bill into law last week. Beginning on January 1, 2020, insurance companies cannot sell or renew named driver policies that exclude residents of the owner’s household from coverage by default. Instead, insurance companies can exclude family members and other household residents from coverage only if those persons are specifically named and excluded on the policy. This should go a long way in preventing consumers from purchasing insurance coverage that proves to be worthless after a collision (since car owners routinely lend their vehicles to others living in the same house). It will also help crash victims by eliminating policy language some insurance companies routinely use to deny claims.
Even though Governor Abbott signed HB 259 into law, it does not go into effect until January 2020. In the meantime, do not wait until it is too late to check whether your policy covers your family and other household residents. If you are unsure whether your insurance policy covers them, contact your insurance agent and ask for a copy of your declaration page immediately. If you or a loved one has been injured in a car crash and you are unsure whether the at-fault driver has liability insurance, you have enough things to worry about. Do not let negotiating with an insurance company and navigating through a confusing auto-insurance policy be one of them. We deal with the insurance company so you can focus on getting your life back to normal. You have one chance to do this; make the right choice by choosing the right attorney. Call us at (956) 291-7870 or email us at contact@rdjlawyer.com for a free consultation and case evaluation.