From the Land Mines in Accident Cases section of How You Can Avoid Legal Land Mines by Joseph S. Lyles (2003).

A client of mine, Robert, called me one day alarmed because he had been served with a lawsuit (the paperwork to begin a lawsuit is technically called a Summons and Complaint). His troubles began when one of his cars developed mechanical problems. Robert knew a man who lived nearby who worked on cars at a very reasonable rate, so he took the car to him for the repair.

Robert realized the mechanic had lost his driver’s license for driving under the influence, so he told the mechanic not to drive the car on the highway. Of course, the mechanic later claimed he needed to test drive the vehicle and drove it on the highway anyway.

As luck would have it, the mechanic caused a collision. Robert’s insurance carrier (carrier A), refused coverage because the driver was unlicensed and because he was specifically told not to drive the car.

The injured party sued the mechanic and recovered damages under her own insurance coverage. Then that insurance carrier (carrier B) sued Robert to be reimbursed for the money it had paid on the claim. This lawsuit was based on the theory that my client had negligently entrusted his car to someone he knew, or should have known, was an irresponsible and potentially impaired driver.

Fortunately, I was able to convince carrier A to provide a defense to the lawsuit in spite of its earlier denial of coverage. But Robert could have very easily found himself faced with a big bill for an attorney to defend him and an even bigger bill to reimburse insurance carrier B.

The Lesson: Allowing someone to access your automobile can be very dangerous. It is hard to say you didn’t give someone permission to drive your car when you voluntarily gave them the keys. However, if you didn’t give them the keys or permission and they cause a wreck while driving your car, then your insurance company still may deny coverage and leave you to protect yourself. Your company would base this denial on the grounds that the driver was not operating the vehicle with your permission. Most liability insurance policies exclude coverage for such non-permissive drivers.