The Family Purpose Doctrine isn’t as family-friendly as it sounds.
Under the doctrine, the owner of a vehicle is liable for damages caused by family members when they use the vehicle.
That makes sense to a lot of people, but less so when they’re told they do not need to have given their permission to be held liable; the doctrine holds that the owner should have control over their vehicle in the same way they are expected to have control over their firearms, because of the dangers they pose.
In other words, if one of the kids in your family takes the car late at night without letting you know and then gets into a crash and injures someone, you’re likely to be held liable.
The doctrine varies by state with some only applying it to parents and their children, while others expand the doctrine to include non-family members. Efforts over the years to repeal laws based on the doctrine have all failed.
It is, in short, one huge risk for parents everywhere, but perhaps especially so for high net-worth families whose wealth can make them a target.
Limiting Your Liability in Family Purpose Claims
None are foolproof, but there are several ways that families can insulate themselves in cases where the Family Purpose Doctrine could be cited.
- Ensure Adequate Insurance Coverage
One of the most crucial steps in protecting yourself from potential liabilities is ensuring that your auto insurance policy provides sufficient liability coverage. Regularly review your policy with your insurance agent or company to ensure it fully protects your interests. Consider increasing your coverage limits as well as buying an umbrella insurance policy to align with your high-net worth status, as substantial assets may be at stake in the event of an accident.
- Coordinate Limits
A common mistake we see is families leaving their children under-insured. The smarter strategy is making sure every member of the household has the same liability limits and is included in your umbrella policy. By providing the same liability limits for every family member, you ensure that each individual is adequately protected in case of an accident or incident that leads to a liability claim. This consistency eliminates any potential gaps in coverage that might arise if certain family members have lower liability limits compared to others.
- Buy Separate Insurance Policies
It won’t be cheap but consider buying separate insurance policies for family members who frequently use the family vehicle. This approach can help minimize your exposure to liability by ensuring each driver has their own insurance coverage.
But beware: if your teenage driver is shuttling younger siblings to school or picking up groceries or on any kind of family-related errand, the parents could still be held liable under the Family Purpose Doctrine.
That liability can even extend to scenarios involving adult children who have their own insurance policies and are living at college or even in their own apartments. Parents can be held liable if they provide financial support to their child, including paying their tuition or rent.
- Emphasize Responsible Behavior
Honestly, if you’re not doing this already, your parent card should perhaps be revoked. So, yes, be sure to educate your family members about safe driving practices and the importance of responsible behavior behind the wheel.
Consult with an Attorney
If you have concerns regarding the family purpose doctrine and how it may impact you, seek guidance from an attorney specializing in insurance or personal injury law. They can provide valuable insights based on the specific laws in your jurisdiction and help you understand your rights and responsibilities.
As a high net worth individual, understanding the family purpose doctrine and taking proactive measures to protect your assets in cases where it applies is crucial. By ensuring adequate insurance coverage, emphasizing responsible behavior, and seeking legal advice, you can mitigate potential liabilities and safeguard your financial well-being. Don't leave your wealth at risk – take the necessary steps to protect yourself and your family today.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. An employee-owned organization, we’ve been providing our clients with the confidence to face whatever lies ahead for more than 100 years. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.