Omnibus Clauses as Extending Auto Insurance Coverage to Third Persons

Automobile liability insurance policies usually include a provision, generally called the “omnibus clause.” This extends the policy’s coverage to any individual user responsible for the use of the insured vehicle, provided the actual use is with the permission of the named insured.

What Is Automobile Insurance, and What Does Automobile Insurance Cover?

Automobile insurance is insurance for cars, trucks, motorcycles, and other street-legal vehicles. Its primary objective is to provide financial protection in an accident and against liability that may also result from accidents and other incidents in that vehicle.

Auto insurance is an agreement between you and your insurance provider in which you consent to pay a monthly premium. In exchange, the provider pays for your losses in the event of an accident if your specific policy covers those losses.

In most states, auto insurance is mandated by law, and there are fees or penalties assessed for driving without it. Auto insurance coverage is heavily demarcated by what policies your insurance provider offers, what policy you have bought, and the specifics of that policy. There are six basic types of automobile insurance coverage:

Liability Coverage
Liability coverage protects the motorist who harms another driver or property while driving the insured vehicle. It is mandatory in most states, and there is typically a minimum amount to purchase. Auto liability insurance delivers two primary forms of protection: body damage liability, which refers to another individual’s sustained injuries if you caused an auto accident; and property damage liability, which refers to property damage resulting from an auto accident, such as damage done to the other driver’s vehicle.

Uninsured and Underinsured Motorist Coverage
Although most states demand all motorists to carry auto insurance, there are uninsured motorists on the roads, causing accidents and problems for others. Uninsured or underinsured, motorist coverage helps cover you if you are involved in an accident with a driver who has no auto insurance or not enough.

Comprehensive Coverage
Comprehensive coverage is a form of insurance coverage that aids if you are involved in an incident that is not a wreck. Comprehensive coverage will help pay to replace or fix your car if it has been stolen, damaged if it is not a collision, or damaged from fire, theft, vandalism, and falling objects. Financing or leasing a vehicle typically requires obtaining and maintaining comprehensive coverage but is otherwise optional.

Collision Coverage
Collision coverage can help pay for repair or replacement expenses if your car has collided with an object or another car or if your car has rolled over. This kind of auto coverage protects your car, whereas property damage liability coverage would pay for the damage done to the other motorist’s vehicle. Collision coverage is typically optional.

Medical Payments Coverage
Medical payments coverage can be part of an auto insurance policy. It could cover your or your passenger’s medical costs in a car accident that results in damages.

You would be shielded no matter who caused the accident, whether you or the other driver. It is optional and not available in all states but is required in others.

Personal Injury Protection
Personal injury protection is also often referred to as PIP coverage. It is an auto insurance policy component that covers medical expenses related to an auto accident, regardless of which driver was at fault, and will often include lost wages coverage. It is only available in some states, while other states require PIP as a policy add-on.

What Are Some Examples of Auto Insurance Conflict?

The best way to avoid auto insurance conflicts is to thoroughly understand your auto insurance policy’s details, coverage, and limitations before signing a contract with the insurance provider. One of the most prominent examples of auto insurance conflict is a conflict of interest when the same insurance company covers each driver involved in an accident.

Another typical auto insurance dispute arises when a suit is filed against the insured client. That suit contains allegations both within and without policy coverage or if the suit filed against the insured seeks damages above the agreed-upon policy limits.

Some other examples include:

• The insurance policy provider denies payments or coverage in the event of an accident;
• Problems with insurance fraud, such as vehicle dumping, false registration, exaggerated repair costs, etc.;
• Conflicts regarding insurance rates, such as signing a contract after being assured one rate when signing the contract and then being charged another;
• Liability issues between drivers and other passengers;
• Cancellation conflicts; or
• Breach of contract by either party.

Once again, one of the best ways to avoid conflict is to ensure you are clear on the terms of your policy and get everything in writing.

I Have Been Injured in an Auto Accident – What Should I Do?

When you’ve been hurt in an accident, you’ll usually look to the other individual’s insurance company to collect damages for your injury. If the other individual doesn’t have insurance or doesn’t have enough insurance, you may be relying on your own insurance company to pay your damages. Negotiating with an insurance adjuster can be frustrating and downright difficult.

How Far Does the Omnibus Clause Extend?

Often, the named insured permits the first permittee, which then permits a third party known as the second permittee. The most common example is when a parent allows a kid to use their car, and the kid then lets a buddy drive. The main problem in determining coverage is whether the initial permission included either authority to the first permittee to allow the second permittee to operate or use the vehicle or the named insured’s consent to the second permittee to do so.

Most courts hold that the named insured’s consent to another to use the insured automobile does not authorize the first permittee to entrust their right to a third individual. However, the named insured’s permission to a second permittee need not be expressed. Permission may be implied from the nature or scope of the initial permission or the conduct of the parties and the facts and circumstances.

How Do Courts Determine Whether the Insured Has Given Permission?

If the named insured expressly authorized the original permittee to delegate their privilege to use the insured vehicle to other individuals, the courts have typically ruled that coverage will extend to a second permittee. When the named insured expressly prohibited the original permittee from letting anyone else drive, and the second permittee was driving for their benefit, most courts have held that coverage will not extend to the second permittee.

In cases where the insured did not expressly permit third-party people to operate the vehicle, courts are split. Some courts have ruled that a named insured’s grant of unrestricted use of the automobile to another individual includes the power to permit other individuals to use the car, and thus the omnibus clause applies.

However, other courts have held that the insured’s silence does not give the first permittee capacity to delegate. Thus, a second permittee using the car for their purposes would be denied coverage because the required permission of the named insured was lacking.

Should I Consult an Attorney?

Automobile insurance policies can be complex and confusing, and dealing with your insurance company can be challenging.

If you feel that your insurance company is wrong in denying your claim, hiring an insurance attorney can help. An attorney can help explain the complex provisions of your policy and help you deal with your insurance company to get the coverage you are entitled to.