|Wow! Talk about a close call. Here's one from the Arizona files of close calls.
One of our members, lets call him Mr. Lucky, had a large personal lines client with a teenage son. As fate would have it, the son accumulated a driving record that was absolutely horrible. The parents had significant wealth, and carried very high liability limits to protect that wealth. Due to the son's age, driving record, and type of vehicle the auto liability premiums were very high.Due to a suggestion of a family friend, the Dad re-titled the vehicle in the son's name, deleted coverage from the family's auto insurance, and had the son secure his own policy from a specialty auto insurance carrier who provided only minimum financial responsibility limits. The Dad felt that the son had no assets to protect, so it was not important to have limits in excess of the financial responsibility requirement. He further felt that he and/or the family had no responsibility for the tort actions from the son's driving as the vehicle was in the son's name, as was the liability insurance on that vehicle.To prevent the family's insurance carrier from charging a higher premium for the son's driving record, the Dad agreed to and did in fact sign a Driver Exclusion" on the family's auto policy.It is important to understand that the son still lived in the same household, and frequently used his own car to run errands for the family. The family not only provided the vehicle to the son, but the family maintained the vehicle for the son's use to attend a local university. The most common errand was taking his siblings to and from school, and occasionally doing shopping for the family's groceries.When on a mission for the family the son had an at-fault accident, and injured another driver. When it became apparent that the 15/30 bodily injury limits might not be adequate, the attorney representing the injured driver notified the son's family that they shared responsibility for the injuries caused by the son due to The FAMILY PURPOSE DOCTRINE.This doctrine is recognized in Arizona, and the elements of the family purpose doctrine are set out in Brown v. Stogsdill, 140, Arizona. 485, 682 P2d 1152 (App. 1984) as follows: "There must be a family with sufficient unity so that there is a head of the family, the motor vehicle responsible for the injury must have been one furnished by the head of the family to a member of the family and this vehicle must have been used on the occasion in question by the family member with the applied or expressed consent of the head of the family for a family purpose."
The case described above is almost identical to Brown v.Stogsdill, and would have no doubt endangered the family's assets to claims from the injured party.The Family Purpose Doctrine can expand the liability exposure of families to the actions of their children regardless of whose name the vehicle is titled in, and regardless of what name the policy was purchased in. Arizona Court's have taken an expansive view of what constitutes a "family purpose", and in one case held that a minor daughter traveling to and from work using the car to earn her living was serving a family purpose.Determining what would or would NOT constitute a 'Family Purpose" can only be determined with certainty in a Court of Law, and is certainly beyond the scope of expertise of us non-legal types. Having said that, you may understand why we recommend our membership refer policyholders considering a separate policy for their children to their own attorney. It does, however, make good sense to advise your policyholders that simply changing the policy and title of the vehicle does not insulate them from the actions of their children.In the case discussed above the "Dad" and the rest of the family was fortunate in that the damages were adequately covered by the minimum limits of the son's policy. (Just barely adequate, but adequate none the less.)
Author: Lanny L. Hair, CIC, ARM, RPLU - Executive Vice President
Independent Insurance Agents and Brokers of Arizona, Inc., Phoenix
Young v. Beck
On April 5, 2011 the Arizona Supreme Court rendered an opinion on the Young v. Beck case which reaffirms the Family Purpose Doctrine. S. David Childers of Kutak Rock LLP in Scottsdale wrote a memorandum describing the case as well as the general principles of the Family Purpose Doctrine. Click Here