Wednesday, March 21, 2012

Buy your teen the same amount of car insurance you buy yourself

The day has arrived when you drive your teen to the DMV to get his or her learner’s permit and then driver’s license.  Scary.  But the scariest thing for a parent is being asked to sign for your child’s driver’s license as a “sponsor.”

Wisconsin law requires that children under 18, with some exceptions, have an adult sponsor in order to get a learner’s permit and driver’s license.  The sponsor is typically a parent. The sponsorship application for a child’s driver’s license requires that a parent agree to be jointly and severally liable for damages caused by the negligence or willful misconduct of the child.  This means that if an accident were to occur, the parents would be held liable as if they caused the accident.  Note too, one parent’s signature typically puts both parents on the hook even if they are divorced.  As a result of Wisconsin’s “sponsorship statute” it is important to protect your family and your assets by purchasing your teen drivers as much car insurance as you buy for yourself. 

A recent appellate court decision shows why adequate insurance is so important.  In Progressive Northern Ins. Co. v. Jacobson, 2011 WI App 140, a minor child caused an accident killing his two passengers.  He owned his car and carried his own car insurance, but it appears it was minimal.  However, since Wisconsin requires a sponsor for a minor’s driver’s license, his mother was his sponsor.  Due to the severity of the damages, the deceased passengers’ estates looked to the mother since she was equally liable under the sponsorship statute. 

The mother sought coverage with her insurance company, Progressive Insurance.  However Progressive sought to escape responsibility arguing that it had no duty to cover her son’s accident, even though she was her son’s sponsor.  Progressive’s insurance policy, like most auto policies in Wisconsin, had a “relative” exclusion and the Court agreed with Progressive and found that the mother had no insurance coverage for her son’s accident.  As a result of being liable for her son’s negligence, she could now be forced to use her own assets (money, home or other property) to pay a judgment.

As a result of the sponsorship statute, my typical recommendation for families is that all cars in a family’s household be insured with the same car insurance company and that each car has liability, uninsured (UM), and underinsured (UIM) limits of at least $250,000 per person.  In addition, I strongly advise anyone with any assets, like a home, to purchase an umbrella insurance policy with UM and UIM coverage for $1 or $2 million. 

Sometimes people ask why UM and UIM coverage is important.  The answer is that such coverage protects you and your family from irresponsible drivers with little or no insurance or assets.  Added coverage is not nearly as expensive as you might think, and if you are sponsoring one or more teen drivers, you are at risk and must protect yourself and your assets.

Wisconsin Personal Injury Lawyer