I recently met with a parent who believed they were helping their child—but the unintended consequences could be financially devastating.
To help their adult son obtain financing for a vehicle, the parents purchased the car in their own names. Although the son no longer lived at home, he had exclusive possession of the vehicle and drove it as though it were his own. The son also maintained his own insurance policy on the car.
At first glance, this arrangement may seem harmless. It wasn’t.
The son was later involved in a motor vehicle accident, and the facts indicate he was at fault.
Nevada law includes what is known as the Family Purpose Doctrine (NRS 41.440). Under this statute, when an immediate family member—such as a son—causes an accident while driving a vehicle owned by a parent, the vehicle owner can be held fully liable for the resulting damages. In other words, simply because the parents owned the vehicle, they may be legally responsible for the accident—even though they were not driving it, and did not control the vehicle’s day-to-day use.
The situation becomes even more troubling when insurance coverage is considered: Because the son was a “regular user” of the vehicle but was not listed on the father’s insurance policy, it is likely that the parents’ policy will deny coverage altogether. If the son’s insurance policy provides sufficient coverage, the financial exposure may be limited. If it does not, however, the parents could be personally liable for damages, with no insurance protection to shield them.
The simple, preventative solution—before an accident occurs—is to either (1) list the child as a driver on the owner’s insurance policy and pay the additional premium, or (2) transfer title to the actual driver.
This is a powerful reminder that well-intentioned decisions involving vehicle ownership and insurance can create serious and unexpected legal risks. Before putting a car in your name “just to help,” it is critical to understand the potential liability you may be assuming.
If you have been involved in an accident or have questions about liability and insurance coverage, contact Yan Kenyon at 702-888-0000. Consultations are free
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