Consider the following, you are a small businessperson and the vehicle

Jennifer Meyers / The Post-Standard

you normally drive is owned by and insured under your business automobile insurance policy. One day your normal vehicle, the one insured under the policy, is low on gas or maybe it needs new brakes so you borrow your wife’s car for the day. Unfortunately, you are involved in a horrible accident and incur several hundred thousand dollars worth of medical bills. The person who hits your vehicle has little or no insurance. Your wife’s vehicle has a $100,000 policy. The company policy for the vehicle you normally drive is $1million in coverage. Are you covered under your company’s automobile policy’s uninsured or underinsured motorist coverage? The answer is it depends.

Typical UIM language in an automobile policy might include the following:

B. Who is An Insured

If the named insured is designated in the Declarations as:

2. A partnership, limited liability company, corporation or any other form of organization then the following are “insured”:

a.         Anyone “occupying” a covered”auto” or a temporary substitute for a covered “auto”. The covered “auto” must be out of service because of its breakdown, repair, servicing, “loss” or destruction.

The analysis to the above hypothetical revolves around determining what is meant by out of service because of a “breakdown, repair, servicing, “loss” or destruction” of your covered auto. In Ransom v. Fidelity and Casualty Co., 250 N.C. 60 (1959), the N.C. Supreme Court held that Francis Lee who drove his brother’s car because his own car was low on gas was not covered under his insurance policy because his car was not withdrawn from normal use. In Maryland Casualty Co. v. State Farm Mutual Automobile Insurance Co., 83 N.C. App. 140 (1986), the court held that Thomas who had borrowed a truck that day did not have coverage under his insurance policy because even though his covered vehicle was rusted and worn out it was not withdrawn from normal use. However, perhaps if your insured vehicle needed repairs you would be safe to borrow another car for the day. In Martini v. Companion Property and Casualty Ins. Co. the N.C. Court of Appeals found coverage for Douglas Martini who had borrow his wife’s car for the day because his Sequoia, insured under his company policy, was in need of new brakes. The court distinguished Martini’s case from Ransom and Maryland and found the facts more in line with the decision in Nationwide v. Fireman’s Fund Ins. Co., 279 N.C. 240 (1971) which held that coverage did exist for a man who borrowed a vehicle while having his insured vehicle painted.

The moral of this story is be careful when you borrow someone else’s car that they either have adequate insurance coverage or that your own insured vehicle is truly out of service otherwise you might be left without insurance coverage.