Hit by a Borrowed Car? Which Insurance Policy Pays After Acuity v. Progressive

Published November 21, 2023 · Ohio Supreme Court

A young man borrows a friend's car, runs off the road, and his three passengers are hurt. Two insurance companies are involved: the one that insures the car's owner, and the one that insures the driver through his father's policy. Each says the other should pay. For the injured passengers, the fight between insurers is more than a technicality. It determines whose money is available, how much there is, and how long it takes to get it.

Last month, in Acuity, A Mut. Ins. Co. v. Progressive Specialty Ins. Co., Slip Opinion No. 2023-Ohio-3780, the Supreme Court of Ohio answered the question for that crash. The short version: the old rule of thumb that "insurance follows the car" is not a safe assumption. What matters is the language of each policy.

The facts

According to the Court's opinion, Ashton Smith was driving a friend's car with the owner's permission (in insurance language, he was a "permissive user") when he drove off the road, injuring his three passengers and damaging a utility pole. Smith was listed as a driver on his father's auto policy with Acuity. The car's owners were insured by Progressive. Both policies carried the same liability limits: $100,000 per person and $300,000 per accident.

The two policies contained competing language:

• Progressive's policy defined "insured person" to include someone driving the owner's car with permission, but only if that person was not insured for liability by any other policy.
• Acuity's policy covered a relative of the policyholder driving a car he did not own with permission, but said that coverage for a non-owned vehicle was "excess" over any other collectible liability insurance.

Acuity filed suit asking the court to declare that Progressive had to pay. The trial court ruled for Progressive. The Eleventh District Court of Appeals reversed, relying on a 1970 Supreme Court decision, State Farm v. Home Indemnity, to treat Progressive's definition as an unenforceable "escape clause" and to split the loss between the two insurers in proportion to their limits.

What the Supreme Court decided

In a 5-2 decision written by Justice DeWine, the Court reversed and held that Acuity must provide the liability coverage. The reasoning was straightforward contract interpretation:

• Insurance policies are contracts, and courts must give their plain language its ordinary meaning rather than rewriting them.
• Under Progressive's plain language, Smith was not an "insured person" when driving his friend's car, because he had his own liability coverage through Acuity.
• Under Acuity's plain language, Smith was an insured. Acuity's "excess" clause applied only if other applicable liability insurance existed, and because Progressive's policy did not cover Smith, none did.

The Court declined to read State Farm v. Home Indemnity as a broad rule against such clauses. It explained that the 1970 case involved policy language under which, if both policies were enforced as written, neither would have covered the loss. Here, enforcing both policies as written still left a policy covering the crash. The Court limited State Farm to the facts of that case and said that policy choices about who should pay are for the legislature and the Department of Insurance, which reviews policy forms.

Justice Brunner, joined by Justice Donnelly, dissented. She would have dismissed the appeal, and argued that because Acuity's policy also treated coverage for a borrowed car as excess, both policies were really excess coverage and the earlier precedents should have governed.

Why this matters to people hurt in a borrowed-car crash

Acuity was a dispute between two insurance companies, and the injured passengers were not parties to the appeal. In this case, both policies had the same limits, so the decision determined which company pays rather than how much is available. But the lesson for injured people is broader.

You cannot assume the car owner's policy covers the driver. Many Ohioans, and many adjusters, still talk as though insurance always "follows the car." After Acuity, the answer depends on how each policy defines who is insured and how its "other insurance" clause is written. The coverage that actually applies may be the driver's own policy, with different limits than the owner's.

Limits may be smaller than you expect. If the driver's policy is the one that responds, and the driver carries only the minimum, the liability coverage available to you may be far less than your injuries are worth. We explained why the state minimums are inadequate in our post on Ohio's 25/50/25 limits.

Young drivers make this common. Teenagers and young adults borrow cars constantly, and they are often insured as relatives on a parent's policy, as Smith was. We discussed the related question of when parents are responsible in Teen Drivers and Parental Liability in Ohio.

Where your own coverage comes in

When the at-fault driver's coverage is too small, your own underinsured motorist (UIM) coverage may fill the gap. Under R.C. 3937.18(C), UIM coverage applies when the liability limits available to you from everyone responsible are less than your UIM limits, and your UIM limit is reduced by the amount available from those liability policies.

Two features of Ohio law matter especially in borrowed-car crashes:

• Passengers often have coverage at home. UM/UIM coverage typically extends to the named insured, a spouse and relatives who live in the household, even when they are riding in someone else's car. A passenger injured in a friend's borrowed car may have UIM coverage under a parent's or spouse's policy. Our guide chapter on using your own insurance explains who is covered.
• Same-policy limits. R.C. 3937.18(C) also provides that a vehicle with liability coverage under the very policy that provides the UIM coverage is not an "underinsured" vehicle for that policy. That is one more reason every potentially applicable policy, not just one, has to be identified and read.

Identifying every policy (the owner's, the driver's, the driver's household policies, and each injured person's own household policies) is one of the first things we do in any serious crash case. Our page on uninsured and underinsured motorist claims in Ohio explains the process in more detail.

What this means for you

Acuity is not a pro-plaintiff or anti-plaintiff decision so much as a reminder: insurance coverage is decided by policy language, and the language varies from company to company. If you were hurt by someone driving a car that was not theirs, or as a passenger in a borrowed car:

• Get the names of the driver, the owner, and their insurers, and request the declarations pages.
• Pull your own household's policies and look for UM/UIM coverage.
• Do not accept an adjuster's statement that "there's only one policy" without verifying it.
• Do not sign a release with any insurer until every available policy has been identified and your own UIM carrier's consent requirements are satisfied.

Our Dayton car accident practice handles these coverage questions every day.