Ever borrow a friend’s valuable car and worry that something bad might happen? Here’s a case where it did.

As usual after the completion of the competitive runs at a recent SCCA Solo autocross event held in the paddock at Portland International Raceway, the course was opened up for “fun runs.” The owner of this autocross-prepared Porsche GT3 offered it for a fun run to his Corvette-driving buddy, who jumped at the chance. The friend missed the last turn and went off-course, collecting three parked cars in the process. Luckily, no one was injured. But only a few minutes before, the owners of the parked cars were changing wheels, and it could have been a disaster.

Let’s take a look at who might get stuck with the repair bills here.

The owner gave his permission

Assuming that both the owner and the driver carried auto insurance, which one gets to fix the Porsche? The answer might surprise (or even anger) you, but the owner’s insurance company gets first crack at it.

Take a look at your insurance policy. It identifies your cars as the “covered vehicles.” It also defines the “insured” as you, members of your family, and anyone driving one of your covered vehicles with your permission. That means that your friend driving your car is entitled to the same coverage under your policy as you are. In insurance lingo, that means that the owner’s policy provides primary coverage, and the driver’s policy provides secondary coverage.

Here’s an example how the two policies might work in tandem. Say the friend driving the car causes $1.5 million of liability and both policies have $1 million liability limits. As the primary coverage, the owner’s policy pays its full $1 million of liability coverage, and the driver’s policy then pays the remaining $500,000.

Owner’s insurance rating is wrecked

It’s not hard to see that the owner may be unhappy with the outcome. His friend wrecked his car, but his policy pays the claim, his insurance record is smeared, his premiums go up, and possibly his policy gets cancelled.

Fair is fair—can the owner refuse to make a claim on his policy and insist that the driver make a claim under his policy? What if the driver agrees to go along with that, or even suggests it? Neither will work. As an “insured” under the owner’s policy, the driver is able to make a claim under the owner’s policy whether the owner wants to or not. And if the driver doesn’t do so, the driver’s insurance company will make the claim. Either way, the claim ends up with the owner’s insurance carrier.

Autocross dodges race track exclusion

“Legal Files” has reported before that insurance companies have been revising their racing exclusions to broaden the exclusion for racetrack activities. It is now quite common for policies to exclude coverage for incidents that occur “on a racetrack or any surface designed or used for racing.” Would such an exclusion apply to an autocross?

If the autocross were conducted on a racetrack, the exclusion would clearly apply. But this one was conducted in the paddock, which is a parking lot, not a racetrack. It’s certainly a “surface,” so the questions become, was it designed or used for racing, and is autocross racing?

There is no clear answer. Autocrossers are definitely driving as fast as they can over a prescribed course, and could easily be classified as racing. Even though you don’t have two cars racing side by side, competitiveness comes from the clock and the comparison of lap times. But on the other hand, we’re talking about a parking lot, not a racetrack, even though the cones try to make it feel like a racetrack.

In the Portland crash, we have the added facts that the competition was over, and the incident occurred during the fun laps. Most policy exclusions also refer to ”preparing or practicing for racing.” But was the driver doing that? After all, it was his one and only ride in the Porsche, and possibly more of an exhibition than a practice.

But here is another nail in the autocrossing-is-not-racing coffin. “Legal Files” has seen another recent version of the racing exclusion, which refers to racetracks and “courses” designed or used for racing or high performance driving. It would seem quite clear that this type of policy language would snare autocross incidents.

Autocross coverage exclusion is the key

The potentially conflicting policy exclusions could also play a role in determining which policy covers the damage. If the owner’s policy, which gives primary coverage, excludes coverage for autocross incidents, then the full liability would fall to the driver’s policy. If its exclusions don’t cover autocross, then the owner’s policy would have to pay the full claim.

If both policies exclude coverage, does the driver have to fix the Porsche? There are two hurdles for the owner to get over here. First, the owner has to show that the driver was negligent. Second, the owner has to show that the release he signed doesn’t eliminate his claim against the driver. If the owner can’t get over both these hurdles, he’s stuck with the loss.

Releases would defeat subrogation claims

In all likelihood, the damage to the parked cars will be covered by their owners’ insurance policies. Even a very broad exclusion that extended to autocrosses wouldn’t seem to apply. After all, these cars were not being used in an autocross at the time of the incident. They were just innocent parked bystanders.

Once the insurance companies pay the damage claims, they automatically acquire the owners’ legal claims against the true guilty party. That means they can seek reimbursement from the driver of the Porsche, a legal process referred to as “subrogation.” But their subrogation rights are no better than the owners’ original claims.

If the event organizers had all participants sign customary releases, that would almost certainly defeat the insurance company’s subrogation rights. The owners’ releases are binding upon the insurance companies, and this is clearly the type of damage contemplated in the releases.

But if the releases didn’t get signed, or if they are ineffective for any reason, the driver of the Porsche could be held responsible. If both the owner’s and the driver’s insurance exclude coverage for autocross incidents, then the driver would have to pay the damages personally. But in any case, the owner of the Porsche would not be liable unless it could be shown that he was negligent in allowing the driver to use the Porsche.

It’s not hard to figure out that the event organizers might have been negligent in allowing cars to park too close to the autocross course. But the releases signed by the owners of the Porsche and the parked cars would probably protect the organizers from liability.

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