When a driver is excluded from an auto policy, all coverage is removed if the excluded driver is in an accident while driving the vehicle. Exclusions vary by state and insurer. Some require the named insured to sign the exclusion form, acknowledging that they understand that there is no coverage if the named excluded driver ever drives a covered vehicle.

There are no exceptions. The excluded driver can't claim that it was an emergency, they were taking someone to the hospital, or that they had to get to work and their car was broken down, or anything else. It's critically important that insureds understand what happens when a driver is excluded and what could happen if that excluded driver drives a listed vehicle.

The excluded driver then needs to get his own coverage someplace else. It may be lower limits through a nonstandard insurer, but if the person is driving a vehicle, either his own or someone else's, he still needs coverage. If the excluded driver does not own any vehicle they can get a named non-owner policy.

For example, Joe is the named insured and his son Ralph is an excluded driver on the policy. Joe is out of town on a business trip when Ralph takes Joe's car to get to work because Ralph ran out of gas. On the way to work, Ralph is speeding and rear-ends another vehicle, damaging the vehicle and injuring the other driver. The injured party makes a claim against Joe's policy since the vehicle belongs to Joe and is insured in his name. The insurer reviews the policy and sees that Ralph is an excluded driver. The claim is denied. If Ralph had his own policy, there is likely coverage there. But if Ralph does not have a policy of his own, the injured party will likely sue Ralph and Joe for his damages and injuries.

In Safe Auto Insurance v. Oriental-Guillermo, 7 Cal. 5th 781 (2019), the auto policy excluded any driver of the vehicle who lived in the household and was not a listed driver on the policy. In this case, an unlisted person was driving when an accident occurred. A passenger in the other vehicle sued the owner of the vehicle for damages. The court found that not only did the exclusion apply, but that the exclusion did not violate the Pennsylvania Motor Vehicle Financial Responsibility Law or public policy.

Conversely, in Thounsavath v. State Farm Mut. Auto. Ins. Co., 2018 IL 122558, the court ruled that even though the at-fault driver was excluded from the policy, the Insurance Code was unambiguous that "each policy must contain the specified uninsured coverage". Ms. Thounsavath was a passenger in a vehicle owned by Clinton Evans who was a named excluded driver on her policy. Evans had insurance through another insurer that paid a $20,000 limit, but it was not enough to cover Thounsavath's expenses. She then filed for uninsured coverage under her own policy, where Evans was excluded. State Farm denied the claim based on that driver exclusion. She sued and argued that the Illinois Insurance Code required that all policies provide UM coverage to the named insured. The trial court granted summary judgment, the appellate court agreed, and the Supreme Court affirmed. The court said that while named driver exclusions were permitted in the state and that coverage could have readily been denied for Evans, that Evans was not the person seeking coverage; Thounsavath was, which made the difference. She was entitled to coverage under her own policy.

In Nationwide Prop. & Cas. Ins. Co. v. Castaneda, 306 A.3d 397 (December 2023) we see a different exclusion scenario. In this case, the driver wasn't specifically excluded by name from the policy but was excluded because at the time of the accident she did not have a valid driver's license when she was rear-ended by another vehicle, causing her injuries. The policy itself had a general exclusion for unlicensed drivers, and Nationwide denied the first-party medical benefits to the driver based on that exclusion. The court agreed. On appeal, the driver claimed that the Motor Vehicle Financial Responsibility Law (MVFRL) required insurers to provide coverage for first party medical expenses. The Superior Court agreed with the driver and noted that the insurer must pay regardless of fault. The judge's position was that the court couldn't ignore the mandatory nature of medical expense coverage; doing so would ignore the legislature's intent for insurers to provide a minimum amount of medical coverage for injuries sustained in an accident.

In March, the Maine Bureau of Insurance issued a bulletin outlining acceptable reasons why a driver could be excluded from a personal auto policy. Reasons include to avoid cancellation or nonrenewal of the policy itself, agreement between the insured and the insurer, and the insurer must show that the excluded driver committed an act that would justify cancellation or nonrenewal. The insured and insurer must both sign the form, and the insured's proof of insurance must list any excluded person on the policy.

Excluding a driver from a personal auto policy is complex. While many states have filed exclusion forms, even in those states a court may rule that it violates public policy; states vary in their interpretation of the issue. Commercial auto exclusions are not standardized and vary by insurer. When a driver is being excluded from a policy, it needs to be made very clear to the insured what the hazards are if that person is to ever drive the covered vehicle.

Read more:

Underinsured Coverage When Riding With Excluded Driver

Thounsavath v. State Farm Mut. Auto. Ins. Co.

Maine – Conditions for Driver Exclusions in Private Passenger Auto Policies

Resident Driver Exclusion is Upheld by the Superior Court.

PA Court Rules That 'Unlicensed Driver Exclusion' Runs Counter to State Law