The general rule is that an authorised driver of an insured vehicle, temporarily becomes the new insured in place of the insured person, for the time that they are in control of the insured vehicle. Though, the authorised driver is not the party to the contract and may not even know about the existence of an insurance policy.
Circumstances where an insurer may have a right of recovery from the authorised driver would depend on the conditions of the insurance policy. In addition, the insurer’s recovery action would be subject to the Insurance Contracts Act 1984 (ICA), including but not limited to sections 48, 54 and 65. If the insurer has indemnified the authorised driver directly, then there is no recovery action against the authorised driver. If the authorised driver is not indemnified but the insurer cannot deny indemnity to the policy holder, recovery by way of subrogation from the authorised driver is possible.
In C L Seward & Co Pty Ltd v Thompson (1992) 17 MVR 70 (VSC), the authorised driver whilst under the influence of alcohol, caused damage to the insured vehicle. The insurance policy contained an exclusion clause, not providing cover to any person whose faculties were impaired by any drug or intoxicating liquor. Having indemnified the policy holder, the insurer, by way of subrogation sought to recover the loss amount from the authorised driver, claiming that she had an excess of blood/alcohol. It was held that the authorised driver of the insured vehicle was not an insured within the meaning of the insurance policy for the loss. It was further stated that depending on the construction of the insurance policy, the insurer may have the right to recover the damage caused to the insured’s vehicle by an authorised driver subject to section 65 of the ICA.
Sewards case demonstrates that an authorised driver is not immune from the insurers recovery action by way of subrogation. Whilst an insurer may provide full protection to the policy holder, such benefits do not always extend to the authorised driver. An authorised driver of an insured vehicle may be insured against “particular risks”, for the time that they are in control of the vehicle – but not all. The insurer may pursue them for losses they are not covered for under the policy subject to insurance policy and the ICA.
Note: This is a general discussion only. Circumstances may vary and advice should be sought about your specific circumstances.
