An insured gives up his driver’s license after his doctor diagnoses him with dementia. His wife wants to keep him on their personal auto policy to ensure coverage in case he ever takes the keys and gets in an accident.

Q: Should we remove this insured from the policy because he has no license? Since they’re married, would liability and collision coverage apply if he somehow obtained use of the car?

Response 1: The unlicensed spouse is covered as a resident relative. If he is unlicensed and doesn’t drive the insured vehicles on purpose, why would he need to be listed as an insured on the policy? 

Response 2: This used to be a simple question when policy language was more standardized. Under the ISO PAP, the spouse—actually, any "family member"—would be an "insured" regardless of whether they’re licensed. But today, it’s becoming more common to see policies which either exclude coverage for unlicensed drivers or provide only drop-down limits (the state minimum limits) for unlicensed drivers. Your best bet is to read the liability exclusions under the policy in question.

Response 3: In states with which I am immediately familiar, people without a driver's license may still be insureds on auto policies—like when someone owns a car but has no license and lists a driver or drivers. Conversion of the vehicle would normally be an intentional act, but a person suffering from dementia may not have the capacity to form intent. Ask the underwriter and get an opinion in writing regarding coverage if he remains on the policy as an insured, but is not listed as an operator.

Response 4: You have many issues to consider. Since your question does not specify a different form, I’m assuming the ISO PAP applies. See Page 2 of 13 for the definition of “insured” under the insuring agreement.

Response 5: Assuming an ISO PAP, there is no exclusion for not having a license. And a spouse who is a resident of the same household is an automatic insured. So there would be coverage if this individual took the car and got in an accident.

Response 6: It depends on the policy language and the fact of the loss scenario. Typically with standard policies that are not "lasered" with exclusions and limitations, coverage would apply to protect the named insureds for accidents that result from someone taking the car for a joy ride, whether or not they are licensed. The husband and wife should both be listed as named insureds, because they probably both have assets to be protected by the PAP and the PUP. However, the husband would not be listed as a driver because he is not licensed and not expected to be driving the vehicle.

Response 7: If his name is still on the title, he should still be on the policy. There is really no reason to take him off just because he does not have a license. 

Response 8: He still needs to be listed on the application; ACORD asks for all members of the household, regardless of license status or age. Whether he's listed on the policy is up to the underwriter. Assuming standard PAP wording, if the wife is the named insured, the husband is an insured by virtue of being a "family member." The policy doesn’t say anything about coverage being limited to licensed drivers.

Response 9: Very interesting problem. If the policy is in both names, each individual is a named insured. If the policy is in the wife’s name only, the husband is still covered as a "family member" under "you and your." The exclusion that takes away coverage if there is no reasonable permission to use the vehicle does not apply to a named insured or a family member, so removing him from the policy would not delete coverage.

Response 10: Since you know about his condition, you're obliged to inform the insurer. If he's not licensed and not a driver, then you'd be correct in removing him from the list of drivers. If he's a named insured, the insurer will probably question leaving him in that role if he's not a driver. As long as he remains a resident of the household, there's no problem with removing him as an insured. The situation will require further study if he's no longer a resident in the household—if he moves to a care facility, for example—and there is a possibility that he might drive the car. 

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