Legal Question in Insurance Law in California

Binder insurance for leasing a car

I leased a BMW about 3 weeks ago.

When I signed a lease, I needed a proof of insurance, of course.

But it was Saturday and the agency could not reached.

The dealership says they could put BMW on my Honda Accord I have.

But they said I'll need to buy something called ''binder insurance'' because my Honda had liability only insurance. They said they would put BMW on my Hona if it has full coverage.

So I had to buy the binder insurance for 30 days.

On Monday, my State Farm agency told me my liability only insurance (on Honda) had courtesy coverage of any new vehicle for up to 30 days.

My State Farm agency says the California State law requires all liability insurance to have such option. She claims I have been ripped off since it's all required by law.

The dealership says my State Farm insurance policy had the automatic coverage but it is not required by the law.

Who is right here ? Is it enforced for liability insurance to have automatic courtesy coverage for new veheicle by California State law or not ?

Thanks.


Asked on 4/30/07, 8:30 pm

2 Answers from Attorneys
Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Re: Binder insurance for leasing a car

You are mixing apples and oranges.

Your existing coverage, liability only, does extend to the new car. But that won't satisfy BMW, because they are leasing you a car and they require comprehensive coverage (covering fire, theft, and accidents that are your fault) so that they don't lose money if you wreck their car. BMW doesn't care if you have liability insurance -- only the law does -- and my best guess is the BMW 30-day binder doesn't include liability insurance. So they were within their rights to demand that you purchase a binder, and my best guess is you had no double coverage at any time.

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Answered on 5/10/07, 7:12 pm
Jonathan Stein Law Offices of Jonathan G. Stein

Re: Binder insurance for leasing a car

Neither one of them is right.

Your State Farm policy would extend, generally, liability coverage for up to 30 days on a "newly acquired vehicle." The BMW probably is a newly acquired vehicle. However, it only extends the coverage that you had on the Honda - liability.

Your BMW was leased. Leased vehicles require comprehensive and collision. These coverages pay if the car is damaged. BMW wanted to make sure you had these coverages, and thus you had to buy them since you did not have them on the Honda.

To understand insurance better, you can email me at [email protected] for my new ebook on buying auto insurance.

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Answered on 5/10/07, 9:52 pm


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