Can I be sued for anything that arises from an accident that involves a vehicle that I’m selling but keeping in my name?

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Can I be sued for anything that arises from an accident that involves a vehicle that I’m selling but keeping in my name?

I’m selling a vehicle to a friend. It will stay in my name, but he will insure it in his. We will have a notarized contract for the sale. If he gets in an accident can I be sued or be liable for anything?

Asked on November 3, 2010 under Accident Law, California

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The owner of an asset can be sued for injuries caused  by that asset, even if someone else is controlling it. In this case, if the car stays in your name, you'll still be the owner, notwithstanding a contract for sale; that means that if there is a cause of action involving that vehicle--e.g. your friend is at fault in an accident and destroys property or injures a person; he takes out a loan using the car as collateral and then defaults--the injured parties can and very likely will sue you. There may be cases in which you will be able to raise a defense by showing that, notwithstanding ownership, you should not be party to the case, BUT you first be sued; you'll have to raise a defense (which costs money); and there's  no guarantee it will work.

There are other situations where you could find yourself in trouble: if your friend commits a crime, hypothetically, and all the witnesses get is a car description and license, the police will come looking for you initially (and note: a hit and run accident is a crime). Or if your friend tries to sell the car, you'll have to get involved, because he can't transfer title--and if he doesn't tell that to the buyer, the buyer may then bring a lawsuit against you to get title.

In short, this is a very, very bad idea. Never keep title over an asset that is being "sold" to another and will be controlled by another, unless you want to keep title over any resulting liability.


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