If my wife and I were in the process of purchasing a used car from a private owner but they canceled the insurance and we had an accident, who is liable for what?

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If my wife and I were in the process of purchasing a used car from a private owner but they canceled the insurance and we had an accident, who is liable for what?

We paid him part of the price he was asking and agreed to pay him the remaining balance in a couple weeks. The verbal agreement also stated that he’d keep the title in his name and possession, keep the vehicle insured as it was and everything up-to-date until the final payment was given to him but that we would drive the car. We got a receipt for the purchasing of the car with a statement that we’d get the title upon final payment. Then 3 days after we drove away with the car, a drunk driver hit me head-on in it. The sellers insurance company says he canceled his policy the same day we drove it away. The other driver’s insurance company says that state law is no fault.

Asked on January 20, 2015 under Accident Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 6 years ago | Contributor

If you had an agreement that the car's seller would maintain the insurance until the final payment, then you could sue him for breach of contract (violating the agreement) to recover any damages (losses or costs) you suffered--since had he not breached, you'd have had insurance to rely upon. You could also potentially sue him for fraud (lying about something important to get you to agree to buy the car), if it appears that he never intended to maintain the insurance. You will have a much easier time of it if you have a written agreement to rely on; while you can sue for breach of an oral (often called verbal) agreement, it is more difficult, since you have to prove the existence of the agreement and its terms, which can be hard if the other side disputes your version.


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