The Illinois Motor Vehicle Code, 625 ILCS 5/5-101 provides the rules as to when a dealer’s insurance is primary or secondary with regard to test drives or service loaners.

We start with the definition of “permitted user.” Under the law, a “permitted user” is a person who, with the permission of the new vehicle dealer or an employee of the new vehicle dealer, drives a vehicle owned and held for sale or lease by the new vehicle dealer which the person is considering to purchase or lease, in order to evaluate the performance, reliability, or condition of the vehicle [TEST DRIVE]. Additionally, “permitted user” also includes a person who, with the permission of the new vehicle dealer, drives a vehicle owned or held for sale or lease by the new vehicle dealer for loaner purposes while the user ‘s vehicle is being repaired or evaluated [SERVICE LOANER].

For service loaners, it is paramount that the dealer first evaluates the permitted user’s insurance. If the permitted user has a liability insurance policy that provides automobile liability insurance coverage of at least $100,000 for bodily injury to or the death of any person, $300,000 for bodily injury to or the death of any 2 or more persons in any one accident, and $50,000 for damage to property, then the permitted user’s insurer is the primary insurer and the dealer’s insurer is the secondary. If the permitted user does not have a liability insurance policy that provides automobile liability insurance coverage of at least $100,000 for bodily injury to or the death of any person, $300,000 for bodily injury to or the death of any 2 or more persons in any one accident, and $50,000 for damage to property, or does not have any insurance at all, then the dealer’s insurer is the primary insurer and the permitted user’s insurer is the secondary insurer. For test drives, the new vehicle dealer’s insurance is always primary (irrespective of the amount of the permitted users’ insurance), and the permitted user’s insurance is always secondary.