Most states require auto insurance and at a minimum to protect others when you lend your car out. It sounds like you and your sister will be using the bus a lot unless the insurance company changes their tune.
My name is Stephen R. Cohen and have practiced since 1974. I practice in Los Angeles and Orange County, CA. These answers do not create an attorney client relationship. My answers may offend I believe in telling the truth, I use common sense as well as the law. Other state's laws may differ.. There are a lot of really good attorneys on this site, I will do limited appearances which are preparation of court documents it is , less expensive. However generally I believe an attorney is better than none, but many will offer a free consultation and a face to face meeting generally will be better, I like my clients to write a short one page history of the fact and questions they have prior to meeting with them, so nothing is forgotten.
You need to consult a local lawyer to fully analyze the issues. You, as the owner of the vehicle, could be liable under a variety of legal theories. Unfortunately, you and your sister's interest are in conflict (unless you agree to waive the conflict and pay the damage). Thus, it would be wise for you to consult an attorney.
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