I am sorry to hear about your sister's accident. I hope neither she nor anyone else involved was seriously injured.
Regardless of the insurance, both you (owner) and your sister (operator) are responsible for damages caused by your sister's negligence. The question really is whether or not your sister caused the accident. If she is even a portion responsible, you both may be on the hook. This would include damages for pain and suffering (physical, mental, emotional), and financial/economic loss (loss of wages).
Also, as you may be aware, the fact that you didn't maintain insurance on your vehicle may result in fines, suspensions, or other results. I would look for notices from the local Department of Motor Vehicles or the State.
Please try to avoid the situation in the future if possible. I understand it wasn't your fault, but the law doesn't usually care. You have to protect yourself. Good luck.
THE ABOVE ANSWER AND ANY SUPPLEMENTAL RESPONSES ARE NOT LEGAL ADVICE AND SHOULD NOT BE CONSTRUED AS LEGAL ADVICE. NO ATTORNEY-CLIENT PRIVILEGE OR ATTORNEY-CLIENT RELATIONSHIP IS CREATED BY THIS OR ANY OTHER RESPONSE TO YOUR QUESTION. FOR LEGAL ADVICE, PLEASE CONSULT AN ATTORNEY.
There are a couple of issues going on, here.
First, assuming your sister was at fault for the accident, she is definitiely financially liable. On the otherhand, just because you gave her your car, that does not mean you are financially liable. In Washington, the owner of a vehicle is not automatically liable for the negligence of the driver. There are circumstances where that is the case. For example, if you were a passenger in the car; or your sister was acting as your agent (perhaps driving at your request). But if you merely lend your car to someone else, you are frequently NOT liable for the accident.
Second, normally in Washington, you have to receive a formal notice from an insurance company advising that your coverage has lapsed or has been cancelled. It sounds like you were relying on the lender to make insurance payments on your car. Usually, if you don't make the payment, the lender will make it for you anyway, and then come after you for the money. That way, the lender is protected. There needs to be much more research done on this issue before your accept the contention that you didn't have insurance.
By the way, Washington financial responsibility laws require that you maintain a minimum of $25,000 in liability insurance on your vehicle. If the car was not insured, since your sister was driving, it is your sister that can get in trouble for this lack of insurance. If she is reported to the State Division of Financial Responsibility, she can have her driver's license suspended.
All in all, I would suggest you seek assistance from an attorney; both to protect you (in the event others seek to hold you financially responsible) and to determine whether or not you really did have insurance in place at the time of the accident.
I agree with both previous answers and would add the insurance that lenders use only protects the collateral and will only pay off the car for you and pay the other parties if the lender is sued.
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