Registered Insurance Brokers of Ontario (RIBO) Practice Exam

The correct answer highlights a significant aspect of third-party liability coverage. Insurers are not liable for bodily injury if the insured allows someone to drive who has a misplaced driver's license because it indicates that the driver may not have valid permission to operate the vehicle legally. If a driver can't produce a valid driver's license when requested, this can be seen as a failure to meet the legal obligations for operating a vehicle, thereby complicating the insurer's responsibility in the event of an accident.

In contrast, while insufficient funds, expired vehicle registration, and inexperience with the vehicle may present challenges or risk factors, they do not directly equate to a breach of legal authority to operate the vehicle in the way that a misplaced driver's license does. Inexperienced drivers may still be legally permitted to drive, and financial issues or paperwork irregularities do not inherently negate the validity of the driver’s license itself.