Auto insurance is very state-specific. I'm not familiar with CA's laws but in my state your insurance covers occasional use by parties not included in your policy. One exception to this is if the person who was driving lived in your home and was not added to the policy. If the nephew had a left the state then the policy might cover this accident but the insurance company might think that the nephew still lived with them thus denying the claim. At this point attorneys really need to get involved.