I think you should definitely shelter yourself from liability with the car. However, if you are the owner of the car, even if she carries the policy, do you not still have some liability? I would offer to help her get the car transferred to her name if she is interested in continuing the payments, as well as letting her take over her own insurance.

This is the double edge of adulting. She wants to be treated like an adult who has the right to make her own decisions and make mistakes if that the route she goes, and she should be. But also, being an adult means you need to take care of your own responsibilities.

I liken it to our Plan A in an affair, just because you try to woo a spouse back into the marriage does not mean you also support the affair. Same concept would apply here.

Sorry you are going through this, I have a 17 yo daughter and can only imagine how hard it is.