What happens if you get caught driving a car still owned by someone that is deceased?

That's a good one. The question is if the friend was authorized by the person who own the car now, to drive it. The person who owns the car now would be the heir or heirs of the deceased person's estate. If they didn't authorized your pal to drive it, it could possibly lead to Unauthorized Use or Theft charges. Sounds like there was some connection with your friend and the dead person which may water down any criminal intent here. as far as liability with the accident, it is up to the dead person's insurance policy and insurer as to whether they will provide coverage to an unauthorized driver of a car. They may pay the claim bet seek a claim from the driver for reimbursement. Your friend needs a lawyer. There are criminal and civil law issues here.