I can see how that would happen!
I could possibly see the scenario where a PPL student is sitting in the left seat (he/she threfore could not be PIC), another pilot but a student Instructor (fully qualified pilot) however under test to become a flying instructor is in the right hand seat and the back seat contained a Flight Instructor Examiner who is testing the FI student who is teaching the student student could possilby be a valid sceanrio.
As swh mentions above I am still the PIC when I go to the loo or the bunk.
On homonculus's point I disagree as my understading is that policy wording is contractual in nature and you cannot contract out of the law. So if a contract implies you can/should or worse must do smoething and that thing turns out to be illegal then the drafter has a liability for the act.