The Business Auto Policy is often considered straightforward. However, it does present challenges of its own. The most common mistake that clients and insurance agents make is an understanding of how Business Auto insurance operates.
Most important to understand is that the structure of the policy intends to provide coverage for the Named Insured for covered autos while being operated by permissible drivers. There are many potential errors that flow out of this misunderstanding, including titling errors, unreported vehicles or drivers and failure to assess and apply proper coverage.
Here is an overview of key coverage types that we routinely utilize:
- Auto Pollution Liability: Many businesses are prone to losses to Pollution Liability resulting from the use of their vehicles. Contractors will often have a tank mounted on their pickup truck to fuel their off-road equipment. Fuel spills from the tank of this vehicle will need appropriate pollution coverage. Auto Pollution Liability provides coverage for any cost or expense arising from:
- Any request, demand or order; or
- Any claim or suit by or on behalf of a governmental authority demanding the insured or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize or in any way respond to, or assess the effects of pollutants.
- The loss or damage must result from the upset, overturn or damage resulting from the maintenance or use of a covered auto. The discharge, dispersal, seepage, migration, release or escape of the pollutants must be caused directly by such upset, overturn or damage.
- Bodily Injury and Property Damage Liability: Protects you for your legal responsibility, and resulting lawsuits, caused by an automobile accident. The protection afforded by this coverage includes bodily injuries to another person or persons and/or damage to property. It is imperative to select the right amount of coverage. The law requires the responsible party to make restitution for damages in the form of cash payments. If you do not have enough insurance to pay for the judgment against you, you will be personally responsible for paying the excess amount out of your own pocket. If you are unable to do that from your current earnings, then a judgment against your future earnings may be assessed.
- Collision: Pays for damage to your vehicle caused by the colliding of two or more objects. The basic policy pays up to the actual cash value of the insured vehicle at the time of loss.
- Coverage for Injury to Leased Workers: This endorsement redefines the definition of employee in the general liability coverage form to include coverage for leased workers.
- Drive Other Car: Modifies the commercial auto policy to provide for limited personal auto coverage as an extension of the Business Auto policy, even if no private passenger type autos exist in the policy. Covered persons include the specified individual and spouse, if members of the same household.
- Employee as Lessor: The most common mistake business owners and insurance agents make relates to adding personally titled vehicles to a corporation’s insurance policy, or a policy that is not held by the title holder. Dangerous coverage gaps are created when this occurs leaving the individual owner of that personally titled vehicle without coverage. Drive Other Car coverage may be added, providing liability protection for an employee of yours who leases an insured auto to you. Additionally, the insured auto will be considered an auto you own, and not a covered auto you hire, borrow or lease.
- Employee Hired Autos: Does your business have employees who travel out of town and rent a vehicle in their personal name for business use? The Personal Auto Policy will most likely exclude coverage for the damage of the rented vehicle, as well as the liability that would result from that accident. Employee Hired Autos provides both liability and physical damage protection for an auto rented in an employee’s name while used in service for the company.
- Employees as Insureds: Includes in the definition of “Who Is an Insured,” an employee who drives their personal auto during company business.
- Fellow Employee Coverage: Provides liability protection for an employee suit brought against a fellow employee out of and in the course of employment.
- Hired and Non-owned Auto Liability: Nearly every business has the potential for losses from the use of rented vehicles (Hired Autos) and vehicles it does not own (Non-owned Autos). For example, consider a general contractor that utilizes subcontractors. If that subcontractor were involved in an accident on the job site, the likelihood is great that the general contractor will be brought into a lawsuit because of its vicarious liability. Also, what about the business owner who sends its employees to run errands in the employee’s vehicle? Hired and Non-owned Auto Liability provides valuable protection for the business from these types of lawsuits.
- Hired Auto Physical Damage: If your business rents vehicles, Hired Auto Physical Damage coverage is the answer to providing coverage for damage to the rented vehicle. Coverage may provide for Collision and Other Than Collision.
- Lease/Loan Gap: While the standard insurance policy pays for the actual cash value of the vehicle at the time of loss, there are instances where you may owe more than the standard insurance covers. A lease of a vehicle, or sometimes even a loan, will result in a contractual obligation that requires payment of more than the vehicle’s actual cash value, thereby leaving a shortage between what the insurance pays and what the bank requires you to pay. Lease/Loan Gap Coverage provides payment for this difference so that you are not obligated to pay this out of your own pocket.
- Medical Payments: Provides an amount of money to pay for automobile-related injuries to you or passengers of your insured vehicle.
- Other than Collision (Comprehensive): Provides payment for damage to your insured vehicle caused by a Comprehensive loss, sometimes termed “Other-Than-Collision.” Typical examples include fire, theft, vandalism, malicious mischief and breakage of a windshield. Collision with a bird or animal is also included as Comprehensive. The basic policy pays up to the actual cash value of the insured vehicle at the time of loss.
- Rental Reimbursement: Provides for payment of a rental car due to a covered loss to your insured vehicle. Hired Auto Physical Damage may be purchased which will provide coverage for the physical damage of the rental auto.
- Towing and Labor: Pays towing costs, and necessary labor expenses, completed at the scene of the disablement. This includes expenses such as roadside fueling of your car, a jump start or battery replacement and changing a tire.
- Trailer Coverage: May be added to provide for physical loss to trailers. Coverage may also be endorsed to provide liability coverage for trailers more than 2,000 pounds gross vehicle weight, whether attached or detached from the power unit. Liability protection is provided automatically for trailers under 2,000 pounds gross vehicle weight.
- Uninsured and Underinsured Motorists: Provides payment for bodily injury to you or passengers involved in an auto accident and caused by a driver with either no insurance (uninsured motorists) or not enough insurance (underinsured motorists). This coverage may also apply to bodily injury to an insured household member, caused by an uninsured or underinsured motorist while riding in a non-household vehicle, walking or riding a bike.
- Uninsured Motorist Property Damage: Pays for damage to your vehicle when it is hit by a positively identified underinsured motorist. If you insure your vehicle for full coverage, then the collision coverage will pay for your vehicles. If you do not carry collision coverage, or you carry high deductibles, then Uninsured Motorist Property Damage is a good option to protect your vehicle from damage caused by a driver with no insurance. This coverage is subject to a $250 deductible.
If you are a bit overwhelmed by all the different Business Auto Insurance coverages available, contact McMichael Insurance. We will help you find the best coverage and reasonable rates.
