Millions of people drive “company cars”; that is, vehicles that the business owns. These drivers are the business owners themselves, members of their families, as well as their employees. In these situations, the business both owns and insures the vehicles.
Frequently, other members of the household have their own cars and insurance. In other cases, they do not. In cases like that, it’s likely that the family does not have a personal auto insurance policy, since the business owns and insures all the cars. Problems could arise if someone rents or borrows a car belonging to someone else.
The Business Auto Policy may insure vehicles the business owns, hires or borrows, but not vehicles that individuals hire or borrow. When the business owner or her spouse borrows a car for purely personal reasons, the business’s insurance will not apply.
This might not seem to be a problem because the person who owns the borrowed vehicle should have insurance on it. However, what if:
- The owner didn’t pay the premium, let the policy cancel, but continued to use the car
- The owner bought the minimum amount of liability insurance required by state law
- The owner has either no or minimal amounts of uninsured/underinsured motorist coverage
In these cases, the driver may be responsible for large amounts of money. He may owe damages to someone whom he injured or whose property he damaged. He may also have large personal medical expenses if a driver who injures him has little or no liability coverage.
To solve this problem, the business should consider purchasing an extra coverage, Drive Other Car (DOC) Coverage – Broadened Coverage For Named Individuals, for its auto policy. The business can list an individual to have the coverage and select some or all of the liability, auto medical payments, comprehensive, collision, uninsured motorists, and underinsured motorists coverages.
The chosen coverages apply to any vehicle the business does not own, hire or borrow while the person listed is using it. Coverage also applies while that person’s spouse is using the vehicle, if the spouse resides in the same household. It does not apply to any vehicles that a person or a member of the household owns. It also does not apply to the person or spouse while working in a business of selling, servicing, repairing or parking autos. The form extends to the auto medical payments, uninsured motorists and underinsured motorists coverages to family members of the named person while they are occupying or struck by a vehicle the business does not own. This extension does not apply to vehicles owned by the person or any family members. Lastly, comprehensive and collision coverages apply with the same restrictions on vehicle ownership, but they apply only to private passenger type vehicles.
To illustrate, suppose Bob’s employer adds this coverage to its business auto policy, names Bob on it, and selects all the coverages. Bob’s wife does not have a car, and one day she rents one from a car sharing service. She gets into an accident and injures four people. The car she rented carried only the minimum amount of liability insurance her state requires. Bob’s employer’s auto policy will pay the remainder of the damages, up to the amount of insurance the employer purchased.
Business owners who use company vehicles for personal use should address this with their broker to review the different options that may provide coverage for this additional risk. Some companies will also allow you to purchase a personal umbrella over a commercial vehicle and if this is available, it can further enhances and increase the amount of coverage you have.
Contact us to know more and to see how we can help.