Business Auto policies cover your owned, leased or non-owned vehicles for third party liability (bodily injury or property damage) or physical damage losses (comprehensive and collision). It contains several important coverage sections: Covered Autos, Liability, Physical Damage. Additionally, many businesses purchase endorsements for: Uninsured/Underinsured Motorist and Medical Payments.
This section describes the type of autos which can be covered under the BAP and assigns symbols to each “type” of auto coverage. For example, Symbol 1 is the broadest and provides coverage for “Any Auto” (but only applies to liability). Symbol 2 provides the broadest physical damage coverage, whereas Symbol 7 provides more restrictive coverage (and is less expensive), only providing coverage to “Specifically Described Autos”.
It should be noted that due to language within the coverage form, Symbol 1 does NOT apply to “Hired or Non-Owned” autos, so Symbols 8 and 9 must be applied and rated if you want this coverage. Often overlooked, this is very important coverage for almost any business or organization to protect them from liability if an employee runs an errand on company business using their own vehicle (thus, the organization has a “non-owned” exposure).
Another important note is that trailers and mobile equipment are considered to be covered for liability under the following scenarios: Trailers less than 2,000 lbs and mobile equipment while being towed.
The Insuring Agreement states that coverage is applied to “bodily injury” or “property damage” as a result of an “accident” from the ownership, maintenance or use of a covered auto. It further grants coverage for “pollution cost or expense” if resulting from “bodily injury” or “property damage” caused by an “accident”. Insurer retains the same right and duty to defend as other liability policies.
This section further identifies Who Is An Insured, which includes “you, your employees and partners, while using your covered auto”, but also allows coverage for others if they’re driving your auto with permission – otherwise known as the “permissive user clause”.
Section III covers “loss” to covered autos for Comprehensive, Collision or Specified Causes of Loss and Towing and Glass Breakage. There are also coverage extensions available for rental, loss of use, etc. Typically, anyone who asks for “physical damage coverage” obtains comprehensive and collision to insure their vehicles for damage resulting from collision with other autos or object or for overturn and other types of damage. Specified Causes of Loss is an option, but the other two encompass this coverage, so usually it is ignored.
Who Needs This?
Any company with owned autos. If your company does not own any autos, then you may want to consider buying just Hired & Non-Owned Auto coverage for protection while employees operate their own or rented vehicles on company business.
Business Auto: Common Coverage Gaps
Inaccurate Assignment of Covered Auto Symbols
One example is failure to assign symbol 2 or 7 for someone requesting physical damage coverage. This would more commonly be an agent E&O problem, but something for you as a consumer to watch for. The proper symbols should be listed on the application you sign.
Driver Other Car (DOC) Endorsement
When executives or others are furnished with company vehicles, which are also used for personal time, the Drive Other Car endorsement is required, unless they have a personal auto policy in force. Otherwise, the BAP does not offer coverage.
Hired & Non-Owned Auto
Nearly every organization has this exposure and coverage is often inexpensive. If you or your employees drive personal vehicles or rent vehicles on company business, then your organization has a significant exposure to liability.
If your business has mobile equipment subject to motor vehicle laws, then it must be identified by symbol 19 and covered under the BAP.
The definition of an “employee” includes “leased workers” and this creates a potential gap in coverage if worker is injured on the job. Under workers compensation statute, the leased worker falls under the employee leasing firm if they are injured while working for you.
However, the leased worker may select to claim damages against you for negligence, but the unendorsed BAP policy will not respond due to the “employee” and “workers compensation” exclusions.
BEST SOLUTION: Ask the leasing firm to name you as an “alternate employer” on their Work Comp and Employers Liability policy and show you proof of such.
Except for “Insured Contracts”, note that contractual liability is not otherwise covered and there may also be requirements beyond what is covered. Read all Indemnification Agreements carefully and let your Insurance Broker and Attorney read the contracts before signing.
Care, Custody or Control
For those engaged in any form of auto services business, whereby you operate, repair or store others vehicles, the traditional BAP does NOT offer coverage. You will generally need a Garage policy.
If your vehicle contains significant values for after-market or temporary electronic equipment, you will need to endorse the BAP for coverage.
Failure to Endorse
If you sign a contract requiring Additional Insured, Primary & Noncontributory, Waiver of Subrogation or any other similar clauses, you will need to endorse your insurance policy to account for this contractual exposure. Otherwise, the costs are all yours!