Insurance policies are filled with legal jargon and complicated wording, but those details are often essential for understanding the ways in which you are (and are not!) covered. Among the many details we translate for our clients, we’re often asked about the Omnibus Clause in their commercial auto policy, so we wanted to take a moment to offer some much needed clarity.
A Quick Overview of a Commercial Auto Policy
In an ideal world, a commercial auto policy protects your business, its employees and property, and others who may suffer injuries or damages in an accident.
Unfortunately, there are different types of coverage that you may or may not have included in your current policy, such as liability coverage, collision coverage, comprehensive coverage, and uninsured/underinsured motorist coverage.
To further complicate matters, there’s often confusion about who is covered and which vehicles are covered under your commercial auto policy – such as an employee who is driving his or her own car to conduct company business.
To explore the basics of commercial auto insurance, we suggest starting with our recent post: Is that Employee Covered? Business Auto Policy Coverage 101.
The Omnibus Clause – Who Does That Cover?
When you’re exploring who is covered under your commercial auto policy, it’s likely that you’ll come across the three categories of insureds:
- Named Insured(s) who are listed in the policy declarations.
- Permissive Users who are allowed to drive covered vehicles.
- Omnibus Insureds (aka vicariously liable parties).
It’s that third category that causes such confusion. That’s because the omnibus clause isn’t coverage for someone who was directly involved in the accident. Instead, it’s a form of liability coverage for individuals and companies who could be held financially responsible for the negligence of the covered driver (either you, as a named insured, or an employee, as a permissive user). In other words, omnibus insureds are entities who could be sued even though they didn’t directly commit the negligent act – they are vicariously liable.
For example: Imagine your company has a loading dock that can receive large shipments. However, access is difficult, and you instruct your vendor’s driver to back into the driveway from the street. If that driver were to hit a pedestrian as he backed the truck in, the pedestrian could theoretically sue the driver, the vendor, and your company.
Since you instructed the driver to back into the driveway and he was making a delivery to your property, you could be seen as being vicariously liable for the accident. However, your vendor’s commercial auto policy should cover you, since you were an omnibus insured.
Let’s Make Sure Your Business Is Fully Covered.
At Swarts, Manning & Associates, we provide a unique perspective on all of your commercial coverage options, and we help to determine which carrier best fits your business needs. We strive to find you the broadest coverage at the best available rate. Give us a call to get started: (833) 878-2820.
Each week, Swarts, Manning & Associates covers relevant topics for your business. Stay tuned to hear more discussions about managing your insurance and industry-specific tips.
