Whether you have a single company vehicle or an entire fleet, you likely recognize the need to have a Business Auto Policy (BAP) added to your Business Owners Policy or Commercial Package Policy. However – like in many insurance scenarios – not all BAPs give you the same amount of and type of coverage.
Here’s the unfortunate truth: whether you have a business auto policy or not, if an employee causes an accident while conducting business on your behalf – you are liable. As you conduct your annual commercial insurance check-up (or perhaps explore your options for the first time), it’s important to understand basics of a business auto policy – so you can avoid the most common pitfalls and coverage gaps.
#1 – Who Is Covered?
Most BAPs recognize 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) which we’ll discuss in a later post.
Although BAPs generally cover employees as permissive users, named insureds have the broadest and most reliable coverage because there’s no question that they’re specifically covered under the policy. You should consider explicitly listing any employees who regularly drive company vehicles.
#2 – Which Vehicles Are Covered?
Whether they’re named insureds or permissive users, your employees are only covered if they’re operating “covered vehicles.” Be sure that all company-owned vehicles are listed and talk with your insurance expert about whether your policy covers hired and non-owned vehicles. Keep in mind that international car rentals are one of the most overlooked liability exposures for businesses.
#3 – Are Employees Covered When Driving Personal Vehicles?
Perhaps one of the most common business auto policy questions is whether employees are covered when they’re driving their own vehicles to conduct company business. Since these vehicles are not owned by the named insured(s), they generally aren’t covered in a standard policy – even though your company could still be held liable for your employee’s negligence if an accident occurs while he or she is working.
Hired and Non-Owned Coverage can (and should) be added to your policy if your employees drive their own vehicles while doing business on your behalf. This is especially important for small and medium-sized businesses that would have a difficult time recovering from the financial losses associated with a lawsuit and damage settlements.
#4 – What Does a Business Auto Policy Cover?
Beyond the drivers and vehicles that are covered under the policy, there are different types of coverage available – meaning, for example, your current policy may cover damages to others’ property without providing coverage for your own vehicle. Talk with your insurance expert about these areas of coverage (and the many optional add-ons):
- Liability Coverage – Covers bodily injury to others (including medical bills and lost wages), property damage to the other vehicles if your employee is at-fault, and legal expenses if you are sued.
- Collision Coverage – Covers damages to your vehicle (regardless of fault) for traffic accidents.
- Comprehensive Coverage – Covers damages to your vehicle for causes other than an accident, like theft, floods, fire, etc.
- Uninsured/Underinsured Motorist Coverage – Covers injuries and property damage if the other party was at-fault but didn’t have adequate insurance.
Let’s Protect Your Business from Your Specific Risk Exposures
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.
