Even businesses that own fleets of autos sometimes use vehicles that do not belong to them. Often, a company asks an employee to run an errand or visit a customer or vendor using that employee’s car.
The business may be legally liable for anything an employee acting on its behalf does while behind the wheel. Lawsuits and accompanying legal costs may confront the business if they have an accident, putting the company’s assets at risk.
Many business automobile insurance policies cover this situation but do not do so automatically.
The standard Insurance Services Office business auto policy uses numbered symbols to identify covered autos for each coverage the business has purchased. The policy provides liability coverage for non-owned autos only if symbols 1 or 9 are shown on the information page:
Symbol 1 means “Any auto.” This broadest symbol designation covers any auto, including borrowed, hired, owned, or leased.
Symbol 9 means “Non-owned autos.” The policy defines non-owned autos as vehicles the insured business does not own, lease, hire, rent, or borrow and that are used in the industry. The term includes:
- The business’s employees own autos.
- Partners (if the business is a partnership).
- Members (if it is a limited liability company).
- Members of their households.
However, coverage applies only if the vehicle is used in the business or the policyholder’s personal affairs.
Scenario: A consulting firm has run out of paper, and a worker is asked to purchase supplies at an office supply store. Then, he drives his vehicle to run the errand. On his way back to the office, the employee collides with another car going in the opposite direction.
If the firm’s auto insurance policy’s information page has either symbol 1 or 9 for liability coverage, it will cover this accident, including:
- Cost of damage to the other vehicle (notably, it does not pay for collision damages to the hired or non-owned vehicle),
- Cost of medical costs for injured third parties and
- Legal defense costs arising from the accident.
If the policy has another symbol, it will not cover an accident from using the employee’s vehicle.
This type of coverage is essential for companies that do not own their vehicles but have employees who drive their cars for work or rent them when on business.
The employee’s auto insurance policy may provide some coverage for the employer. However, it would help if you did not assume this is guaranteed.
In the event of an accident, you could be found negligent for various reasons, including:
- The employee’s insurance has lapsed.
- The employee only carries the minimum limits the state requires, and the damages exceed this limit.
- The employee’s vehicle needs to be appropriately maintained.
- The employee’s driving record is below standard.
- Your company does not have any fleet controls or policies to address these issues with employee vehicles used for business purposes.
If the accident burns through the employee’s policy limits, the damaged third party will turn to the employer next. With no non-owned auto or “all vehicles” coverage, the company would be liable for any damages out of pocket.
The takeaway
Almost every business has situations where it asks someone to use a personal vehicle for business, and an uninsured loss can be both financially devastating and easily avoidable.
All auto and non-owned auto insurance protects your business by covering potential coverage gaps that could threaten the company’s financial stability.
BGES Group is one of New York, New Jersey, and Connecticut’s Construction Insurance Specialists representing 50+ companies, including all the BEST general & umbrella liability programs. We offer all the coverage needed, including property, builders’ risk, inland marine, general liability, umbrella liability, auto, bid & performance bonds, workers’ compensation, N.Y.S. disability, and group health. Our commitment to you goes beyond the policies we provide. We are always just a call, text, or email away, ready to assist you, even on weekends. We understand the importance of your business and are here to help you navigate any insurance challenges.
BGES Group are Workers’ Compensation Insurance Specialists for Tri-State Business Owners: Unhappy with your rates, company, being canceled, losses causing difficulty getting coverage, in the middle of an audit dispute, misclassified payrolls, or whatever your issue. We can help! We have special programs for Auto Services, Contractors (especially in New York), Limousine Services, Logistics Companies, Manufacturers, Recyclers, and Truckers; we can help ANY tri-state business owner. We are considered “Preferred Agents” for this one program that, if we can get you into, their pricing is excellent, offers long-term coverage stability, and can cover multi-state operations. The program takes the hassle out of doing annual audits, too.
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