Coverage Corner

WHAT’S IN YOUR BUSINESS AUTO TOOLBOX?

By Cathy Trischan

When an insurance producer places Business Auto coverage, there are some primary concerns. Producers make sure, for example, that the named insured is correct and that all vehicles are owned or leased by the named insured. They make sure, too, that when possible, symbols are used in a way that provides the broadest coverage for the client.

Once the basics are taken care of, though, the producer goes to the toolbox, the library of endorsements that can be used to make the policy work for the particular needs of the client. Being familiar with the tools and how to use them is the mark of the professional insurance producer. Let’s look at some of these important endorsements. While examples here are from Insurance Services Office (ISO), know that many insurers have their own versions of these forms.

EMPLOYEES AS INSUREDS (CA 99 33 10 13)

Employees often use their personal autos on company business, whether to meet with clients or to take mail to the post office. The named insured has coverage for this exposure under the Business Auto Policy if symbol 1 (Any Auto) or symbol 9 (Non-owned Autos Only) applies to liability coverage. What about the employee though? Barring any exclusions, the employee’s Personal Auto Policy provides primary liability coverage for an accident, protecting both the employee and the employer. The employer’s Business Auto Policy pays next, but the employee using a personally owned vehicle is not an insured under the Business Auto Policy.

Employees as Insureds endorsement can help. The endorsement makes employees insureds while using their own autos in the employer’s business. Given that the business probably carries a higher liability limit than the employee, this additional coverage is valuable.

If a partnership partner or LLC member is the one using a personal auto on company business, Partners Or Members As Insureds (CA 05 25 11 20) can be used to provide the same type of protection. And if a volunteer is using a personal auto, Non-Ownership Liability Coverage for Volunteers (CA 05 24 11 20) makes the volunteer an insured.

EMPLOYEE HIRED AUTOS (CA 20 54 11 20)

Your insured has a Business Auto Policy with symbol 1 (Any Auto) for liability and symbol 8 (Hired Autos Only) for collision and comprehensive. Your insured’s employee flies to another state for a meeting and rents a car at the airport. The rental company will not rent a car to the insured, a business, and insists that the car be rented in the employee’s personal name. There has been an accident, and the insured is looking to the Business Auto Policy for liability and physical damage coverage.

With symbol 1, liability coverage applies for the business. It does not, however, apply for the employee. Physical damage coverage also does not apply. Symbol 8 is for autos the named insured leases, hires, rents, or borrows. Because the employee rented the vehicle, the vehicle is a non-owned auto, not a hired auto.

Employee Hired Autos endorsement solves two problems. First, the employee is now an insured with respect to the vehicle rented in a personal name and used for the business. Second, for physical damage coverage, the rented auto is considered a covered auto the named insured owns. Once again, there is a version of the endorsement if a volunteer rents the auto – Volunteer Hired Autos (CA 04 39 11 20.)

BUSINESS INTERRUPTION COVERAGE (CA 99 05 11 20)

Many insureds rely on their autos for income. Think of insureds who have mobile services such as auto detailing and pet grooming or an insured who has a food truck. If these autos are damaged by a covered cause of loss while parked at the insured’s premises, the Business Income coverage on the property policy will apply. But what if the damage to the auto happens away from the premises or the insured does not have a physical location? The insured’s entire business operation might be in the auto.

Business Interruption Coverage endorsement provides Business Income and Extra Expense coverages in much the same way the property policy does. The insured chooses a limit of insurance and a cause of loss – collision, comprehensive, or specified causes of loss. There are options to amend the Business Income waiting period from 72 hours and to extend the Extended Business Income Coverage beyond 60 days.

Knowing how to customize coverage to meet the needs of a particular insured is a skill that professional insurance producers can master. These endorsements are great starting points for many businesses and should be part of every producer’s toolbox.

Til next time!

Cathy Trischan, CPCU, CRM, CIC, ARM, AU, AAI, CRIS, MLIS, TRIP is IA&B’s commercial lines education consultant. She works with our CIC and CISR programs, as well as our live CE webinars. Catch her at one of our upcoming courses: IABforME.com/education