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10 Drive other car coverage.

Drive other car coverage is attained through the use of endorsements to the business auto policy. The purpose of the coverage is, in general, to grant insurance coverage to a driver of an auto that is not owned by either the driver or the named insured.

As an example, the named insured under a BAP is a corporation; it does not own any autos; it allows an executive officer to rent cars in his own name or encourages him to borrow cars when needed, in order to carry out his functions as an officer of the company. Now, in this situation, if the named insured corporation uses symbol 9--nonowned autos only--to designate covered autos under the BAP, the named insured has insurance coverage, but the executive officer does not. The reason is: symbol 9 designates as covered autos only those autos that the named insured does not own, lease, hire, rent or borrow that are used in connection with the business of the named insured. If the auto is hired or borrowed by the executive officer (who is not the named insured), this meets the description under symbol 9; the car is a covered auto and the named insured is an insured for the covered auto. However, note that the "Who is an Insured" clause on the BAP states that anyone else (besides the named insured) while using with the permission of the named insured a covered auto that the named insured owns, hires, or borrows is an insured. The problem is, by definition, symbol 9 does not include autos owned, hired, or borrowed by the named insured. So, if the named insured's BAP has symbol 9 to designate covered autos, how does the executive officer get to be an insured under his company's BAP if he rents or borrows a car?

The answer is drive other car coverage. This coverage acts to extend the scope of the named insured's auto insurance to include certain scheduled drivers.

Drive Other Car Coverage--Broadened Coverage for Named Individuals CA 99 10

This endorsement attaches to the business auto policy and has a schedule to list the individual(s) who are to be considered insureds as well as the coverages that apply. Available coverages include liability coverage, medical payments coverage, physical damage coverages, and uninsured/underinsured motorists coverage. Such coverages apply only where and when a premium is shown in the endorsement's schedule. CA 99 10 declares that any auto that the named insured does not own, hire, or borrow is a covered auto for liability coverage while being used by any individual named in the schedule, or by his or her spouse while a resident of the same household. The individual named in the schedule and his or her spouse, while a resident of the same household, are considered insureds while using the covered auto. For example, a corporation is the named insured under a BAP; it has CA 99 10 endorsed to the BAP and has named its new CEO on the schedule. The CEO does not own a car so he rents one using his personal credit card. CA 99 10 gives the CEO and his spouse insurance under the corporation's BAP for whichever coverages are noted (and paid for) on CA 99 10.

There are some other important points to note concerning CA 99 10.

The individual named in the schedule is an insured. The spouse of that individual does not need to be named in order to be an insured under CA 99 10; and, there is no additional premium charge for the spouse's coverage. However, the spouse must be a resident of the same household as the named individual. In other words, if the CEO discussed above is divorced or separated from his spouse, that spouse is not an insured under the terms of CA 99 10. Any other person--friend, son, daughter, relative, neighbor--must be named on the schedule in order to be considered an insured under CA 99 10.

The auto used by the named individual can not be owned by the individual. To be a covered auto, that car can be rented or borrowed or leased by the individual, but it cannot be owned by him or any member of his household. The car can even be furnished or available for the regular use of the named individual or spouse, but it cannot be owned by them. Furthermore, the car is not a covered auto if it is used by the named individual or his or her spouse while working in a business of selling, servicing, repairing, or parking autos.

Finally, the auto is a covered auto while being used, and the named individual is an insured while using the covered auto. In other words, the named individual can use the car on business purposes or personal purposes and it fits the criteria for coverage under CA 99 10. So, for example, if the CEO discussed previously drives the rented car on vacation, endorsement CA 99 10 will sill provide coverage for him.

Endorsement CA 99 10 also offers auto medical payments coverage and uninsured and underinsured motorists coverage provided the premiums are marked on the schedule. If the insured has chosen those coverages, CA 99 10 makes the following change in the "Who is an Insured" clause of the BAP: any individual named in the schedule and his or her family members are insureds while occupying (or while a pedestrian when being struck by) any auto not owned by the named insured. The significant point here is that the coverage is extended to certain other family members of the named individual and not just the spouse. A family member is defined on CA 99 10 as "a person related to the individual named in the schedule by blood, marriage or adoption who is a resident of the individual's household." So, for med pay and UM coverage, sons, daughters, brothers and sisters, mothers and fathers of the named individual are considered insureds under CA 99 10 - as long as they live with the named individual.

The named individual and his or her family members have this coverage as long as the auto they are occupying or struck by is not owned by the named insured or by the individual or family member. So, if the CEO is an occupant in a car owned by his son (who is a resident relative), CA 99 10 will not grant med pay coverage to the CEO if he is injured in an accident.

Endorsement CA 99 10 also provides physical damage coverage, but there are several restrictions.

First, the auto must be a "private passenger type auto." Unfortunately, neither CA 99 10 nor the business auto policy defines the term. However, the commercial lines manual does indicate that a private passenger auto is a four wheel auto of the private passenger or station wagon type. Pickups, panel trucks or vans not used for business are rated as private passenger autos. While this definition is somewhat open to interpretation, it does imply that cars, as opposed to trucks and semi-trailers, are the focus of coverage under CA 99 10.

Second, the auto can not be owned by the named insured, the individual named in the schedule, or by any member of the individual's household. CA 99 10 is geared toward auto nonownership coverage.

Finally, the covered auto has to be in the care, custody, or control of the individual(s) named in the schedule or his or her spouse. Here again, a distinction is made between the named individual, the spouse, and others. CA 99 10 provides med pay coverage to family members, but if a family member is driving the car, under the terms of CA 99 10, there is no physical damage coverage. An argument could be raised that the named individual has care and custody of the car since he is the one who has leased it, rented it, or borrowed it, but, in reality, the one who has actual possession of the car at the time of an accident is the one who has custody of it.

Insureds under CA 99 10, as well as agents and brokers, should be aware of the coverage distinctions that exist under CA 99 10 based on just who an insured is.

Individual Named Insured CA 99 17

Drive other car coverage is also provided through the use of endorsement CA 99 17. This endorsement modifies the business auto policy and is geared toward the named insured being an individual and toward providing coverage for that individual's family members. By definition, the spouse of the named insured is automatically considered an insured on the same level as the named insured; that is, the "you" and "your" include the spouse if a resident of the same household.

CA 99 17 offers what is called "personal auto coverage." Under this section of the endorsement, a family member of the named insured is added as an insured for any covered auto that is of the private passenger type and owned by the named insured. The family member is also an insured for the use of autos not owned by the named insured, under certain circumstances:

1. That auto cannot be owned by an family member, furnished or available for the regular use of the named insured or a family member; and,

2. The auto cannot be used in the business of selling, servicing, repairing, or parking autos; and,

3. The auto cannot be of a type other than a private passenger type auto while used by the named insured or family member working in any other business or occupation.

Basically then, this section of CA 99 17 extends auto liability coverage to family members of the named insured. This extension may seem superfluous. After all, under the terms of the business auto policy, anyone using a covered auto owned by the named insured with the named insured's permission is an insured; and, presumably, the named insured allows his family members to drive the autos that the named insured owns. However, CA 99 17 removes the requirement that the use of the auto be with permission. In other words, the family member does not need the permission of the named insured (either explicit or implicit) every time he or she uses a covered auto. This arrangement is of value to families when all the family cars are insured under the named insured's business auto policy and the family members have no personal auto policies to cover their driving exposures.

Note, though, that the extension does not come without limits. The family member must be a person related to the named insured by blood, marriage, or adoption and be a resident of the named insured's household in order to be an insured under CA 99 17. In other words, if the son of the named insured lives with his mother who is divorced from the named insured, and drives a car owned by the named insured, the son is not an insured under CA 99 17 (although, as noted above, the "Who is an Insured" clause on the BAP would make the son an insured as long as he is driving the car with the permission of the named insured). In addition, the auto driven by the family member must be of the private passenger type - no trucks or semis. Note, however, that pick-ups or vans not used for business purposes do qualify as private passenger type autos under CA 99 17.

CA 99 17 makes family members insureds while using nonowned autos also, but the restrictions on that are as noted above.

The endorsement also takes note of physical damage coverage. While any auto that the named insured owns (of the private passenger type) is a covered auto, a nonowned auto can also be considered a covered auto. The nonowned auto must be a private passenger type auto, pick-up, van, or trailer not owned by or furnished or available for the regular use of the named insured or any family member, while in the custody of or being operated by the named insured or any family member. As an example, if a family member gets into a customers car and drives it away from blocking the driveway of the business, the physical damage insurance will apply if the car is damaged and if the named insured's owned autos have physical damage coverage under the BAP. On the other hand, if the nonowned auto is one that is leased or rented by the named insured or a family member, that car is considered a car furnished or available for the regular use of the insureds, and therefore is not considered a covered auto under CA 99 17.

One final note on endorsement CA 99 17. The drive other car coverage provided by this endorsement is at no additional charge if the policy covers a private passenger auto not used for public transportation (e.g. a taxi), or covers a pickup, panel truck, or van not used in the business of the insured (other than for farming or ranching).
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Publication:Business Auto Coverage Guide, 2nd ed.
Date:Jan 1, 2004
Words:2183
Previous Article:9 Auto leasing & rental coverage.
Next Article:11 Endorsements.

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