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Business Auto Policies--Part 2. (Risk Primer).

The business auto policy, when written to cover "Any Auto" for liability coverage, will afford the named insured broad protection with respect to the use of any auto, including those owned, hired, and non-owned. This issue, we will continue to look at some of the areas where the policy may fall short of coverage expectations when it comes to the use of various autos by employees.

Since the business auto policy does not insure people unless they are using (with permission) an auto owned, hired, or borrowed by the named insured, an employee provided with a company automobile may face gaps in protection if he or she or any member of that household does not have another auto insured under a personal auto policy. If such employee borrows a neighbor's car to run an errand, the employee will have no coverage under the employer's business auto policy. The only protection available will be that provided under the neighbor's personal auto policy and, if the limits under that policy are inadequate, the employee will be uninsured for the remainder of any judgment. In order to protect the employee under such circumstances, ISO's "Driver Other Car Coverage--Broadened Coverage for Named Individuals" (CA 99 10) is available.

The business auto policy's "who is an insured" provision is broad enough to cover employees when they use an auto hired by the named insured. Consequently, most employers instruct their employees to rent vehicles in the name of the company. But many rental car agencies will only rent vehicles in the individual employee's name, rather than the corporate name. While the employer will still be protected for liability claims under such circumstances, the employee who rents a car in his or her own name may not be covered under the employer's business auto policy.

ISO's "Employee Hired Autos" (CA 20 54) addresses this situation. The endorsement amends the business auto policy's "who is an insured" provision to include an employee of the named insured while operating an auto hired or rented under a contract or agreement in that employee's name with the named insured's permission, while performing duties related to the conduct of the named insured's business. The endorsement also provides some additional protection for firms that purchase hired auto physical damage.

If hired auto physical damage coverage is purchased under the business auto policy (by specifying Symbol 8 for comprehensive and collision coverages) such coverage will only apply to autos leased, hired rented, or borrowed by the named insured (with some limitations). The employee hired autos addresses this situation as well. This endorsement amends the policy to indicate that any covered auto hired, or rented by the named insured's employee under a contract in that individual employee's name, with the named insured's permission, and while performing duties related to the conduct of the named insured's business, shall be deemed a covered auto owned by the named insured and, as such, granted primary physical damage coverage. According to ISO's commercial lines manual, no charge is made for this endorsement.

The business auto policy is subject to a fellow employee claim exclusion that precludes coverage for bodily injury to any fellow employee arising out of the fellow employee's employment. Although the intent of the exclusion is to prevent the auto policy from responding to a claim typically insured under a workers' comp policy, there are several states in which employees are permitted to bring an action against a negligent fellow employee. ISO's "Fellow Employee Coverage" (CA 20 25) deletes the fellow employee exclusion in its entirety while ISO's "Fellow Employee Coverage for Designated Employees/Positions" (CA 20 56) deletes the exclusion for specified individuals or positions. This latter endorsement is frequently used since it can schedule executive officers to track more closely with the commercial general liability policy that provides fellow employee coverage with respect to executive officers.

Charles H. Cox is president of Aldrich & Cox Inc., an independent risk management and employee benefit consulting company in Buffalo, N.Y. He can be reached at
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Author:Cox, Charles H.
Publication:Risk & Insurance
Date:Oct 15, 2001
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