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The
Business Auto policy provides two coverage's for auto's used in the
conduct of business operations. First, it provides liability
coverage for claims made against the insured for bodily injury and/or
property damage to a third party resulting from the use of a covered auto
in the business. Second, comprehensive and collision coverage may be
added to provide coverage for physical damage to insured vehicles. A
vehicle includes any land motor vehicle, trailer or semi-trailer designed
for use on public roads. This would include all common types of
cars, trucks, semi-tractors, motorcycles and trailers. However, it
would not include mobile equipment such as forklifts, back hoe's or
similar items. As a note, most commercial insurance companies will
not write a motorcycle on a commercial auto policy.
What
it Covers
Auto
Liability
The
liability coverage of the commercial auto policy provides protection
against legal liability arising out of the ownership, maintenance, or use
of any insured auto. The coverage territory is the United States,
Canada and Puerto Rico. Separate coverage is needed if driving in
Mexico. The liability coverage will also provide for defense costs
outside the limit of liability. As with most policies today, the
auto liability coverage is written to cover all events not specifically
excluded. Standard exclusions include: injury to an employee;
racing; completed operations; pollution; war; expected or intended
injury. There is also an exclusion relating to the handling of
property. This exclusion is intended to clarify whether the auto
policy or the general liability provides coverage. The auto policy
should provide coverage while an insured vehicle is in the process of
being loaded or unloaded. These situations all seem to be unique the
facts of the event will determine which policy will pay. However,
you should always be careful when allowing non-employees to help with
loading and unloading of your vehicles. You may become responsible
for injury or damage they cause. These days, good Samaritan's are a
liability claim waiting to happen.
Covered
Autos
Autos
covered under the policy may include all scheduled vehicles (vehicles
titled in the insured's name or leased to the insured) as well as hired
and non-owned vehicles. Each vehicle you wish to cover should be
scheduled, along with any new or replacement vehicles purchased during
the year. A hired vehicle is any vehicle rented or leased on a
temporary basis for use in the business. An additional unit rented
to help move an office, fill a short time need or for use on a business
trip all create the need for hired auto liability. It prevents you
from having to purchase the coverage from the rental agency.
Non-owned auto liability provides coverage for the business when
a vehicle not owned by the business is involved in an accident.
For example, if an employee uses their personal vehicle to go to the
bank and rear-ends another car, their personal auto policy will protect
them. The non-owned liability coverage of the business auto policy
would protect the business. Ask a friendly attorney if they would
sue the business and the individual driver in such a case and you'll see
why this coverage is needed. Be aware that no physical damage
coverage is provided for a non-owned vehicle. The vehicle
owner is responsible for any damage as a result of their negligence.
Medical
Payments Coverage
Similar
to the coverage of the same name under a general liability policy, auto
medical payments is a good will coverage. These payments are
made without regard to fault. It offers an opportunity to
voluntarily pay medical expenses in the hope of avoiding litigation.
Uninsured
Motorist
This
coverage provides for payment of damages due to bodily injury to the
insured when injured by an uninsured motorist. Don't kid yourself
and think that compulsory financial responsibility laws guarantee that
your fellow driver has insurance. This is an inexpensive coverage
and should be carried in a limit equal to your liability limit.
Underinsured
Motorist
This
coverage is added to supplement the Uninsured Motorist Coverage, the
coverage applies only when the other driver has liability limits at the
time of an accident, but the liability limits carried may be
insufficient to pay for bodily injury damages for which the driver is
responsible. Many states only require limits of $10-25,000 which
is barely enough to buy you a new car. The guy most likely to hit
you probably has these limits and bought them from an agent in a monkey
suit on a late night commercial. This is when the insured's
underinsured motorists coverage would apply and payment for the
difference could be made. The two coverage's are mutually exclusive and
do not overlap or duplicate each other.
Physical
Damage Coverage
The
second part of the Business Auto policy provides for physical damage
coverage to covered autos. It is available for both scheduled and
hired autos, but not for non-owned vehicles. Comprehensive and
Collision are the two basic physical damage coverage's. Individual
vehicles may be selected to have physical damage included or not.
Collision
Coverage
This
coverage provides protection against loss or damage to a covered auto
resulting from the impact with another vehicle or object. Collision
losses are paid regardless of fault.
Comprehensive
Coverage
Comprehensive
coverage provides protection against loss or damage to a covered auto
resulting from loss other than a collision or upset. This coverage also
provides for supplemental payments for transportation expenses ($15 per
day) in the event of total theft of a covered auto or a non-owned auto.
Endorsements
Personal
Injury Protection
Personal
Injury Protection (PIP) is an endorsement that adds no-fault benefits.
No-Fault means that in the event of an automobile accident, each party
collects from his or her own insurer regardless of fault. The PIP
endorsement is only available in certain states with No-Fault Laws. The
endorsement applies only to bodily injury and not to property damage. (The
state of Michigan is the exception to property damage.) No-Fault Laws vary
widely from state to state.
Hired Auto
Physical Damage
Comprehensive
and Collision coverage may be included to apply to vehicles leased, hired,
rented or borrowed for use in the named insured's business. When purchased
in combination with hired auto liability, there would be no need to
purchase any coverage from the car rental company when renting a car for
business purposes. The standard deductible applies to this coverage.
Drive Other
Car Coverage
The DOC
endorsement provides personal liability coverage to the named drivers
listed on the form. Since this is a business policy, it can create
some coverage gaps if relied upon for personal auto liability. The
problem would arise when using a non-owned auto for personal use, such as
driving a rental vehicle on vacation or a friend's car. Personal use
of scheduled business vehicles is no problem and is covered under the
policy. Typically, it is used by an owner of a business who has all
of his personal vehicles covered on the Business Auto policy without a
personal auto policy in the family name.
Who
is Covered
The
named insured is usually the business. Automatically included as
insured's are: employees; owners of borrowed vehicles; anyone using the
business auto with permission. A bank or leasing company with an
interest in an insured vehicle may be included as an additional insured.
Limits
of Insurance
The
liability, medical payments, uninsured and underinsured coverage's each
state the applicable limit of coverage. That amount is the most they
will pay for damages in any one accident. The liability limit is
provided in a Combined Single Limit (CSL) which includes bodily injury and
property damage under a single limit. (Personal auto policies
provide split limits for bodily injury and property damage.)
Physical damage coverage is provided without a limit. Losses are
adjusted at the cost to repair or replace the vehicle. In no case,
will the settlement be greater than the Actual Cash Value of the
vehicle. So, don't expect a brand new truck when you run your 1967
Chevy over a cliff. In fact, be prepared to establish the actual
value of the vehicle by maintaining accurate repair receipts and having a
current blue book value available when it comes time to settle. And,
don't buy full coverage on your 1967 Chevy, it's usually a waste of money.
Deductible
Typically,
no deductible applies to liability, uninsured/underinsured and medical
payment coverage. If you have one, you are in a high risk business
or have too many claims. A deductible will typically apply to both
comprehensive and collision coverage. It does not have to be the
same for both. It is not uncommon to have a higher deductible for
collision than comprehensive. Glass damage claims are usually
considered comprehensive. While it is not stated in the standard
policy, it is common for most insurance companies to pay the full cost of
windshield repair without application of the deductible. If the
damage requires the windshield to be replaced, the deductible would apply.
Now
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