Providing the right commercial auto coverage can be challenging especially considering the fact that many times the vehicles are not used exclusively for commercial purposes. In order to provide the appropriate protection, it is imperative to understand how the vehicle is titled and how and by whom the vehicle is used. Once ownership and use is ascertained, the policy can be issued with the correct named insured and necessary endorsements attached.
VEHICLES TITLED IN THE NAME OF AN INDIVIDUAL
Many times, the owner of a sole proprietorship will title a vehicle in an individual’s name rather than that of the business. If scheduled on a Commercial Auto policy, this may create coverage gaps in the event of a claim.
While personally-owned autos in general belong on a personal auto policy (PAP), occasionally a commercial insured may ask to include the auto on its commercial auto policy (CA). The agent must determine the legitimacy of the vehicle’s inclusion on the CA policy. Is the vehicle used primarily for use in the business or is the policyholder attempting to avoid rating based on a driving and accident history?
If the personally-owned vehicle is appropriately insured by a CA policy, the named insured on the policy must match the name on the title. When the owner of the vehicle and named insured are not the same, coverage gaps can occur. If a company has vehicles titled both in an individual’s name and that of the company, separate CA policies must be issued based on how the vehicles are titled.
Asking the right questions of commercial auto customers is key to ensuring that the appropriate coverage is provided. When writing new business, confirm how the vehicle is titled:
• Is a Commercial Auto Policy appropriate? Or should the vehicle be ensured on a personal auto policy?
• If more than one vehicle is being insured, is one policy appropriate or will two or more policies be required?
• Who will be driving the vehicle?
• Are any of the endorsements discussed above required?
The same questions should be asked whenever a vehicle is added to the
policy and again during any pre-renewal review.
Consider these commercial auto endorsements...
Individual Named Insured Endorsement (CA 99 17)
The Individual Named Insured Endorsement fills that gap that occurs when a vehicle is insured under a CA policy but coverage is also needed for the insured and his or her family members for personal use of autos. The endorsement provides coverages similar to those which would be provided if a PAP were issued instead.
The Individual Named Insured Endorsement also extends liability insurance and any physical damage insurance coverage to non-owned private passenger autos used by the named insured and family members, subject to certain
exclusions, just as a PAP would.
Coverage under this endorsement applies to all vehicles covered under the policy that are of the private passenger type including vans and trucks.
This endorsement is available for use when a vehicle is titled in an individual name.
Employees As Insureds (CA 99 33)
Under the CA policy, the provision Who Is An Insured specifically excludes employees using their personally-owned vehicles on behalf of the named insured’s business.
While adding symbol #1 (Owned auto) or symbol #9 (Non-owned auto) provides coverage for the named insured for any vicarious liability arising out of the use of the non-owned auto, there is no coverage for the the owner/driver of the vehicle.
The endorsement Employees As Insureds can be added to remove the exclusion for employees driving their own vehicles. Coverage is provided on an excess basis and will apply only after the employee’s coverage has been used up. This endorsement applies to “any employee” rather than a named or listed basis. Because of this, it is important to recognize that the coverage is being extended to all employees and to get information on both driving records and underlying limits of insurance. Some carriers require all employees carry a minimum liability limit in order to attach this endorsement.
Drive Other Car Coverage - Broadened Coverage for Named Insured Endorsement (CA 99 10)
The Drive Other Car Coverage—Broadened Coverage for Named Individuals (CA 99 1) endorsement is commonly used when an employee or executive is furnished with a company auto and has no need for a PAP. This endorsement
extends coverage to include vehicles that are not owned, hired or borrowed by the insured but is used by the listed employee or his or her spouse.
The vehicle may not be owned by the employee or a family member nor may it be used in certain auto businesses. The Drive Other Car Coverage endorsement can be used to extend coverage for liability, medical payments, uninsured and underinsured motorists and physical damage coverage. Further, for medical payments coverage and UM and UIM coverages, the endorsement provides protection for the employee, spouse, and
family members of the listed individual when they are occupants of or struck by a non-owned vehicle.
When adding Drive Other Car Coverage, it is important to be aware of the driving record for all individuals to be covered.
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