INSURING EMPLOYEES UNDER THE BUSINESS AUTO POLICY

The Business Auto policy, particularly when written to cover "Any Auto," will afford the Named Insured broad liability protection with respect to the use of any auto, whether owned, hired or non-owned.  Frequently overlooked, however, is the lack of coverage available to employees under various circumstances.

It can be argued that the primary reason for maintaining Business Auto Liability coverage is to protect the Named Insured (employer), not its employees.  Many organizations, however, feel an obligation or desire to protect their employees if they are using their personal autos in the Named Insured’s business.  In addition, employees using their own autos in their employer’s business may presume or expect that their employer’s insurance will protect them, when indeed it may not.

The Business Auto policy's Liability coverage protects the Named Insured.  It also protects anyone else while using a covered auto owned, hired or borrowed by the Named Insured, but there are several exceptions to this.  First, no coverage is afforded to the owner or anyone else from whom the Named Insured hires or borrows a covered auto.  Nor does coverage apply to the Named Insured's employee if that employee or a member of his or her household owns the covered auto.  This scope of coverage for employees leaves them to look solely to their own Personal Auto policy as the sole source of protection unless the Business Auto policy is broadened by endorsement.

When employees uses their own personal auto in their employer’s business, the employer’s and employee’s first available coverage for liability claims resulting from such use will be the employee’s Personal Auto policy.  If the limits are not sufficient, the employer’s Business Auto policy will provide excess coverage above the Personal Auto policy for the employer only, but no such excess coverage will be available for the employee.  In order to provide that same excess protection for the employees using their own personal autos in their employer’s business, ISO’s Employees as Insureds endorsement (CA 99 33) is needed.  The endorsement amends the Who Is Insured provision to include as an insured any employee of the Named Insured while using a covered auto that is not owned, hired or borrowed in the Named Insured’s business or personal affairs.  Again, since this is an extension of the Non-Owned Auto Liability coverage of the Business Auto policy, the protection for the employee is excess over the insurance provided in his or her Personal Auto policy, which will apply on a primary basis.

Under some circumstances, an employee may lease his or her own auto to their employer.  With ISO’s Employee as Lessor endorsement (CA 99 47), the specifically described auto is treated as an auto that is owned by the employer and, as such, the coverage provided for such auto in the Business Auto policy is primary.  The endorsement goes on further and, with respect to the specifically described auto that is being leased to the Named Insured by one of its employees, that employee is included as an insured (with such coverage applying on a primary basis).

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, when traveling and renting cars, to rent the vehicles in the name of the company.  Many rental car agencies, however, 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 their 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.

If Hired Auto Physical Damage coverage is purchased under the Business Auto policy, such coverage will only apply to autos leased, hired, rented or borrowed by the Named Insured (with some limitations).  The Employee Hired Autos (CA 20 54) also amends the policy to indicate that any covered auto hired or rented by an employee 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.

Many of the broadening features for employees discussed in this article involve additional premium and increase the potential of claims entering into the experience of the employer/Named Insured.  Consequently, care must be taken when electing to broaden the protection for employees.

-- Charles H. Cox

RETURN TO INDEX OF EXCERPTS