6/8/2018 By Agent Ken CobbBy Agent Ken Cobb
If your employer or business gives you a vehicle to drive for work, I’m sure that you probably assume that the vehicle’s insurance will provide you all the protection that you need. And, in most cases, you are probably correct. However, there can be some holes in your protection when you drive a company car and rely only on your employer’s business auto insurance for coverage.
Let’s start with the basics. First, don’t forget that you are personally liable for your actions when you are behind the wheel, whether on the clock or not. If you cause a car accident in a company auto, it’s not just your employer who could be held responsible. It’s likely that you will also be sued for the injuries or property damage resulting from the accident. If you aren’t sufficiently insured, your own financial future could be on the hook if there is a liability verdict or settlement against you.
As an employee driving a company car, you assume that the insurance on the vehicle will provide you this liability coverage that you need. In most cases, you are probably correct. However, there could be holes in this coverage, as I will explain below.
The brings us to the second basic concept. When your employer buys auto insurance to cover vehicles that they own, this policy’s main goal is to protect and cover the business and its interests. (Just like when you buy an auto policy, your policy’s main goal is to cover you.) While this business auto policy usually also extends to cover employee drivers, this isn’t the first or primary mission of the policy, which could potentially create some issues in certain situations.
The coverage holes
While we certainly except your employer’s business auto policy to cover your personal liability in most accidents, here are some examples of situations where you could potentially find yourself unprotected after a serious accident for which you are at fault (or are being accused of being at fault):
Fellow Employee Exclusion. Many Business Auto policies feature an exclusion that says that if you are driving with a co-worker as a passenger and you cause an accident in which your co-worker is injured, the policy won’t cover your liability to your co-worker. This is because your employer is fully protected by state Workers Compensation exclusivity laws, but are you? While your co-worker might not be able to sue you in some circumstances (depending on state law and other factors), there certainly could be cases where this might be possible, leaving you totally unprotected, both for defense costs and to pay the final verdict or settlement.
Vehicle use beyond permission. Let’s say that your employer gives you a company vehicle and tells you that you can use it on the job and to drive to and from work. One day, you are driving the auto home and just before you pull in the driveway, your spouse calls and asks you to pick up a few groceries at the store. You turn around to drive a couple miles to the closest supermarket. On the way, you are involved in an accident in which someone is seriously hurt. Your employer hears about it and decides that they don’t want their own assets at risk if the claim exceeds their policy limits, and so they tell their insurer that you didn’t have permission to make personal shopping trips in the vehicle. On this basis, the business auto carrier denies your claim. You are being sued personally for injuries and damage and have no coverage or defense provided whatsoever.
No coverage in force. Let me ask you a question: how many times have you confirmed with your employer before driving the company vehicle that they remembered to pay their monthly insurance bill? Never, right? Chances are, they probably did, but mistakes do happen. Speaking of mistakes, what if your employer goofed up and didn’t get your company vehicle insured or accidentally dropped from their policy? Would you be aware of this? Maybe only after an accident occurred. While these scenarios may not be likely, they are possible, and it is important to understand that you are staking your entire financial future on someone else not messing up.
Insufficient coverage in force. Let’s say that you are prudent and carry the maximum liability limit offered by your personal auto carrier for your own vehicles. However, unbeknown to you, your employer was trying to save money and recently cut their business auto liability limit down to $100,000. Unfortunately, when you miss the stop sign and broadside the Camry carrying the family of four, you are driving your employer’s vehicle rather than your own. When one of the kids has to be life-flighted by helicopter from the scene and two others are rushed by ambulance to the ER, how far will the $100,000 limit go to protect both you and your employer in the lawsuits that are sure to follow?
For all the reasons cited above, it’s probably best that you take responsibility for your own protection, just in case the worst happens and you find out afterwards that you weren’t fully covered by insurance purchased by someone else. So it’s a good call to make sure your own insurance will be there for you as a backup.
Most personal auto policies do provide backup liability coverage for you when you are driving someone else’s vehicle; however, this normally does not apply if that vehicle is furnished or available for your regular use. So what you need is to add a coverage usually called Extended Non Owned. Extended Non-Owned coverage removes the “regular use” exclusion from your personal auto policy, to extend liability coverage to you when you drive a company vehicle.
Because Extended Non-Owned serves as backup coverage only, it’s usually quite inexpensive. While this can vary somewhat depending on the insurance carrier, many policies offer this for no more than $2 or $3 a month. Usually it only applies only to specified driver(s), so if there is any chance that your spouse or child might ever drive your company vehicle, make sure that they are listed on this optional coverage as well.
It’s important to note that Extended Non-Owned coverage is probably only a good fit when the company vehicle you are driving is a private passenger auto, pickup or a van. This is because there is a business use exclusion found in standard personal auto policies that excludes coverage for any other types of vehicles while used on the job.* So this might not be a solution if you drive a two-ton delivery truck, as an example.
When explaining this topic to clients who drive company vehicles, sometimes they respond that they will hold off for now in adding Extended Non-Owned coverage, until they ask their employer whether they might need this. While some businesses are wise to these issues and even recommend or require that their employees add this coverage to their own policies, most employers know nothing of the potential coverage pitfalls their drivers might encounter. So, at this point, my client likely knows more about the topic than the party they are planning to consult. (Unless your boss works in the financial industry, they’re probably not the one you consult for technical financial advice.)
While it’s certainly not possible to protect yourself against all the risks you face in life, it is wise to put a good insurance plan in place to provide reasonable protection against catastrophic financial loss. A big part of that plan is making sure that your liability coverage has as few holes as possible. If you use a company vehicle, adding Extended Non-Owned coverage to your personal auto policy is a good way to cover a few of those potential holes.
*Pine Country Insurance does not have expertise in the question of how the business use exclusion for anything other than a private passenger auto, pickup or van coordinates with Extended Non-Owned coverage. Therefore, we encourage you to seek other counsel or information on this topic, if you drive another type of company vehicle and are wondering if Extended Non Owned coverage will protect you.
About the Author
Agent Ken Cobb
Ken is the owner and principal agent at Pine Country Insurance in Bemidji. Active in the insurance industry since 2000,Ken uses his years of personal insurance knowledge and experience to assist clients in customizing insurance coverage to fit their needs. Ken considers himself a "farmer" rather than a "hunter"; rather than focusing on writing a lot of new policies as quickly as possible, he works on cultivating long term relationships based on trust with his clients. When writing new policies and meeting for annual reviews, Ken spends time with his clients explaining and helping them understand their insurance, and he is also pleased to share his knowledge with his blogging audience as well.
Ken Cobb is owner of Pine Country Insurance and has been active in the insurance industry for over 15 years. Meet Ken.
Coverage descriptions found in this blog are summaries provided for general educational purposes and cannot fully detail the terms, conditions, limitations or exclusions of a specific insurance policy. Please read your policy carefully.