INTRODUCTION
A coverage concern exists
when a family’s only available vehicle is supplied or owned by a business. Commercial
auto coverage is intended for vehicles used commercially, not personally. In such
cases, there’s a need to fill that gap by providing coverage equal to what is
offered by a personal auto policy. There are ways to address this situation,
including adding all family members to the commercial policy as named insureds.
However, a simpler way is to attach CA 99 10–Drive Other Car Coverage–Broadened
Coverage for Named Individuals.
GAPS IN COVERAGE
Individuals or families
in the situation above may face several serious gaps in coverage.
1. Liability coverage is
not available when the individual or family member is operating a hired
or non-owned auto. The individual is covered only while driving the company
owned vehicle.
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Example: Marvin does not have a personal auto policy because his
employer, Felix's Shoe Factory, supplies the car he drives. A friend, Pat, stops
by one day and asks Marvin to drive him home using Pat’s car. Pat is dizzy,
feels nauseous, and doesn't think he can get home safely. Marvin agrees to
help out. On the way, Marvin takes his eyes off the road when Pat passes out,
runs a stop sign, and collides with a minivan. Pat had only minimum limits on
his policy so Marvin is left with no insurance coverage for the damages and
injury he caused.
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2. There is no Medical Payments or Uninsured/Underinsured
Motorists coverage for the individual’s spouse or other family members.
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Example: Becky and her parents are permitted to drive her dad’s
company-owned auto for personal use so none of them purchases a personal auto
policy. Becky's friend, Karen, invites her to ride with her to the mall. On
their way back home, a pick-up strikes Karen’s car and Becky is seriously
injured. The other driver was uninsured and Karen’s policy provides only
minimum uninsured motorists limits. Becky’s family is responsible for the
expenses that exceed Karen's Uninsured Motorists coverage limits.
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3. There is no
coverage for physical damage loss to any hired or non-owned auto.
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Example: Freda was
test-driving Jake’s bright red convertible. She had decided it was time to
become a two-car family especially because her husband’s only vehicle was a
company vehicle. Jake let the insurance coverage lapse because he couldn’t
afford both the vehicle and the insurance payments. While test-driving the
car Freda took a sharp turn too fast, ran off the road, and struck a tree.
Luckily, the airbags deployed properly but Jake’s car was demolished. Freda
still had to buy the car but without financial assistance from her husband's
commercial auto coverage.
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COVERAGE
CA 99 10 allows the named
insured to designate the individuals who can be insured by the broadened
coverage but it does not make such coverage available on a blanket basis.
Anyone can be scheduled, even persons who are not employees or who do not have
any relationship to the business. The coverage section indicates automatic
extensions beyond the scheduled individuals.
This endorsement provides
six coverages but coverage applies only if entries appear in the premium space
for a specific coverage and for a specific individual.
The coverages available
are:
- Auto Medical Payments
- Comprehensive
- Collision
- Uninsured Motorists
- Underinsured Motorists
Note:
Underinsured Motorists coverage is automatically included if the named
insured purchases uninsured motorist coverage with limits higher than basic
limits. However, if underinsured motorists coverage is purchased separately, a
premium and limit must be in the appropriate space on the endorsement schedule.
This endorsement is
flexible. It can be structured and arranged to meet various needs because
coverage is scheduled for each individual.
1. Liability coverage extends to non-owned or hired autos.
This coverage extension
applies only to the named individual and a spouse residing in the same
household. It does not apply to family members unless they are scheduled.
Liability coverage applies to any auto that is hired or that is not owned by
the individual while being used by the individual or spouse. However, this is
subject to two exceptions:
- Neither the individual nor any member of the
household can own the vehicle.
- The vehicle cannot be one that the individual or
spouse is working on in the course of operating a business as an auto
dealer, repair operation, or parking lot.
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Example: Let’s revisit Marvin who hit a minivan when he ran a
stop sign. Marvin would have been covered up to the limits on the endorsement
schedule if CA 99 10 had been attached to his company’s business auto
coverage. Coverage would have been provided for the damage and injury Marvin
caused.
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2. Auto Medical Payments Coverage and Uninsured and Underinsured
Motorists Coverage extends to non-owned or hired autos.
This modified coverage
applies to the individual scheduled and all of his or her family members.
Family members include any person related to the scheduled individual by blood,
marriage, or adoption, provided they reside in the same household. This
includes wards and foster children.
Auto medical payments,
uninsured motorists, and underinsured motorists coverages apply but only
scheduled for the individual. Limits must be selected. If no underinsured
motorists limit is entered but the uninsured motorists limit is higher than the
minimum required, the underinsured motorists limit is the same as the uninsured
motorists limit.
CA 99 10 provides this
coverage by changing the definition of “Who Is An
Insured.” The named individual and all family members who reside in the same
household are insureds under the coverage form but only for coverages for which
a premium charge is made and only while the individual or a family member
travels in an auto not owned by the insured, by the individual listed, or by
any of family member.
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Example: Remember Becky who was injured as a passenger while
returning home from a shopping trip? Under the modified coverage, Becky has
underinsured motorists coverage up to the limit on
the endorsement schedule.
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3. Physical damage
coverage for non-owned or hired autos is amended.
This coverage extends to
only the scheduled individual and his or her spouse residing in the same
household. There is no coverage for other family members. It broadens the
definition of covered auto to include a private passenger auto that is under
the scheduled individual and spouse's control. The auto cannot be owned by the
individual or any family member and cannot be used by the individual or spouse
in a business operation involving auto repair, auto sales or parking.
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Example: Refer to the example above involving Freda and Jake’s
red convertible. While the same accident occurs during the test drive, this time, CA 99 10 is attached to the business
auto coverage form. Freda’s insurance pays Jake for the damage to his vehicle
and she is free to use her own money to buy the car of her dreams.
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UNDERWRITING CONSIDERATIONS
Little or no additional
underwriting is required if the individual who drives the business auto is the
only person that gains additional coverage because the insurance company has
already evaluated that individual as a driver of a company auto. However, if
the individual's spouse and/or family members are involved, their driving
records should also be reviewed as part of the underwriting process.
