CA 99 10–DRIVE OTHER CAR COVERAGE–BROADENED COVERAGE FOR NAMED INDIVIDUALS

(July 2010)

INTRODUCTION

There is cause for concern when the only vehicle available for a family's use is supplied or owned by a business. Business auto coverage is intended for commercial vehicles and not for personal use. In cases like this, the question is how the entire family gains the complete coverage offered by a personal auto policy. There are numerous 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.

Note: The 03 10 edition has a cleaner schedule and separates the physical damage coverage. This way coverage can be selected for comprehensive and/or collision instead of the previous edition that required coverage for both.

GAPS IN COVERAGE

Individuals or families in the situation above may face several serious gaps in coverage.

1. Liability coverage does not apply to operating a hired or non-owned auto. The individual is covered only while driving the company owned vehicle.

Example: Marvin does not have a personal auto policy since his employer, Felix's Shoe Factory, supplies the car he drives. A friend stops by one day and asks Marvin to drive him home using the friend's car. He 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 his friend passes out, runs a stop sign, and collides with a minivan. Marvin's friend had only minimum limits on his policy and Marvin was left with no insurance coverage for the damages and injury he caused.

2. There is no Medical Payments or Uninsured/Underinsured Motorists coverage for the individual's spouse or other family members.

Example: Becky and her parents drive her dad's company-owned auto and don't have 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.

3. There is no coverage for physical damage loss to any hired or non-owned auto.

Example: Freda was test-driving Jake's bright red convertible to help her decide whether or not to buy it. She was bored and inconvenienced by having to drive her husband's company car, which was the only one in the household. 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.

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:

• Liability

• Auto Medical Payments
• Comprehensive (03 10 edition change)
• Collision (03 10 edition change)
• 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.

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 and it would have applied to the damage and injury he caused.

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 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 only if they are scheduled for the individual. Limits must be selected. If there is no underinsured motorists limit and 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 Business Auto 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.

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.

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 family members. It broadens the definition of covered auto to include a private passenger auto 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.

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.

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.

PREMIUM DETERMINATION

Premium charges that apply to each coverage provided for each individual are prescribed in the Business Auto Division of the Insurance Services Office (ISO) Commercial Lines Manual (CLM).