Automobile Insurance

Autos Used by Employees

Many people often wonder how their insurance policies respond when they are driving their own car on the business of their employer, or when they are using their company car for personal matters. Also, many people have occasion to rent vehicles for personal and business use, and wonder how the various policies involved will respond.

If you as an employee use your own car on the business of your employer, in most cases, your employer’s Business Auto Policy will specifically provides coverage for them if they have purchased Employers Non-owned Auto Coverage. You as an employee would not automatically be considered an insured under the Business Automobile Policy and must rely on your own personal auto policy. In addition, your employer would be covered as an additional insured under your personal auto policy and your policy will be the primary policy for both you and your employer. The insurance policy that specifically names the vehicle is almost always the primary coverage when more than one policy can apply. If you are an employer, you must not rely on this coverage though, because you cannot be sure how much coverage your employee has, or even if the employee has any at all. The moral here is that both parties need their own policies to be properly covered in these situations. The employee can rely on his own policy for his coverage needs, and the business can rely on its policies. This really is as it should be.

When your employer furnishes you as an employee a vehicle for your regular use, you will find that you must rely solely on your employer’s automobile insurance policy, since vehicles furnished for your regular use are excluded by your personal auto policy. This is fine in most instances, however, gaps can occur where injuries can occur and you have no coverage. Take for instance the case of you riding in your company furnished vehicle, along with a co-worker. If you cause an accident, and injure your co-worker, you will most likely have no coverage under your employer’s business auto policy because of what is known as the “Fellow Employee Exclusion” which exists in most standard business automobile policies. Of course your employer may be able to have this exclusion removed from the policy for an additional premium, however, you as an employee will have no way of knowing whether or not this precaution has been taken. The best way to handle the exposure is to endorse your personal automobile policy with a coverage called “Extended Non-Owned Coverage”, thereby giving you excess coverage for furnished vehicles. That is the only way to make sure there is no gap when you are furnished a vehicle.

If you rent a car for business purposes, you can do so in either your own name or in the name of your employer. If you rent a car in your own name for your employer's business purposes, the situation is the same as described above with you using your own car, except for the fact that your personal policy is now considered excess over any other collectible insurance since the vehicle is not owned by you.

When you rent a car in the name of your employer, your employer's Business Auto Policy then comes into play if they have purchased Hired Car Coverage. This coverage applies to autos hired or rented by the named insured; therefore, the employer as named insured has liability coverage for the use of the rented car. You as an employee will also be considered an insured under the employer’s Business Auto Policy in this instance, since you are using a covered auto with the permission of the named insured; i.e. the employer. If you rent a car in the employer's name, your personal auto policy will also provide liability coverage for you; however, it will not provide coverage for your employer. Since a rented or non-owned auto is involved in this situation, both your Personal policy and your employer’s Business Auto Policy are considered excess insurance over any other collectible insurance policies.

The important things to remember here are:

A. If you are an employer, buy Hired and Non-owned automobile coverage instead of relying on coverage from other sources.

B. Have your Business Auto Policy endorsed to cover all vehicles rented by your employees for business use purposes, regardless of whether they rented the car in their own name or in the name of the company. The endorsement to use is CA1054 – Employee Hired Autos, and generally the company will make a nominal charge or no charge at all to add this coverage.

C. If you are an individual, make sure you have your own personal automobile policy.