Drivers of Company Cars Might Have a Serious Gap in Personal Liability Coverage

Category: Personal Insurance

Do you drive a company car furnished by your employer? Do you drive that car for personal use, as well as business use? Are you aware of the coverage limits of your employer’s commercial auto policy? Are you aware of the coverage limits of your personal auto policy?

Typically, business auto policies do not extend coverage to employees and their family members if the company car is operated outside of the scope of the employer’s permission, or if the employee rents or borrows a vehicle on a personal basis which is not owned, rented or borrowed by the business (e.g., a rental car while on vacation).

Coverage for an employee under a business auto policy is subject to various policy limits that the employee needs to be aware of. For example, your employer may not give permission (or coverage) for family members to drive the company car, even if they permit personal use. Or, they may not extend permission for you to use the vehicle on vacation or other specified personal activities. And even if unrestricted personal use is allowed by the employer, the business auto policy probably only covers the employee when he or she is driving a vehicle owned, rented or borrowed by the employer. This means that you have a coverage gap when driving rented or borrowed vehicles on a personal basis.

On the flip side, most personal auto policies exclude coverage when you use a vehicle that is furnished or available for your regular use, such as a company car. So, when you are driving the employer-owned vehicle there is no coverage under your personal auto policy. The same is true when your spouse or another family member uses the company vehicle.

This situation is very common but there is a solution. You need to add the extended non-owned coverage for named individuals endorsement to your personal auto policy. Each driver in your family should be named in the endorsement if there is any chance that they will drive the company vehicle. This endorsement fixes the gap in coverage when an employer provides an employee with an auto for regular use. But it is only additional liability coverage; it does not expand the physical damage coverage (which would be provided by the employer’s commercial auto policy).

You can also purchase a named non-owned auto policy, rather than the endorsement, to fill the coverage gap. It accomplishes the same thing as the endorsement with more comprehensive coverage.

If you have a company vehicle that you drive all the time, and you do not own another vehicle and therefore you don’t have a personal auto policy, you might also face the same coverage gap. What if you borrow someone else’s vehicle or rent a car when you go on vacation? Your personal auto policy would normally provide liability coverage under these situations, but if you have no personal auto policy, then you have no coverage when you are driving a car other than the company furnished vehicle. In these cases, your employer can add a drive other car endorsement to the commercial auto policy, effectively extending coverage for you when you drive a vehicle other than the company car. Or, you can buy a named non-owned auto policy for yourself, which provides you with liability coverage when you are driving a vehicle other than the one provided by your employer.

The extended non-owned coverage endorsement and the named non-owned auto policy are also useful if you feel that your employer’s commercial auto liability limits are insufficient and you desire additional liability coverage.

Do you have a company car that you drive for both business and personal use? Do you know precisely what you are covered for and what you are not? Does your spouse or another member of your family ever drive your company car? These factors and more need to be considered when you have a company vehicle to ensure that you do not have any gaps in your liability coverage when you drive another vehicle, or when you drive a company vehicle for personal use. We can help you assess your situation and add any additional endorsements or policies to ensure that you do not go without appropriate protection.

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