Insurance Services Office (ISO) lists more than 100 endorsements available for use with the business auto policy (BAP) (the total number varies by state). Out of that heap of policy-altering endorsements, most designed to meet the needs of a specific class of insured or specific state's laws, is at least four that every insured should consider.

Regardless of the industry or state of operation, the following four endorsements alter the availability of coverage for exposures common to most insureds: 1) Employees as Insureds (CA 99 33); 2) Fellow Employee Coverage (CA 20 55); 3) Auto Loan/Lease Gap Coverage (CA 20 71); and 4) Rental Reimbursement (CA 99 23). Each is discussed in the following paragraphs.

Employees as Insureds

Coverage granted to the named insured (the policy's "you") in the BAP is initially based on the definition of "covered auto" as granted by the applicable covered auto symbols. Each symbol grants the insured protection against the financial liability associated with the ownership, maintenance or use of a specific class of vehicle - owned, non-owned or hired (See "Does 2 + 8 + 9 = 1? Use of Covered Auto Symbols in the BAP").

When symbols "1," "8" or "9" are used, the named insured is financially protected for its vicarious liability arising out of the use of a hired or non-owned auto. This includes protection for the named insured's vicarious liability that can arise from an employee's use of their personal vehicle on the behalf of and for the benefit of the named insured.

Assume, for example, the office manager uses his personal car to make daily trips to the post office, bank and other trips for the insured; the named insured is benefiting from the activities of the office manager and is thus exposed to vicarious liability for the negligent actions of the office manager. Should the office manager be involved in a serious crash on the way to the bank, the named insured could be held vicariously liable for any injury or damage suffered by a third party.

If the appropriate covered auto symbol is used, the named insured's BAP responds, on an excess basis, to protect it for any vicarious liability that may arise from the accident. However, the unaltered BAP will not extend to protect the employee for his liability when using his personal auto for the benefit of the named insured.

In fact, the employee's personal auto policy responds first to protect the employee AND the company for which he works. The named insured's BAP, by application of the "Other Insurance" provision, actually applies as excess over the at-fault employee's personal auto policy; but again, only for the benefit of the named insured, not the employee.

To add further insult, the named insured's BAP carrier may even be able to subrogate against the employee to recover any money it pays out on behalf of the named insured because of the employee's negligence. Since the unaltered BAP specifically excludes the employee from "insured" status while driving his own vehicle, even on company business, the ability to subrogate is retained. Whether the insurer will or can carry through on this opportunity is based on the totality of the surrounding circumstances.

The Employees as Insureds (CA 99 33) endorsement closes these gaps and seeming inequities by altering the definition of "Who is an Insured" to include an employee while using an auto the "you" (the named insured) does not own, hire or borrow while it is being used on the named insured's behalf. This extends insured status to the employee while using his personal vehicle on company (the named insured's) business.

But even with the Employees as Insureds endorsement, the employee's personal auto policy (PAP) remains the primary protection. However, if the total of bodily injury and property damage exceeds the employee's PAP limits, the BAP with the CA 99 33 attached will respond as excess on behalf of BOTH the named insured and the employee. Plus, as an insured, the BAP insurer cannot subrogate against the employee (unless a policy provision is violated, such as intentionally hitting the other person(s)).

Fellow Employee Coverage

Exclusion "5." in the business auto policy reads: "Fellow Employee: Bodily injury to any fellow employee of the insured arising out of and in the course of the fellow employee's employment or while performing duties related to the conduct of your business." In essence, if one employee through the use of a vehicle injures a fellow employee on the job, there is no coverage extended from the BAP to protect the "at-fault" employee.

Combining exclusion "5." with exclusions "3." (Workers' Compensation") and "4." ( Employee Indemnification and Employer's Liability") effectively removes any protection available under the BAP for an auto-related injury an employee might suffer in the course of employment (depending on who is classified as an "employee" based on entity type and law). Work-related injuries are to be covered elsewhere. The employer (named insured) has the opportunity to purchase workers' compensation to protect it from these exclusions, but an employee has NO such commercial insurance option, only a personal option they may not recognize is needed.

Employees who unintentionally cause an auto-related injury to a fellow employee may be left with no insurance protection should the fellow employee file suit. Three examples of possible fellow-employee gaps include:

1. The employee driving a company-owned vehicle is negligent in his operation of the vehicle and is involved in an accident causing bodily injury to a co-employee riding with him (depending on the provisions of the "business use" exclusions and the meaning of "furnished for regular use" exclusion in the relevant PAP);
2. The at-fault employee injures a fellow employee while using a company-owned vehicle assigned to the at-fault employee (a company car). The at-fault employee does not have the proper endorsement on his PAP (extended non-owned auto) and is sued by the injured employee; or
3. During a business trip, the at-fault employee rents a car in the name of his employer to travel to various appointments. He and a fellow-employee are injured in an at-fault accident and the fellow employee sues the driver.

Yes, these are all work-related injuries and the injured fellow employee will be eligible for workers' compensation benefits (provided no policy provisions have been violated). However, this does not preclude the injured employee from suing the at-fault fellow employee. Workers' compensation's benefit as a sole remedy applies only to the employer, not the fellow employee; some states allow the injured party to also pursue and recover from any fellow employees causing the injury. Such allowance is based on the injury, the benefits received and the facts of the case.

Lacking the correct endorsements on the personal auto policy, the at-fault employee may end up having to pay out-of-pocket for such injuries to a fellow employee.

The Fellow Employee Coverage (CA 20 55) removes the fellow employee exclusion from the BAP allowing the policy to respond on behalf of the at-fault employee following a vehicle-related injury to a fellow employee caused by a covered vehicle. When employers make company-owned vehicles available for employee use or allow employees to rent vehicles to benefit the company, this endorsement should be attached.

Auto Loan/Lease Gap

As the name suggests, this endorsement alters the amount paid under the physical damage section of the BAP to include the difference between the actual cash value of the vehicle and the amount remaining on the loan or the amount remaining on the lease. Basically it helps insureds who are "upside down" on their loan or lease at the time of the loss.

Obviously, the Auto Loan/Lease Gap Coverage (CA 20 71) is a first-party coverage intended for the benefit of the insured. The coverage allows the insured to satisfy its contract with either the loss payee (leinholder) or lessor.

This endorsement pays the difference between the amount paid by the physical damage coverage and the amount owed and only when there is a total loss. Payment is limited to the value associated with the specific vehicle. Expenses such as overdue payments, high-mileage and usage penalties, security deposits, add-on costs (i.e. credit life, etc.) and balances from prior loans or leases carried over to the current financing agreement are excluded from coverage.

Vehicle values drop so quickly and the difference between the ACV and the amount owed can be substantial. Consider this endorsement for all insureds with leased or recently-purchased vehicles.

Rental Reimbursement

Insureds do not necessarily need a specific vehicle - they need the use of that or a similar vehicle. The vehicle itself is covered under the physical damage section of the BAP (under other-than-collision or collision); but the loss of use of that vehicle following a first-party comprehensive or collision loss is not covered by the unendorsed business auto policy.

When the insured suffers a first-party loss of a covered vehicle, they also lose the use of that vehicle while it is being repaired; a replacement must be procured. Rental Reimbursement Coverage (CA 99 23) provides some of the necessary reimbursement to rent a replacement vehicle.

Rental Reimbursement Coverage is designed, as the name suggests, to reimburse the insured for the cost to rent a replacement vehicle while a covered vehicle is being repaired following a covered loss. The policy is subject to three "maximums": a maximum per day limit; a maximum number of days; and a maximum total per loss, per vehicle. Further, the policy contains a 24 hour "after the loss" time deductible.

Coverage limits should be based on the type of vehicles being replaced. Private passenger autos may easily be attainable for $30 per day - depending on the size of vehicle rented. Renting a replacement dump truck or other large work vehicle may run as high as $500 or $600 per day. Know the rental market in the insured's area when selecting limits as the policy limits payment to the lesser of the actual rental cost or the limit purchased.

One last important provision of which the agent needs to be aware; there is no coverage extended from this form if the insured has a spare or reserve auto available for use. The policy pays only when the insured needs a replacement vehicle, not just because the covered vehicle is not available for use due to a covered cause of loss.

Insureds rarely have spare vehicles just sitting around waiting to be used. Generally the vehicle serves a purpose and the loss of use of that vehicle can result in financial harm beyond the cost of rent (loss of sales opportunities, the inability to fulfill a contract, etc.); Rental Reimbursement Coverage finances part of the cost to regain the use of a missing vehicle by replacing it with another for a short period.

Following

The next post focuses on endorsements to the commercial general liability policy. However, the following article takes a slightly different slant than this and the prior article on commercial property.