These two coverages are most commonly provided by a business auto policy, or as endorsements to general liability policies in situations where there’s no business auto policy. Such endorsements should meet contract requirements for commercial auto coverage when the company has no vehicles titled in its name.
Here are two claim scenarios that illustrate the value of this coverage.
Scenario 1: Hired Auto Liability
Nick Smith works as a technical assistant for XYZ Company. At the request of his supervisor, Nick drives a company-rented box truck to a component supplier to pick up parts. While en route, he accidentally strikes a tow truck operator who was assisting a driver of a disabled vehicle on the side of the road.
The injured tow truck operator files a lawsuit against Nick and his employer. XYZ Company is found to be 100% liable for the accident, as Nick had been driving in the scope of his employment. Since XYZ Company carries hired auto liability coverage, its insurance company settles the claim for $700,000. Without hired auto liability coverage in place, XYZ Company would have faced an uninsured loss.
Scenario 2: Employee Non-Owned Auto Liability
Sally Jones works for ABC Company and drives to the bank to make a business deposit. On her way back to the office, she runs a red light and causes a collision with another vehicle. Both vehicles are totaled, and the driver of the other vehicle suffers serious injuries.
The other driver hires an attorney and sues both Sally and her employer. Sally’s insurer pays the policy limits of $50,000. However, the total value of the claim exceeds $500,000. Since Sally had been driving in the scope of her employment, ABC Company is held liable for the remaining damages. Without non-owned liability coverage in place, ABC Company would have to pay these costs out of pocket.
When to Include “Drive Other Car” Coverage
Many organizations provide employees with company-owned vehicles, and in some cases, these employees may not carry their own personal auto policy because they do not own their own vehicle. Nevertheless, these employees often drive other non-company vehicles for personal use. Commercial auto coverage follows the vehicle, not the driver, and many companies are not aware of the potential uninsured exposure.
The problem arises when these employees drive another person’s car or rent a vehicle for personal use such as while on vacation. Personal driving activities in non-company vehicles are not covered under business auto policies unless drive other car (DOC) coverage has been endorsed. DOC endorsements do not provide coverage for the benefit of the business, but rather to benefit key employees who are provided company-owned vehicles for their personal use. These endorsements can provide coverage for not only liability and physical damage, but also for medical payments and uninsured motorists.
Scenario 3: Drive Other Car Coverage
John Doe owns a construction company and drives cars titled to the company and insured on its business auto policy. John doesn’t carry a personal auto policy because he doesn’t own personal vehicles and believes the coverage provided by the business auto policy offers sufficient protection.
John is staying with friends on vacation and borrows one of the friend’s cars to drive to the beach. On the way to the beach, John rear-ends another car stopped at an intersection, injuring its passengers and damaging both vehicles. He is ultimately sued by the occupants of the other car.
The business auto policy carried by John’s company does not include a DOC endorsement that names John as an insured, and so coverage is denied when he files the claim, leaving him to pay over $600,000 in damages out of pocket. If the business auto policy had included a DOC endorsement naming John as an insured, coverage would have been provided on this claim.