Company cars and personal liability

I drive a company car. How am I covered by insurance?

Many businesses offer company cars to salespeople, key employees and management. Not only are these cars used during normal business hours, but they are often taken home and accessible outside of work.
Corporate fleets – including company cars – are oftentimes insured on what is known as a Business Auto Policy. The Business Auto Policy is a commercial insurance policy built to protect businesses from common over-the-road exposures associated with doing business.

When company cars are accessible outside of business-related purposes, the risks are different. For example, business owners may not want their vehicles driven out of town on vacation or taken to taverns after hours. A business may be comfortable assigning a company car to a driver who meets certain safety requirements, but may not want to see that employee’s teenage children behind the wheel.

In order to be protected from the above exposures – and others – businesses institute corporate policies that prohibit or restrict personal use of company-owned vehicles. These policies can address the concept of permission from a variety of angles, including who has permission to drive the car and/or when it may be used.

What many may not realize is how the standard Business Auto Policy coordinates with these corporate policies. If the company does not give permission for the vehicles to be used, then the driver is no longer insured (although the business itself would still be covered).

At this point in the discussion, many inquire about coverage available from their personal auto insurance. Unfortunately, the standard Personal Auto Policy has limitations in coverage, as a standard Personal Auto Policy will not provide coverage for a company car that is regularly accessible.

Personal Insurance Solutions
Many people who drive company cars still desire coverage on a personal insurance policy for a variety of reasons.

To help address these concerns, the “Extended Non-Owned Coverage” endorsement can be added to most standard Personal Auto Policies. This endorsement is widely available, often for a few dollars a month. If Extended Non-Owned coverage cannot be added to an existing Personal Auto Policy – or for those who do not own a Personal Auto Policy – consider purchasing a standalone “Named Non Owner” policy as an option for liability coverage.

A personal umbrella may be able to provide additional coverage above and beyond the Extended Non-Owned endorsement or the Named Non Owner policy.

When you purchase of one of these insurance options, be sure to understand all of the coverage terms and conditions. For example, you may need to list all drivers in your household. Also, these options may not provide physical damage coverage for the company car – meaning that if you crash it, you will still need to pay for repairs out-of-pocket.

The Upshot
Businesses should consult with their attorney and risk manager to address personal auto use in corporate policies, and be aware of how these policies interact with their insurance coverage. Be sure to communicate with employees who have been assigned company cars so that they understand what their exposures and responsibilities are.

Those individuals who have been granted company cars need to be aware of corporate policies that address personal use, and should discuss the situation with their personal auto insurance agent to make sure that they are comfortable with their insurance protection.

This article was also published in the Elburn Chamber of Commerce October 2014 newsletter.