Avoid Coverage Gap when Driving Clients' Vehicles

Do you have employees who drive your client's vehicles? If so, both you and your client may not be properly covered. If your employee drives a vehicle owned or leased by your client, most likely your client will have auto liability insurance on the vehicle (to ensure this, request a Certificate of Insurance from your client). If your employee acts negligently while using the vehicle, your client's auto insurance policy becomes the primary source of indemnification and only covers your client. A problem arises when their auto insurance carrier subrogates (requests payment) against your company. If this happens, your general liability policy will in most cases not cover you. Most commercial general liability policies exclude the ownership, maintenance, use or entrustment of any autos owned, operated, rented or loaned.

There are two ways you can protect yourself against the above scenario:

  • Make sure your Commercial Auto Liability policy lists symbol 1 (Any Auto) under the liability sections of the policy. Maintain "Hired Car and Non-Owned Auto Liability" coverage, symbols 8 and 9.
  • It is important to note that a Commercial Auto policy with the above symbols will only be secondary coverage when your employees drive your client's vehicles. It only covers you, the named insured, and not your client. Again, your client should have primary auto insurance on the vehicle.

Please note, you cannot obtain auto insurance on a vehicle that is not owned or leased to your company. If your client owns or leases a vehicle and requests that you acquire the auto insurance, they would have to either sell or sublease the vehicle to you in order for you to obtain insurance. Larger companies buy hired and non-owned auto physical damage coverage which fills the gap associated with the above claim scenario.