Before you send your employee on a quick errand, make sure you're covered

There probably are times when virtually every employee in every type of employment will run an errand for their employer. Sometimes they will use the company car. More often, they will use their own. Here is some helpful information on the impact those errands can have on the company's insurance.

Company Car
Most businesses with company vehicles cover the use of those vehicles through a business auto policy (BAP). Some BAP policies protect any person considered an "insured" (which employees usually are) or those using with permission. Others will require that the person be specifically listed as a driver under on the BAP for coverage. If your business owns company vehicles and those vehicles are insured under a BAP, review your policy for information on how it will apply if an employee is driving.

Personal Car
Employees running errands for their employer most often do so in their own personal vehicle. Here are some questions and answers business owners should understand concerning this situation.

Q: "If an employee is running an errand for me (employer) and causes an accident, who is liable for resulting damages?"
A: Both the employee and employer can be liable. How much both will pay depends on the severity of the damage.

This relationship is often referred to as "primary and excess." Since the employee is driving his/her own vehicle, the liability insurance on that vehicle is primary, meaning the policy providing personal auto insurance on that vehicle would pay first.

Caution! Unless the employer requests the information (which most do not), there is no telling how much liability insurance the employee carries on his/her vehicle. Most states require a minimum amount of liability insurance on registered vehicles. However, these requirements can be low, resulting in insufficient limits of liability to cover losses.

Further, the employee may have let coverage lapse, resulting in no coverage at all–thus leaving the excess policy to pay for all potential damages.

Q: "If the personal insurance of the employee is not sufficient to cover damages, am I responsible for paying the rest?"
A: If the business is also liable (even partially) for the accident, the answer to this question is yes. Company insurance will pay excess, meaning the limits of the policy kick in once the limits in the primary policy have been reached.

Q: "If my company has a BAP for other vehicles, will this policy qualify as excess?"
A: In the case of an employee running an errand in his/her own vehicle, a typical BAP only will extend coverage if the policy includes coverage for non–owned vehicles. This will extend the BAP to cover the business but not the employee who owns the vehicle.

Review your BAP for information on how it does/does not apply to non–owned vehicles.

Q: "If my company does not have a BAP, how do I obtain coverage for this type of loss?"
A: If your business does not have company vehicles than it is not likely you have a BAP. Further, your business liability insurance does not cover auto accidents. Therefore, you should consider purchasing what's called "non–owned auto liability coverage" separately. Note that many firms are insured by standard business owner's policies, or a BOP; in that case, ask about an endorsement for non–owned auto liability coverage.

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