Q: “We insure a business that owns a vehicle that can’t pass a vehicle inspection test in the county where the business is located. The business transferred the title to one of the corporate officers, who lives in a neighboring county that does not require vehicle testing. Then, the client asked us if they needed to do anything about their auto insurance.
We have suggested the business lease the auto back from the officer for $1 a year and insure it on the business auto policy. Could problems arise for the client from insuring a vehicle owned personally by a corporate officer on a business auto policy issued in the name of the corporation?”
A: “Short answer: Yes. Long answer: Check out the Big “I” Virtual University (VU) article ‘Insuring Personally Owned Autos on a Corporation's BAP.’
To approximate coverage under the ISO PAP, the business will need at least two and up to six endorsements—and even then, it will still have problems. Question: Why didn’t the customer just fix the auto that couldn’t pass the test?
These kinds of predicaments are not unusual. Need tips on how to deal with these situations? Check out the VU article ‘Business Auto Coverage Games’ for a few more examples of harebrained schemes insureds get tangled in, often in an attempt to save a few dollars in premium:
Agents cannot address these real-life coverage scenarios with traditional insurance training and education. Instead, they must read and understand the products they sell, and develop the skills necessary to examine these situations and determine how to risk-manage them.”
Bill Wilson is director of the Big “I” Virtual University.
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
