Coverage for Car Sharing?
Car sharing has gained traction over the past couple of years. It usually comes in two varieties. The first business model usually involves a company (such as Zipcar) that owns the autos, rents them to members and includes some insurance. The second approach involves a company (such as RentMyCar) that facilitates one individual renting his or her vehicle to another person.
In regard to the second model, the first question might be, who in their right mind would allow a stranger to use their car? The second issue, from the Big “I” Virtual University faculty perspective, is determining how this exposure is insured. For example, does the ISO Personal Auto Policy (PAP) extend coverage to the renter and vehicle, not to mention the vehicle owner? The answers can be quite complex.
The PAP includes exclusions when vehicles are used as “public or livery conveyances” or to “transport persons or property for a fee.” An “auto business” exclusion exists, as well as an “Other Insurance” provision, which can get sticky when all parties have some sort of insurance. Keep in mind, too, that coverage and exclusions among auto policies vary widely beyond the ISO-standard form.
Underwriting is also a concern. What insurer wants to assume this risk in their personal auto program? If you haven’t already, expect to see your insurers introducing “car sharing” exclusions in the near future.
For a complete analysis of the coverage issues, visit the Virtual University.
Dealer Auto Dilemmas
Your insured’s auto is being serviced by the dealer, and he receives a loaner car that he proceeds to negligently wreck. The total loss is $37,000, which is paid by the dealer’s garage policy insurer, less the deductible. The garage insurer turns to the customer for reimbursement and the customer turns the claim in to his PAP insurer. The customer’s insurer points out that coverage on nonowned autos is excess only, and will only reimburse the garage policy deductible.
The garage insurer isn’t happy with this offer, so they file suit against the customer for more than $30,000. The customer again refers this to his auto insurer, who then denies it as a liability claim, citing the care, custody or control exclusion in the policy. Where is the coverage?
The answer, upon a literal reading of the ISO PAP, is that the customer’s insurer is correct. Physical damage coverage is provided on nonowned autos on an excess, not primary, basis. Keep in mind, though, that about half the states have exceptions to this generalization in the form of state-specific endorsements that address specific varieties of nonowned autos, such as dealer autos and rental cars.
The Big “I” national Technical Affairs Committee is addressing this issue with ISO, and the group has a recommendation for a change in commercial auto forms that could solve this problem.
For more information about the related coverage issues and a similar claim involving test driving a dealer auto, visit the Virtual University.
More Auto Issues
If an employee rents a car on a business trip, is this a Symbol 8 (hired) or Symbol 9 (nonowned) exposure? To avoid having to answer this question and potentially creating a coverage gap, the simple solution is an endorsement introduced by ISO a few years ago at the request of the Big “I” Technical Affairs Committee: the CA 20 54 – Employee Hired Auto.
While this endorsement solves the 8 vs. 9 dilemma, it is not without a couple of problems. For example, coverage extends only to rentals in that specific employee’s name. What if two employees are on business and one rents the auto but the other drives it? Also, coverage extends only to an employee “while operating” the auto. What if the vehicle is involved in an accident when parked or while being operated by a valet?
For a full discussion of the CA 20 54, visit the Virtual University.
Bill Wilson is director of the Big “I” Virtual University, an online learning center for agents and brokers. Follow the Virtual University on Twitter.
