After her employers instruct her to look into buying a company car, an agent's client picks up a vehicle from a friend in the auto business and drives it to her office for her employers to test drive. What happens when the employer causes an accident?
An agent’s client, Macy, is employed with an accounting firm as the business manager. When the firm asks her to look into purchasing a company car, she contacts a good friend in the auto business, who drives the prospective vehicle to his house.
Macy picks up the car from her friend’s house in the morning and drives it to her office so the owners of the business can take it for a spin. While test driving the vehicle, Jeff, one of business owners, runs a stop sign and hits another party. No injuries—just a lot of car damages.
Q: "Jeff submitted the information to his personal auto insurer, which is denying the claim based on the reasoning that Macy was responsible for the auto and must therefore submit the claim to her own personal insurance carrier. The accounting firm does not currently have business auto coverage under their business policy because it doesn’t have any other company-owned vehicles. According to the dealership, when a car leaves the lot, the person driving the car is responsible for it. The dealership carries a large deductible and therefore doesn’t feel it should turn in a claim.
Who is responsible for the damages to both the car in question and the other parties? Macy was doing her job as requested to look for a vehicle for the company and was not driving the vehicle at the time of the accident. Furthermore, Macy was not interested in the vehicle for herself—when the dealership released the car, was it on behalf of Macy or her employer? At the time of the accident, the owner of the vehicle was the dealership.”
A: “This situation reveals several learning points:
- EVERY business needs hired/non-owned auto coverage.
- Personal auto insurers: caveat emptor. Don’t believe everything you see in auto insurance advertising. Not all auto policies are created equal. Same goes for the knowledge levels of insurer staffs, as well as their claims practices.
- Insurers need to address coverage from the standpoint of what their insurance contracts cover or not cover, not some vague ramblings about personal liability.
- The dealer’s policy is probably primary, but either the dealership or its insurer will likely subrogate or sue. Their insurance will ultimately get involved, hopefully not like the scenario outlined in the Big ‘I’ Virtual University article ‘Driving a Dealer Loaner Auto…No PAP Coverage?’
Note that about half the states have laws that modify the ‘other insurance’ provision(s), usually liability and sometimes physical damage. For example, in my state, if I’m driving a dealer auto, my PAP is primary for liability coverage; if they’re driving my car, their liability coverage is primary.
If the PAP in question is anything like ISO’s PAP, Jeff should have coverage. To claim that Macy is liable and he is not, given that he’s the one who ran the stop sign and caused the accident, is ridiculous.
For damage to the dealer car, Macy potentially has a problem if she has any liability and has an ISO PAP because of this condition for physical damage coverage on a non-owned auto:
‘“Non-owned auto" means…Any private passenger auto, pickup, van or "trailer" not owned by or furnished or available for the regular use of you or any "family member" while in the custody of or being operated by you or any "family member"’ [emphasis mine].
If this auto was not still in Macy’s ‘custody,’ she might not have any coverage for the damage to the auto. This is why it‘s usually not a good idea to valet park a rental car at a hotel or restaurant.”
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.
