Autos and Loans: Personal or Commercial Exposure?

Q: An insured owns 100% of a corporation. The corporation doesn’t own any vehicles, but its commercial general liability policy is endorsed to provide non-owned auto coverage. The owner uses his personally owned auto, which is insured by a personal auto policy, for company business.

Does the endorsement cover the corporation for the owner’s use of his personal vehicle? 

Faculty response: Yes, the endorsement covers the corporation for vicarious liability arising out of the owner's use of his personal vehicle for company business. However, it does not cover the vehicle's owner—he is protected by his PAP. The same provisions apply to any employee driving their own vehicle on company business.

All non-owned auto coverage, whether in the business auto policy or by endorsement, excludes coverage for the owner of the vehicle. And remember the order of payment: The vehicle owner's PAP provides primary coverage to both the vehicle owner and the entity vicariously liable for the employee. If the PAP's limits are not sufficient and the corporation is held legally liable for the actions of the driver, the entity's non-owned auto coverage responds as excess over the PAP—but only for the benefit of the named insured, not the vehicle owner.

Q: A commercial insured obtains a loan from a bank to purchase a property. The loan is in the insured’s personal name as well as the name of his corporation.

Should the insured’s personal name be added as an additional insured to the business policy? Does listing his personal name on the loan expose the insured personally to premises or operations liability? 

Response 1: It depends on how the property is titled. Is any property on the premises titled in the name of the individual instead of the business? Who owns what? Who uses what? Any natural or legal person with insurable interest should be listed on the policy. 

Response 2: What matters for the legal exposure is the ownership and operation of the land, building and business. If the individual is listed as an owner and the corporation runs the business, then the individual should be listed as an additional insured. I do not believe that being personally named on the bank loan exposes the individual to liability, but a lawyer should answer that question.

Response 3: All entities listed on the deed should be be named insureds.

Response 4: Why not list all parties that have an insurable interest? Various endorsements are available to address your concerns. Another issue is dilution of limits without the use of excess liability. List each named insured as their interest may appear and discuss any additional concerns with your underwriter or office manager.

These questions were originally submitted by agents through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.