Sometimes, businesses that own fleets of vehicles have to use cars that don’t belong to them, such as when an employee has to use their own car to run an errand or visit a customer or vendor.

There is a chance the organization may become legally liable for anything an employee does behind the wheel while acting on its behalf. Lawsuits and accompanying legal costs may confront the business if they have an accident. Many business automobile insurance policies cover this situation, but most do not do so automatically.

The standard Insurance Services Office Business Auto Policy uses numbered symbols to identify covered automobiles for each coverage the business has purchased. The policy provides liability coverage for non-owned autos only if symbols 1 or 9 are shown on the information page. Symbol 1 means “any auto,” and Symbol 9 means “non-owned auto.”

The policy defines non-owned autos as vehicles the insured business does not own, lease, hire, rent or borrow and that are used in the business. The term includes autos owned by the business’s employees, partners if the business is a partnership, members if it is a limited liability company, or members of their households.

Coverage only applies if the vehicle is used in the business or in the policyholder’s personal affairs.

For example, a printing company needs an emergency replacement part that broke on one of its presses. One of the workers drives his personal vehicle to a parts warehouse 30 miles away. On his way back with the part, he gets in an accident.

If the print shop’s auto insurance policy’s information page has either Symbol 1 or 9 for liability coverage, it will cover this accident, pay for the shop’s legal defense costs, and any resulting damages the shop is liable for, up to the amount of insurance purchased. If the policy has another symbol, it will not cover an accident resulting from the use of the worker’s car.

Many types of business allow employees or partners to use their own vehicles for work purposes, such as:

  • Restaurants that deliver.
  • Businesses that do not provide company cars for salespersons.
  • Architects, attorneys, engineers, and other professionals who make site visits.
  • Any organization that sends employees to offsite meetings, errands, or professional conferences.
  • Contractors who borrow trucks on job sites or who send employees to get tools.
  • Any organization that sends employees to the bank or post office.

It is possible that the employee’s personal auto insurance policy may provide some coverage for you in case of an accident. But you should not assume that it is guaranteed.

Additionally, many individuals purchase the minimum amounts of insurance required by state law, so any coverage you share with the employee may be used up quickly, leaving you liable for the rest.

The takeaway: Almost every company has a situation where it asks someone to use a personal vehicle for business. If you are concerned that you may not be covered if an employee has an accident in their own car while on the clock, make sure the proper coverage is in place. An uninsured loss can be financially devastating, but is easily avoidable.

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