As a general rule personal auto exposures should not be insured under commercial auto policies. Unlike personal policies, commercial auto policies do not cover family members of insured individuals. However, there are a few situations in which personal auto risks should be insured under a commercial policy. This article will explain one of them.

Example

Beth is an employee of Supreme Software, a company that develops custom-made software for individual clients.

Beth works as a trouble-shooter, traveling to customers' locations and solving software problems. She spends a considerable amount of time driving, so Supreme Software has provided her a vehicle. Beth keeps the car at her home and uses it as her primary vehicle for both business and personal use. Beth does not own a vehicle herself.

It's a Saturday afternoon and Beth needs to do some shopping. Her company vehicle is in the shop for repairs so Beth borrows a car from her next-door neighbor, Jim. She is driving home from her shopping trip on a local street when the driver in front of her suddenly slams on his brakes. A child chasing a ball has run into the street and the driver (Fred) has stopped abruptly to avoid hitting her. Beth is traveling too fast to stop quickly and she rear-ends Fred's car. The child is not hurt but Fred is injured. Both cars have sustained moderate damage.

Later that day Beth discovers that Jim has no personal auto liability or physical damage insurance. He had a policy six months ago.

However, Jim failed to pay the premium so his insurer cancelled his coverage. Beth promises that she will pay for the damage to his car out of her pocket.

Two months after the accident Fred sues Beth for bodily injury and property damage. Beth reports the lawsuit to her supervisor at Supreme Software. She is dismayed to learn that the suit is not covered under Supreme Software's commercial auto policy. The policy declarations show symbol 1 (any auto) for liability coverage. However, employees (such as Beth) are insureds under the policy only while driving autos owned, hired or borrowed by the named insured (Supreme Software). Employees are not insureds while driving vehicles their employer does not own. Because the car Beth was driving when the accident occurred was a non-owned auto, the policy does not cover the lawsuit against her. Beth has no available insurance to cover Fred's lawsuit.

Driver Other Car Coverage

Beth would have been covered for the accident under her employer's commercial auto policy had the policy included Drive Other Car Coverage (DOC). This coverage may be added to a commercial auto policy via an endorsement. It is designed for an employee, executive officer, partner or other individual, other than the named insured, who:

1. has been furnished an auto by his or her employer; and
2. has no personal auto coverage

Liability Coverage

This endorsement broadens liability coverage in the policy so that it applies to the person named in the endorsement while driving a non-owned auto. A non-owned auto is an auto that is not owned, hired or borrowed by the named insured employer.

Drive Other Car coverage extends liability coverage not only to the individual listed in the endorsement, but to his or her spouse as well. The spouse is covered as long as he or she and the employee live in the same household. The endorsement does not extend liability coverage to any other family members of that listed employee.

Liability Exclusions

Neither the individual listed in the endorsement nor his or her spouse is covered while driving any of the following:

1. Any auto owned by that individual or by any member of his or her household.
2. Any auto used by that individual or his or her spouse while working in a business of selling, servicing, repairing or parking autos.

The first exclusion would apply if say, Beth was driving a vehicle owned by her husband when the accident occurred. If Beth or her spouse owned a vehicle, they would presumably be covered under a personal auto policy. The second exclusion would apply if, for instance, the accident occurred while Beth or her spouse was driving a vehicle owned by a customer of an auto repair business.

Auto Medical Payments and Uninsured/Underinsured Motorist Coverages

If the commercial auto policy includes auto medical payments or uninsured motorist and/or underinsured motorist coverages, the DOC endorsement extends these coverages to the individual named in the endorsement and his or her family members (not just the spouse). These individuals are "insureds" while occupying a non-owned auto or if they are struck by a non-owned auto while a
a pedestrian. For coverage to apply, the non-owned auto cannot be owned by the listed individual or by any of his or her family members.

Family member means anyone related to the individual listed in the endorsement by blood, marriage
or adoption, if that person is a resident of the same household. A resident ward or foster child qualifies as a family member.

For example, suppose that Supreme Software's commercial auto policy includes the DOC endorsement, which lists Beth as an insured. The policy covers uninsured motorist coverage on all vehicles for which UM is required by law. Beth borrows Jim's car to run an errand with her 10-year-old daughter. Beth is driving home when the car she is driving is struck by a hit-and-run driver. If Beth or her daughter is injured, each will be covered under uninsured motorist coverage, subject to the "per person" and "each accident" limits.

Physical Damage Coverage

If the commercial auto policy includes physical damage coverage, that coverage is extended to any private passenger type auto that you (the named insured employer) don't own, hire or borrow. Coverage applies while the non-owned auto is in the care, custody or control of the individual named in the endorsement or his or her resident spouse (but not other family members). However, the following autos are excluded:

1. Any auto owned by that individual or by any member of his or her household.
2. Any auto used by that individual or his or her spouse while working in a business of selling, servicing, repairing or parking autos.

For example, suppose that the DOC endorsement has been added to Supreme Software's commercial auto policy. The endorsement lists Beth as an insured. Beth borrows Jim's car and rear-ends Fred's car as outlined in the initial scenario. If Supreme Software's auto policy includes Collision coverage, the damage to Jim's car should be covered as a collision loss.