Common Coverage Misconceptions, Part II Dateline: 01/19/99 As promised last time in Part I, this week we'll look at a VERY common auto coverage misconception. Misconception: As long as I have an auto policy, I am covered driving ANY vehicles. Reality: Wrong. There are many situations when you may NOT have liability coverage while operating certain vehicles. The standard ISO auto policy, which is used by the majority of insurance companies, contains some exclusions that you had better know about. One exclusion reads: We do not provide liability coverage for the ownership, maintenance or use of..... 1. Any vehicle which: a. Has fewer than 4 wheels b. Is designed mainly for use off public roads. 2. Any vehicle, other than your covered auto, which is a. Owned by you, or b. Furnished or available for your regular use. Your covered auto is defined as : 1. Any vehicle shown in the declarations. 2. ...( a lengthy description of newly acquired vehicles) So when might you NOT have coverage? 1. Do you own a motorcycle or 3-wheeler? 2. How about your company car? 3. How about the vehicle of your significant other that resides with you? 4. Or the old vehicle you've owned for years and haven't insured, but finally got it running again? Number 1 can be taken care of with a separate motorcycle or RV policy, but how do you cover the other situations? Fortunately, the answer is relatively easy. ISO provides an endorsement called "Extended Non-Owned Auto". This relatively cheap endorsement will take care of this situation created in number 2 and 3 above by extending liability coverage to non-owned autos that are furnished or available for your regular use. Number 4 above is the only one of the above situations that absolutely requires the action of the insured: you must call and add the vehicle to your policy BEFORE you put it back on the road. A warning: many people who operate company cars assume that their employer covers the vehicle. Their employer most likely DOES have liability coverage on the vehicle FOR THE EMPLOYER. The employee may or may not be included in the definition of an insured on the employer's auto policy. In the event of an accident, most likely the employee AND the employer will be sued. The employer has coverage for its part of the lawsuit, but does the employee? Add the extended non-owned auto endorsement for every client that drives a company vehicle, and you won't have to worry about it. One more warning. I heard of this sad tale at a CIC institute. A prominent doctor's daughter went off to college. She did not own a vehicle, and was insured under her father's auto policy. This daughter lived in a dorm with several other girls, and did not have a vehicle on campus. One of her roommates DID have a vehicle on campus, and the keys to this vehicle were left hanging on a hook so that any of the roommates could use the vehicle when needed. The doctor's daughter took the keys to the "communal vehicle" and went out to run some errands or some such. On the way she was involved in a very serious accident that did grave bodily injury to the other party. The doctor's auto carrier denied the claim because even though the daughter was an "insured" under his policy, she was operating a vehicle "furnished or available for her regular use." Since the daughter was not a minor, the doctor avoided being drawn into the ensuing lawsuit, however the daughter will probably spend the rest of her life paying off the judgement that was won against her. I also believe that the doctor's insurance agent's E&O carrier was eventually drawn into the situation, and although I don't recall the outcome, I'll bet you could take a guess. The moral of this story? If you have children in college, or if you have clients who have children in college, or if you have ANY situation where two unrelated persons are residing together, add the extended non-owned auto endorsement. The above fiasco could have been avoided with an endorsement that probably would not have cost more than $75.00 year. Do you have any questions about this article, or would like to share some of your favorite misconceptions? Stop on by the Bulletin Board, available at http://insurance.about.com/mpboards.htm. We'd love to hear them. Until next time,
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