The REAL Dangers of Using Your Personal Auto in Business

In the course of our week we review many coverage contracts that business owners rely on to defend their assets against outside raiding parties. Picture a fortress with strong contract walls to protect your assets from some onetime event that could plunder those assets that just took you a lifetime to build. If you have a business the coverage walls that protect your assets are typically General Liability, Workers Compensation and Commercial Auto policies. If that last wall is a Personal Auto policy instead of a Commercial Auto policy then that wall is kind of flimsy and has gaps that can crush your financial plans. The problem lies in the fact that a Personal Auto policy was never designed to cover business activities:

• There are actual exclusions in Personal Auto policies for business exposures like delivering products or carrying around people (look out pizza delivery guys and Uber drivers).

• Commercial Auto policies don’t have these exclusions and cover personal usage of the vehicle as well.

There are many business auto endorsements that come with Commercial Auto policies that you can’t even add on any Personal Auto policy. Most often there is only one business auto endorsement you can add to a General Liability policy called “Non Owned Auto Liability” which is not available on a Personal Auto Policy either. Say your employee Joe is nice enough to use his own vehicle for you to go do some business task. What if Joe has an accident while doing your business mission for you? What happens next is Joe will be sued and you will be sued since you sent him there. If the claim settles for $500,000 and Joe only has $250,000 for Bodily Injury on his Personal Auto policy, if you have Non Owned Auto Liability on your policy it will pay the remaining $250,000 and save the day for you. While your day might be saved it might not be the end of the story for Joe. When carriers pay out large sums they always look around to see if they can get their money back from some negligent party through a process known as subrogation. Your own carrier could end up bringing suit against your employee Joe to repay the $250,000 they just spent for Joe’s accident and as the business owner you won’t be able to stop this process. Of course this is a nightmare for any business owner to have his own insurance company suing his employee but if you had a Commercial Auto policy the carrier would be cut off from subrogating against Joe.

• This is because most Commercial Auto policies come with an endorsement called “Employees As Insureds”. This endorsement cuts off the possibility subrogation against an employee. This can’t added to a Personal Auto policy.

This is just one of the many auto type endorsements that usually come standard with a Commercial Auto policy. Some other benefits include:

• The liability limits are much higher than Personal Auto policy normally.
• The policy is paid through the business and the premium is now another write off for the business.
• Most importantly, now almost anything the business does with that vehicle for either business or personal usage will now be covered and have strong liability limits to throw at the claim.

If you a vehicle in business at all, get a quote on a Commercial Auto policy, it could play a big role in your life someday!