When it comes to making decisions about your business, commercial auto insurance is pretty routine, right?
That's why many contractors seem to purchase commercial auto insurance using the same logic and buying habits they use to insure the family station wagon. But that can sometimes result in inappropriate coverage and higher insurance costs.
Typically, when you purchase insurance for the cars and trucks used to conduct your business, all of the following reasons are considered:
- Asset protection -Both to protect the value of the vehicle and to protect yourself from financial consequences if you are found liable for injury or damage to others resulting from the use of your vehicle
- Meeting financial responsibility requirements -To provide a means of compliance with state and federal laws
- Requirements for umbrella coverage -To purchase an umbrella policy for catastrophic loss protection, an auto policy and general liability policy with minimum limits, usually $1 million, are required
For contractors, it pays to consider some of the less obvious aspects associated with an auto insurance program. Here are some tips that you and your agent may find helpful to fine-tune coverage and control the auto insurance risks often associated with construction businesses.
Additional Insureds
Most construction contracts used today require the project owner or general contractor to be named as an additional insured on a subcontractor's policies. Do your policies require this? There are endorsements available to do this for general liability, but did you know the standard auto policy already includes this provision? A special endorsement is not generally required. However, some owners or general contractors insist on a special endorsement. This can be done, but since it's already included in the basic policy, there should be no additional charge. You may also need an endorsement to add an auto leasing company as an additional insured.
Speaking of insureds, individuals should not typically be listed as an insured on a business auto policy. The party/parties to whom the vehicles are titled should be shown as an insured. This is usually the name of your business. Typically, in the standard form used in the industry, you, your officers and your employees will be covered by the policy because of the way "insured" is defined in the policy.
Coverage Forms
Is your general liability insurance and commercial auto insurance with the same company? If not, there are potential gray areas that can result when interpreting policy definitions or other contract language in the event of a claim. For example, it's not always clear whether a loss resulting from the loading and unloading of a vehicle should be covered by a general liability or auto policy. In another instance, two versions of the same insurance form have differences in the definitions of mobile equipment versus an automobile that may raise questions at the time of a loss. You can avoid the potential gray areas by having your general liability and auto insurance with one company so when there is a claim, there is no doubt about who should handle it. This should also minimize inadvertent coverage gaps and uncovered claims.
In 2004, revisions to industry standard general and auto liability forms were offered. Not all insurance companies adopted them and today you'll find that both 2001 and 2004 forms are used. In addition, although most insurance companies use comparable coverage forms, each will modify coverage to suit underwriting requirements. It would be difficult to find a "one-size-fits-all" approach between companies and avoid interpretation problems, even if special endorsements were devised in an attempt to synchronize coverages. Always consult with your agent on the coverage afforded under any specific policy or contract in order to avoid coverage gaps or duplication.
Financial Responsibility
Do you like publicity? The right kind can attract favorable attention. But being in the news because one of your vehicles was in an accident and you lacked the proper insurance is not the best approach.
