If the vehicle owner has no insurance or insufficient limits, the employee may face a large out-of-pocket loss. Businesses can protect their workers from such events by adding drive other car coverage to their commercial auto policy.
The Basics of Drive Other Car Coverage
When an employee drives a vehicle provided by their employer, they qualify as an insured person under the employer’s commercial auto liability insurance. While the liability section of the standard business auto policy doesn’t address employees specifically, it does apply to anyone using a covered auto that the named insured (employer) owns, hires, or borrows. These individuals are covered if they are using the vehicle with the employer’s permission.
How It Works
An individual who’s been furnished with a company vehicle should have adequate liability coverage under their employer’s commercial auto policy if they never drive any other vehicles. But the worker could still face an unexpected loss if they use a car owned by someone other than the employer. For example, let’s say Cameron is employed by Classic Concepts, a commercial interior design company. Cameron spends many of her work hours visiting clients, so Classic Concepts has given her a company vehicle. Classic Concepts allows Cameron to keep the vehicle at home and use it for pleasure as well as business. One evening, Cameron’s company car is in the shop, so Cameron borrows a car from her neighbor Beth to drive to a nearby supermarket. While driving home from the store, Cameron accidentally broadsides another vehicle. Cameron isn’t hurt, but the two occupants in the other vehicle are badly injured. When the accident occurred, Cameron was driving Beth’s car with permission. Consequently, Cameron qualifies as an insured under Beth’s personal auto liability insurance. Unfortunately, Beth purchased limits of only $25,000 for each person and $50,000 for each accident, the minimum required limits in the state. Each of the injured passengers has sued Cameron for $75,000 in damages ($150,000 in total), which exceeds Beth’s per-person limit of $25,000 by $50,000. Because Cameron doesn’t own a vehicle, she have not purchased auto insurance. The claims against her aren’t covered by Classic Concepts’ commercial auto policy because Cameron wasn’t an insured when the accident took place—the business auto policy doesn’t cover employees while driving non-company-owned autos. Cameron may be stuck with a $100,000, out-of-pocket loss. This situation could have been avoided if Classic Concepts had purchased drive other car coverage.
Drive Other Car Policy Endorsement
Drive other car (DOC) coverage can be included in a commercial auto policy via a policy endorsement. A DOC endorsement covers the individual listed in the endorsement schedule as an insured. If that person’s spouse resides in the same household, the spouse is also an insured. The individual and the spouse are insureds while driving any auto the named insured (employer) doesn’t own, hire, or borrow. They aren’t covered while driving vehicles they own or that are used in an auto-related business, such as a parking garage or auto repair shop. When purchasing DOC insurance, business owners must indicate the coverages and limits they want, so the overall cost will depend on the employer’s policy and may vary by location. The options include liability, auto medical payments, comprehensive, collision, and uninsured and underinsured motorist (UM and UIM). Limits must be selected for all coverages except physical damage. Deductibles must be indicated for comprehensive and collision.
Advantages and Disadvantages
The DOC endorsement provides backup coverage for employees or company executives who have no personal auto insurance and occasionally drive cars other than the one furnished to them by their employer. Individuals listed in the endorsement and their spouses are insured for liability while driving any auto they rent or borrow from someone else. If the employer has elected medical payments or UM/UIM, those coverages extend to the individual’s family members who reside in the same household. The DOC endorsement does not extend liability coverage to the employee’s family members, other than the spouse. Moreover, physical damage coverage applies only to private passenger vehicles. If the employer has elected physical damage coverage and an employee listed in the endorsement borrows a large truck, the vehicle won’t be covered. A third disadvantage of the DOC endorsement is that coverage applies only when the vehicle is used as permitted by the employer. If the employer has barred employees’ spouses from driving company-owned vehicles, they are not part of the DOC coverage. They may be covered for driving vehicles owned by a neighbor or friend under that car owner’s policy, just not the company car.
Alternative to DOC
An alternative to a DOC endorsement is the named nonowner endorsement, which can be added to a personal auto policy. It is designed for individuals who don’t own any autos but occasionally rent or borrow vehicles. The individual may cover just themselves, or their family, too. This endorsement includes options for physical damage coverages as well as liability, medical payments, and UM/UIM. The average cost varies by location and the individual policy, but could cost anywhere from a few hundred dollars to more than $1,000 per year.
The Bottom Line
Workers who are insured to drive company cars but don’t have their own insurance could face large out-of-pocket costs if they were to cause an accident while driving someone else’s car. Businesses of any size can protect their workers by adding drive other car coverage to their commercial auto policies.
