By Greg Even
Myth: My basic Business Owners Policy covers the typical risks associated with vehicles used for business purposes.
Fact: Business owners face a number of typical auto-related risks that are generally not covered under the standard Business Owners Policy.
Seasoned entrepreneurs and first-time small business owners alike know that when they begin a venture, there are certain insurable risks for which they’ll need coverage. One of the first insurance policies they purchase is a Business Owners Policy (BOP) — a basic coverage that is often mistakenly assumed to be a “catch all” against all risks.
One of the biggest exposures many small business owners may assume is covered under a basic BOP is their business’s auto use. Small business owners who conduct business without an understanding of their automobile risk exposures are driving into dangerous territory.
Risk #1: Bodily injury and property damage
Small business owners that assume property damage and bodily injuries related to company-owned trucks or cars are automatically covered under their BOP may risk significant financial losses. For example, if an employee is driving a company-owned car and crashes into a fence, injuring a pedestrian and damaging the fence, the small business owner may be held liable for the related costs.
Bodily injury and property damage arising out of the use of an automobile are generally excluded under a standard BOP. Small business owners can manage the financial risk associated with the ownership and operation of automobiles by securing a separate commercial auto policy.
Risk #2: Physical damage
Though small business owners often assume their standard business owners policy is a one-and-done coverage, their automobiles are not covered in the event of physical damage to the vehicle. In the earlier example, when the employee struck a fence with a company-owned car, the company was responsible for damage to the fence and the pedestrian’s injuries. If the company car was also damaged, the small business owner would need a commercial auto policy with physical damage coverage to successfully submit a claim. The same is true if the vehicle overturns, is vandalized, explodes or collides with a falling object.
Risk #3: Employee wheels on company time
Small business owners may assume that if an employee is driving his or her own car for business purposes, the employee is solely responsible, financially, for any accident injuring persons or property. However, as the employer, the company is usually responsible for employees using their own cars on behalf of the company. If the driver who damaged the fence in the earlier example is an employee, or other permissive user who is running a business errand for company purposes in their own vehicle, the business may be responsible for damages caused by that driver. Most small business owners can manage the risk associated with this exposure by adding “non-owned auto” liability coverage to their current BOP by endorsement if they do not own any autos.
Risk #4: “Hired” Autos
While some small business owners own their trucks and cars outright, there are often situations in which trucks and cars are leased, hired, rented or borrowed for business purposes. Similar to employees using their own car for company business, this is another exposure area that is not covered by a standard BOP, but can be addressed by an endorsement to the BOP or through a commercial auto policy.
For example, if the employee in the previous examples had been driving a car rented by the company on company business, the company would usually be responsible for costs associated with the accident. Business owners who proactively secure “hired auto” liability coverage can help manage the financial risks associated with using automobiles that the business leases, hires, rents or borrows.
Risk exposure safety belt
Any auto-related incident business owners or their employees experience when on the road for company purposes can lead to expensive results. Savvy business owners would do well to speak with their insurance agents or other risk experts to ensure they are properly protected from the hazards of the road.
Greg Even is regional vice president, Northeast, for the small business division of Travelers. For more information go to www.travelers.com/smallbusiness.
