Many business owners recognize that having a standard Business Owners Policy (BOP) is a necessary first step to properly protect their business.
But where seasoned entrepreneurs and first-time small-business owners alike may miss the mark is assuming that all potential exposures are covered under the policy. In particular, owners who run their business assuming that the BOP covers their automobile risk exposures may be driving into dangerous territory as the BOP excludes most auto-related risks.
Talking to an experienced insurance professional, like an agent or an insurance adviser, can help to break down the specific exposures and define the needs of a business when it comes to auto coverage. I’ve described a few scenarios to assist business owners in determining when an auto-focused policy would be an effective risk management tool.
Bodily injury and property damage
Business owners may not be aware that property damage and bodily injuries caused by employees when operating company-owned trucks or cars are not automatically covered under their BOP.
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. Although each policy is unique, bodily injury and property damage arising from a car accident are not covered under a standard unendorsed BOP.
So what’s a small business owner to do? A savvy owner can manage the financial risk associated with the operation of automobiles for business purposes by securing a separate commercial auto policy.
When physical damage occurs
Let’s revisit the scenario described above.
In that case, the business is held responsible for damage to the fence and the pedestrian’s injuries. But what about the actual damage caused to the company-owned car? Without a commercial auto policy with physical damage coverage, that business owner would be left with the expenses related to fixing the car. The same is true if the vehicle overturns, is vandalized or collides with a falling object.
Employee’s car …employer’s risk
Employees driving their own cars for business purposes pose another possible risk exposure.
As the employer, the company is usually responsible for incidents that take place when employees are using their own cars with the business owner’s permission on behalf of the business. For instance, in the earlier example, if the employee driver who damaged the fence was running a business errand for the company in their own vehicle, the business may be responsible for damages caused by that employee driver.
Adding a “non-owned auto” liability endorsement to an existing BOP is an effective tool some business owners can use to protect themselves from losses associated with employees driving their own vehicles for business purposes.
The renting and borrowing conundrum
Many business owners have the need to lease, rent or borrow a car or truck for business purposes.
Similar to employees using their own car for company business, this is another exposure area that may not be covered by a standard BOP. It can, however, be addressed by an added insurance endorsement or through a commercial auto policy. For example, if the employee in the previous example had been driving a car rented by the company, the company would generally be responsible for the bodily injury and property damage associated with the accident.
Business owners can proactively manage these types of risks and exposures by securing “hired auto” liability coverage under an endorsement or a commercial auto policy.
Any auto-related incident business owners or their employees experience when on the road for company purposes can cause financial losses for businesses that don’t have the proper coverage.
Business owners are faced with enough challenges without having to unnecessarily spend time and money on auto-related hassles. The proper insurance protection is the best way to avoid such a scenario.