Business Auto Insurance Policy

A business auto insurance policy covers both property and liability risks that a business owner faces because of ownership or use of autos and trucks. A policy covering a vehicle used in business also may cover your employees when they are operating their personal cars for your business.

Business Auto Liability Coverage

The liability portion of the policy obligates the insurance company to pay because of bodily injury or property damage caused by an accident and resulting from the ownership, maintenance, or use of a covered auto up to the policy limits.

When there is an auto liability lawsuit against the insured business, where the loss is covered by the policy, the insurance company is obligated to defend the business owner or settle the lawsuit. The policy leaves the decision entirely up to the insurance company about whether to defend or settle a given claim. The insurance company's duty to defend or settle ends when the insurance policy limits have been exhausted by the payment of judgments or settlements.

There are three options for liability coverage under the business auto insurance policy: (1) autos owned by the business; (2) all autos owned, hired or leased; or (3) all autos, including those that are not owned, hired, or leased. Most business owners should buy the third type of coverage to protect themselves from liability when an employer or principal is driving a personal auto on company business.

When is the business liable?

An employer is generally liable for the acts of the employees when they are acting within the scope of their employment. So, when employees are driving vehicles on company business, regardless of who holds title to the vehicle, the employer probably will be liable.

For example if an employee takes a company-owned vehicle home at night, generally on the way to and from home, the employer is liable. However, if the employee takes that vehicle out later that night on personal errands, the employer will usually not be liable, because the employee is not acting within the scope of employment.

Controlling Auto Loss Exposures

The cause of most accidents is the driver. Employers should always check driving records of any employees who will drive on company business and never allow persons with a poor driving record to drive.

It should also be company policy that drivers always use seat belts. Driving safety should be frequently emphasized, and all vehicles should be well maintained.