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Commercial Auto Insurance Policy Information

Commercial Auto Insurance. Commercial auto insurance is a type of insurance policy that provides coverage for vehicles used for business purposes. This includes vehicles such as delivery trucks, company cars, and other vehicles used in the course of conducting business.

Commercial auto insurance policies often have higher limits of liability than personal auto insurance policies, as the vehicles covered by the policy are typically used for business purposes and may be at higher risk for accidents and losses.

The specific coverage provided by a commercial auto insurance policy can vary, but it may include protection for the vehicle itself, as well as liability coverage for injuries or damage caused to others in an accident.

Commercial auto insurance protects your business from liability and physical damage lawsuits from accidents caused by company vehicles, such as cars, trucks and vans - with rates as low as $67/mo. Get a fast quote and your insurance card now."

Below are some answers to commonly asked business auto insurance questions:

• What Is Business Auto Insurance?
• How Much Does Commercial Auto Insurance Cost?
• What Factors Affect The Cost Of Business Auto Insurance Premiums?
• Do I Have To Carry Commercial Auto Insurance?
• Do You Need A Personal Or Commercial Auto Policy?
• How Do The Business Auto Coverage Form and The Personal Auto Policy Handle Losses Involving Intentional Acts?
• What Are The Differences In Physical Damage Coverage Options Between The Business Auto Coverage Form vs The Personal Auto Policy?
• What Does Commercial Auto Insurance Cover?
• What Doesn't Commercial Auto Insurance Cover?
• What Type Of Vehicles Are Covered Under A Commercial Auto Insurance Policy?
• What Are Common Commercial Auto Insurance Coverage Gaps?
• What Are The Auto Insurance Financial Responsibility Laws?
• What Are The Minimum Car Insurance Requirements By State?
• What Are Commercial Auto Cancellation & Nonrenewal Time Requirements?
• What Does Business Auto Insurance Cover & Pay For?

Not sure whether you need a commercial auto or personal insurance policy? Following are some questions and answers that shed light on the differences between business auto policy (BAP) vs personal auto insurance policies (PAP):

Who owns and/or drives the vehicles for insurance purposes?

If your car, van or truck is owned by the business, then you'll probably need a business auto insurance policy.

How is the vehicle used?

If you use your vehicle for business purposes, you'll most likely need a commercial auto insurance policy.

What is the weight & type of vehicle?

If the car, truck or van you drive weighs more than a normal size pickup or SUV, like a dump truck, tow truck, or tractor trailer, you might require a business auto insurance policy.

Do you have any federal, state or contractually required liability limits?

If your business car, van or truck requires higher liability limits, like for the FMCSA, state agencies or for a contract - you will probably need commercial auto insurance. Business auto insurance policies offer higher limits than personal ones.

The insurance company pays all sums an insured is legally obligated to pay as damages because of bodily injury or property damage covered by this insurance and caused by an accident resulting from owning, maintaining, or using a covered auto. Pollution cost or expense that is a consequence of the same covered accident is also covered.

The company has both the right and duty to defend any insured in a suit requesting such damages or pollution costs and expenses but only if coverage is available under this insurance. The insurance company makes the decision as to when and how to investigate, settle, or litigate, as it deems appropriate. Any defense obligation ends when the liability limit of insurance is used up paying judgments and settlements.

If symbol 1 is used, no other symbols are needed. However, a combination of the other symbols is normal when symbol 1 is not used. Following is more detailed information on the business auto coverage symbols:

The Insurance Services Office's (ISO's) Business Auto Coverage (BAC) Form (CA 00 01) protects the named insured ("you") against the financial consequences of its legal liability for bodily injury or property damaged not excluded by the policy and arising out of the ownership, maintenance or use of a "covered auto." This makes the covered auto symbols the key to the Business Auto Coverage Form. Each symbol grants insured auto status to a different class of vehicle.

Symbol 1 - (Any Auto): "Any," as provided in Symbol 1, contains no limitations; it means exactly what it says. Regardless of the auto's status as owned, nonowned, hired, borrowed, or other status, it is covered. The only limitations on an "Any Auto," auto are the policy exclusions. Essentially, if the named insured (the "you") or "automatic insured" (subject to five exceptions) are held legally liable for injury arising out of the ownership, maintenance, or non-excluded use of an auto, the BAC provides coverage.

Symbol 1 is almost exclusively a liability coverage symbol. It is unlikely underwriters will allow its use with any other auto policy coverage type (e.g., medical payments, uninsured and underinsured motorists (UM/UIM), or physical damage). Due to the breadth of insured vehicle status granted by Symbol 1 (owned, nonowned, and hired), it should be used to trigger liability coverage whenever possible. However, use of Symbol 1 may not always be appropriate. Specific inappropriate Symbol 1 usage generally flows from the unique risk characteristics of a particular insured.

Symbol 2 - (Owned "Autos" Only): Only those "autos" you own (and for Liability Coverage any "trailers" you don't own while attached to power units you own). This includes those "autos" you acquire ownership of after the policy begins.

Symbol 3 - (Owned Private Passenger "Autos" Only): As the title suggests, use of this symbol limits protection to only private passenger autos owned by the insured. If the insured acquires any private passenger autos during the policy period, protection is extended to these vehicles during the remainder of the policy period. Use of this symbol is generally limited to liability coverage.

Symbol 4 - (Owned "Autos" Other than Private Passenger "Autos" Only): Like Symbol 3, this symbol extends coverage to owned autos, but this extends coverage to only "other than private passenger autos" such as trucks (light, medium, heavy, and extra-heavy). In addition to the vehicle, protection is extended to any nonowned trailer while attached to a vehicle protected under this symbol. If the insured acquires additional "other than private passenger autos" during the policy period, protection is extended to these vehicles during the remainder of the policy period. Use of this symbol is generally limited to liability coverage.

Symbol 5 - (Owned "Autos" Subject to No-Fault): This symbol is used when a vehicle is licensed and principally garaged in a state subject to and under "no-fault" (aka Personal Injury Protection (PIP)) statutes. The symbol extends coverage to any autos newly acquired during the policy period. As suggested, this symbol is limited to liability coverage.

Symbol 6 - (Owned "Autos" Subject to Compulsory Uninsured Motorists Laws): This symbol is used when a vehicle is licensed and principally garaged in a state subject to and under uninsured motorist statutes. In these states, the insured cannot reject uninsured motorist coverage. Extends coverage to any autos newly acquired during the policy period. As suggested, this symbol is limited to uninsured motorist coverage.

Symbol 7 - (Specifically Described "Autos"): Use of this symbol limits coverage to only those autos specifically listed (scheduled) in the policy. If the auto is not scheduled, there is no coverage. Newly acquired autos are subject to specific restrictions and only a short period of "automatic coverage." However, to gain the 30 days of "automatic" protection granted, the insurance carrier must already insure all the insured's vehicles on the same policy or the new vehicle must be a replacement for an existing auto. If the insurance carrier does not insure all the vehicles on the same policy, and the new vehicle is in addition to the current schedule, there is no automatic coverage on the vehicle, and it is not covered until the insurer is notified of its existence. Symbol 7 is usually limited to physical damage protection, but it can be used to signify liability, uninsured/underinsured motorists, or physical damage.

Symbol 8 - (Hired "Autos" Only): Only those "autos" you lease, hire, rent or borrow. This does not include any "auto" you lease, hire, rent, or borrow from any of your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households.

Symbol 9 - (Nonowned "Autos" Only): Only those "autos" you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes "autos" owned by your "employees", partners (if you are a partnership), members (if you are a limited liability company), or members of their households but only while used in your business or your personal affairs. (Emphasis added. Note: Essentially, Symbol 9 extends vicarious liability protection to the named insured (the "you") for bodily injury or property damage suffered by a third party caused by someone operating a covered vehicle on the named insured's behalf or benefit.)

What Are Common Commercial Auto Insurance Coverage Gaps?

Improperly Insuring Private Passenger Autos

Often times small business owners choose to insure a businesses owned vehicle on their personal auto insurance policy.

For example, personal auto policies eligibility rules generally will not cover newly purchased pickups or vans that have a gross vehicle weight of more than 10,000 pounds. That means most personal car insurance policies are not the right choice for insuring commercial vehicles.

Using the Wrong Covered Auto Symbols

To avoid business auto coverage gaps, it is important to pay close attention to the symbol descriptions and to understand how the symbols are supposed to be used.

For example, one of the most serious mistakes an insured may make is to use symbol 7 for liability coverage. It's a mistake because symbol 7 provides very limited coverage for newly acquired autos.

Improperly Insuring Mobile Equipment

Mobile equipment that is subject to motor vehicle laws should be covered under a business auto policy, not the commercial general liability policy.

A large coverage gap exists if an insured mistakenly believes one of it's vehicles is covered by its general liability policy. So since the equipment was not specifically scheduled in the commercial auto policy, the insured has no liability coverage.

No Hired and Non-Owned Auto Liability Coverage

When a business owns no autos, its owners or managers often believe commercial auto coverage is not necessary. Why spend money for a business auto policy when there are no autos to insure?

But the fact that a firm owns no vehicles does not mean it doesn't have auto-related exposures. Someone's autos are likely to be used on the company's behalf, and that use creates an auto liability exposure.

Also rental cars also create loss exposures for a business. If the owner of the business rents a car and is in a car accident, the business may be sued for damages that exceed the liability limit provided by the rental agency.

A coverage gap often exists when an employee who is traveling for business on behalf of his or her employer hires an auto in his or her own name rather than in the name of the business entity. If they hurt someone or damage property, the business can be sued for any damages that are larger than liability limits provided from the rental car company.

No Hired Auto Physical Damage Coverage

Many business owners recognize the importance of insuring hired autos for liability but overlook the significance of hired auto physical damage coverage. Failure to purchase this coverage naturally creates a coverage gap.

What Does Business Auto Insurance Cover & Pay For?

Here are a few examples of commercial auto claims and how business auto insurance can help pay for the lawsuit:

• Delivery truck accident: If a delivery truck owned by a business gets into an accident, causing damage to other vehicles or property, the business auto insurance can help pay for the damages and any resulting lawsuit.
• Company car collision: If an employee driving a company car gets into a collision with another vehicle or causes property damage, the business auto insurance can help cover the damages and any legal expenses resulting from a lawsuit.
• Food truck liability: If a customer gets sick after eating from a food truck owned by a business, and the customer files a lawsuit against the business, the business auto insurance can help cover any legal expenses incurred in the lawsuit.
• Taxi accident: If a taxi owned by a business gets into an accident, causing bodily injury or property damage to a passenger or another driver, the business auto insurance can help cover the damages and any resulting legal expenses.
• Construction vehicle accident: If a construction vehicle owned by a business causes property damage or bodily injury while working on a job site, the business auto insurance can help pay for the damages and any resulting lawsuit.

In all of these examples, having business auto insurance can provide protection and financial support in the event of an accident or lawsuit. It's important for businesses to have appropriate commercial insurance coverage to protect themselves from potential losses.

'Real Life' Court Cases Involving Business Auto Insurance:

Seals vs. Erie Insurance Exchange

Stephen Seals was injured in an automobile accident while test-driving a car owned by Atlantic Motors (Atlantic). Atlantic's insurance company was Erie Insurance Exchange (Erie). Seals made a claim for underinsured motorist coverage under the Erie policy and Erie, in turn, filed a declaratory judgment action asking the court to determine if Seals was entitled to the coverage. The lower court found in favor of Erie. The Supreme Court of Virginia granted Seals an appeal.

The language of the policy's uninsured/underinsured motorist coverage endorsement provided: "We will pay, in accordance with the Virginia Uninsured Motorist Insurance Law, all sums that anyone we protect is legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle." "Anyone we protect" was defined as "anyone else occupying a covered auto." "Covered auto" was defined as "a motor vehicle . . . with respect to which the bodily injury or property damage liability coverage of the policy applies."

To determine if the "bodily injury or property damage liability coverage of the policy applied," the lower court referenced the "Liability Protection" section of the policy. That section had its own definition of "anyone we protect," which stated: "The term 'anyone we protect' means any person or organization listed below . . . (2) Anyone else while using an auto we insure with your permission, except . . . (d) your customer who has other available insurance with limits at least equal to those required by law in the state where the auto is garaged."

Based on this language and the fact that Seals had "other available insurance with limits at least equal to those required by law in the state where the auto is garaged," the circuit court determined that Seals was not entitled to either liability or underinsured motorist coverage under the Erie policy. On appeal, Erie argued that Seals was not entitled to coverage under its policy because Seals was not occupying a "covered auto." Erie also argued that the Virginia Underinsured/Uninsured Motorists Statute did not require it to provide Seals with underinsured motorist coverage because Seals was not entitled to liability coverage under the Erie policy.

The Supreme Court of Virginia disagreed with both of Erie's arguments. In reaching its decision, the court first noted that Virginia's "garage keeper's exclusion" made it permissible for Erie's policy to exclude Seals from liability coverage. That statute provided, in pertinent part: "Each policy or contract of bodily injury or property damage liability insurance which provides insurance to a named insured in connection with the business of selling . . . motor vehicles, against liability arising from the ownership, maintenance, or use of any motor vehicle incident thereto, shall contain a provision that the insurance coverage applicable to those motor vehicles shall not be applicable to a person other than the named insured . . . if there is any other valid and collectible insurance applicable to the same loss covering the other person under a policy with limits at least equal to the financial responsibility requirements specified in [the relevant statutory provision]."

Because Seals had other insurance that met the statutory requirements, Erie's policy could exclude Seals from coverage.

The court next addressed the issue of whether or not the policy provided Seals with uninsured/underinsured motorists coverage. As a preliminary matter, the court noted that its finding that Seals did not have liability coverage under the Erie policy was irrelevant to the issue of whether he had uninsured/underinsured motorist coverage. It then focused on the language of the policy. The Virginia Supreme Court found that in reaching its decision the lower court had incorrectly relied on the "Liability Protection" section of the policy.

According to the Virginia Supreme Court, the "proper inquiry" was whether Seals was operating a "motor vehicle" . . . the "Autos We Insure" section of the policy, which provided: "The Declarations shows [sic] which of the following are autos we insure under this policy." The "Declarations" section of the Erie policy stated: "AUTOS WE INSURE: ANY AUTO-OWNED, HIRED & NON-OWNED AUTOS." The court concluded that because Seals was operating a vehicle owned by Atlantic, he was operating a "motor vehicle . . . with respect to which the bodily injury or property damage liability coverage of the policy applied." Thus, Seals was entitled to underinsured motorist coverage under the Erie policy.

The decision of the lower court was reversed.

(Seals vs. Erie Insurance Exchange-Record no. 081331-Supreme Court of Virginia-April 17, 2009-674 South Eastern Reporter 2d 860)

James David Miller and Magnum Plastics, Inc., Plaintiffs–Appellants, v. Hartford Casualty Insurance Company, Defendant–Appellee

In May 2002, a vehicle leased to Magnum Plastics, Inc. (Magnum) and driven by James David Miller was involved in an accident with a bicycle that resulted in the bicyclist's death. At the time of the accident, Magnum was insured under a commercial general liability policy issued by Hartford Casualty Insurance Company (Hartford) and an automobile policy issued by Progressive Insurance Company (Progressive).

Only the Progressive declarations pages were available. They revealed the following:

• The policy provided the coverages the lease required.
• Magnum was listed as the insured.
• The vehicle was listed as an insured vehicle.
• Miller was listed as a driver.
• General Motors Acceptance Corp. (GMAC) was listed as the loss payee.

The policy did not describe either Magnum's or GMAC's interests in the vehicle. Miller may have been named as an additional insured on the auto policy but that was not clear based on the portions of the policy on the record.

The Hartford policy excluded bodily injury that arose from ownership, use, or entrustment to others of any automobile rented or loaned to the insured (the automobile exclusion). It also had an endorsement that partially restored coverage that stated the following:

"A. Under B., Exclusions, 1. Applicable to Business Liability Coverage [the automobile exclusion] does not apply to any 'auto' that is a 'non-owned auto.' A 'non-owned auto' is an 'auto' you do not own, including but not limited to: 1. An 'auto' that you lease, hire, rent, or borrow... "This does not include a long-term leased 'auto' that you insure as an owned 'auto' under any other auto liability insurance policy or a temporary substitute for an 'auto' you own that is out of service because of its breakdown, repair, servicing, or destruction."

The deceased bicyclist's heirs sued Magnum and Miller for negligence. In turn, they requested that Hartford provide defense and indemnification. Hartford denied coverage and refused to defend or indemnify. In order to limit their exposure, Magnum and Miller settled with the deceased bicyclist's heirs after notice to Hartford. They then sued Hartford, asserting claims for declaratory relief, breach of an insurance contract, and bad faith breach of an insurance contract.

Hartford responded by denying coverage based on the endorsement's exception. Both parties moved for summary judgment. The trial court granted Hartford's motion, concluding that it did not have a duty to defend or indemnify because the leased vehicle involved in the accident was not a covered vehicle. Magnum and Miller appealed.

On appeal, Magnum and Miller argued that the trial court erred in concluding that Hartford did not have a duty to defend. The appellate court noted that the duty to defend arises when the underlying complaint alleges any facts that might fall within the policy's coverage. The insurance company has the responsibility to establish that the policy does not cover the claims asserted in the complaint because they are "solely and entirely within the exclusions in the insurance policy' and they "are not subject to any other reasonable interpretations."

It then noted that the Hartford policy excluded coverage for "bodily injury...arising out the ownership...[or] use of any...auto...owned or operated by or rented or loaned to any insured." On this basis, the appellate court determined that Hartford did not have a duty to defend or indemnify Magnum and/or Miller.

Magnum and Miller then argued that the policy did not define "long-term" and that it was reasonable to believe that the vehicle was a long-term leased vehicle. The appellate court again disagreed, citing various sources that defined the term as being something that involved a number of years.

Magnum and Miller finally asserted that the phrase "insure as an owned auto" was ambiguous because it was subject to more than one interpretation. The court again disagreed. Hartford stated that the word "as" functions as a simile and means "after the manner of; the same as; like." In contrast, Magnum and Miller argued that, because Magnum had insured the vehicle as a leased vehicle instead of as an owned vehicle, it was reasonable to believe that this phrase did not apply to this situation.

The court noted that the record did not offer anything to support that assertion. However, even assuming that it was true, because a leased vehicle, by definition, is not an owned auto, it agreed with the Hartford definition as the only logical one.

To summarize, the appellate court ruled that the vehicle was a "long-term leased auto" within the meaning of the insurance policy's exclusion and the vehicle was insured "as an owned auto" within the meaning of the insurance policy's exclusion. It affirmed the trial court's decisions.

(Colorado Court of Appeals, Div. 1. James David Miller and Magnum Plastics, Inc., Plaintiffs–Appellants, v. Hartford Casualty Insurance Company, Defendant–Appellee. No. 05CA2412. April 5, 2007. 160 P.3d 408)

Additional Resources For Commercial Auto Insurance

Learn about small business commercial auto insurance which includes liability and physical damage protection for vehicles that are used for business purposes.

• Insurance Automotive Terms Glossary
• Amazon Delivery Drivers
• Ambulance Services
• Big Rig Truck
• Bobtail Non-Trucking Liability
• Charter And Tour Bus
• Commercial Auto
• Commercial Auto Liability
• Commercial Electric Vehicle Insurance
• Commercial Van
• DoorDash, GrubHub & Uber Eats Drivers
• Dump Truck
• Food Truck
• Freight Forwarder
• Household Goods Moving
• Limousine
• Motor Truck Cargo
• Non-Owned And Hired Auto Liability
• Owner Operator
• Pizza Delivery
• Repossession
• Taxi
• Tow Truck
• Truck
• Specialty Automobiles, Trucks And Recreational Vehicles
• Specialty Physical Damage

Commercial auto insurance is a type of insurance that provides coverage for vehicles used for business purposes. This includes vehicles such as delivery trucks, company cars, and other vehicles that are used to transport goods or employees.

Commercial auto insurance is necessary for businesses that rely on their vehicles to conduct their operations. It helps to protect the business from financial losses due to accidents, theft, or other unexpected events. It also helps to protect the business from potential lawsuits that may arise from accidents involving their vehicles.

There are several types of coverage options available under business auto insurance policies. These include:

• Liability coverage, which covers damages or injuries that you or your employees cause to others while operating a business vehicle.
• Physical damage coverage, which covers damages to your own vehicle, is also available.
• Other coverage options may include medical payments, uninsured or underinsured motorist coverage, and rental reimbursement.

It is important for businesses to carefully consider their commercial auto insurance needs and to choose a policy that offers the right level of coverage. This can help to ensure that the business is protected in the event of an accident or other unexpected event.

Minimum recommended small business insurance coverage: Building, Business Personal Property, Business Income and Extra Expense, Accounts Receivables, Computers, Motor Truck Cargo, Valuable Papers and Records, Employee Dishonesty, Money and Securities, General Liability, Employee Benefits, Umbrella, Motor Carriers Liability and Physical Damage, Hired and Non-owned Auto & Workers Compensation.

Other commercial insurance policies to consider: Earthquake, Flood, Mobile Equipment, Signs, Warehouse Operators' Legal Liability, Cyber Liability, Employment-related Practices, Environmental Impairment, Underground Storage Tank, Stop Gap Liability and International Coverages.