Auto Liability - What's Not Covered?
An Auto Policy Excludes Claims Covered By Other Policies
Commercial auto liability insurance is covered under Section II of the standard Business Auto Coverage Form. It protects your business against third-party claims for bodily injury or property damage sustained in an auto accident. In most states, your business is obligated by law to purchase auto liability coverage if it owns cars or trucks.
While commercial auto liability coverage is relatively broad, it doesn't cover all auto-related claims. Section II contains 13 separate exclusions, most of which apply to risks that are covered by other types of policies. Many of the exclusions are absolute but a few contain exceptions that add back a limited amount of coverage. The 13 exclusions are outlined below.
Expected or Intended Injury
The first exclusion applies to bodily injury or property damage expected or intended from the standpoint of the insured. While interpretations vary from state to state, the exclusion generally applies if the insured intentionally injures someone or damages their property. It may also apply if the insured commits an act with the expectation of causing bodily injury or property damage.
For example, suppose you are driving a company-owned car when another driver cuts you off. Enraged, you rear-end the driver's vehicle to teach him a lesson. You cause an accident with the intent to harm him and expect he will sustain at least a minor injury. If the driver is injured and sues you for bodily injury, your auto policy won't cover the claim.
Liability you assume under a contract is excluded with two exceptions. First, coverage is provided for liability you would have if the contract did not exist. Secondly, the policy covers liability you assume under a contract that qualifies as an insured contract as that term is defined in the policy.
The definition of insured contract includes an agreement in which you assume the tort liability of another to pay for bodily injury or property damage to a third party. It also includes liability you assume under an auto rental agreement that you or an employee enters into on behalf of your business.
The definition of insured contract doesn't include liability you assume under an auto rental agreement for physical damage to a hired auto.
Your auto policy will not cover benefits you are obligated to pay under a workers compensation, disability, or unemployment compensation law. These benefits should be provided by a workers compensation policy, disability policy, or government program.
Your auto policy excludes claims by employees against your business for injuries sustained on the job. Such claims are excluded because they are covered by the Employers Liability section of your workers compensation policy. The employers liability exclusion contains two exceptions. The first provides coverage for claims by injured domestic employees who aren't eligible for workers compensation benefits. The second affords coverage for liability you have assumed under an insured contract for claims arising from injuries to your workers.
While most workers compensation laws prohibit injured workers from suing their employer, they don't bar workers from suing someone else who may be liable for their injury. For example, suppose Primo Paving has been hired by Classic Construction, a general contractor, to pave a road at a job site. The contract between Classic Construction and Primo Paving requires the latter to assume liability for claims against Classic that arise from injuries to Primo's employees. A Primo Paving employee is injured in an auto accident at the job site and sues Classic Construction for negligence. Classic forwards the claim to Primo Paving. Because of the contractual liability exception cited above, Primo Paving's auto policy should cover the claim.
Fellow Employee Injuries
This exclusion precludes coverage for a claim by one employee against another for an injury sustained on the job. The exclusion serves the same purpose as the co-employee exclusion found in a general liability policy.
Care, Custody, or Control
This exclusion eliminates coverage for damage to property you own or transport, or that's in your care, custody, or control. You can protect yourself against physical losses to autos you own or hire by purchasing commercial auto physical damage coverage. Property you own that you transport in company vehicles can be insured under transit insurance.
You can insure other people's property that you transport in your vehicles under motor truck cargo insurance.
Handling of Property
Auto policies generally cover bodily injury or property damage that occurs while property is being loaded or unloaded onto or off of a covered auto. For example, you purchase a fireproof safe for your business at a hardware store. You are helping a store employee load the safe onto your truck when you accidentally drop it onto the worker's foot, causing an injury. If the worker demands compensation from your firm for his injury, his claim should be covered by your auto policy.
The handling of property exclusion eliminates coverage for injury or damage that occurs before you begin loading property onto an auto or after the property has been unloaded. Accidents that fall within this exclusion will likely be covered by your general liability policy.
Movement of Property
Your auto policy won't cover injury or damage that results from the movement of property by a mechanical device (except a hand-truck) unless the device is attached to a covered auto. For example, an employee of yours delivers bags of concrete to a job site. Your employee is unloading the bags with a forklift when he accidentally injures a bystander. If the injured party sues your firm for bodily injury, the claim will not be covered by your auto policy since the forklift was not attached to your truck. The suit would instead be covered by your liability policy. However, if the employee injures the bystander while using a truck-mounted crane to unload the bags, the claim should be covered by your auto policy.
Operation of Mobile Equipment
Claims that arise from the operation of mobile equipment are not covered by a commercial auto policy. Liability coverage for mobile equipment is provided by a general liability policy.
Your auto policy won't cover claims alleging injury or damage that results from work you have completed. Such claims may be insured by your general liability policy under products-completed operations coverage.
Claims that arise out of war or racing activities are excluded. Auto policies aren't intended to cover such risks.
Insurance Information Institute. "Auto Financial Responsibility Laws by State." Accessed August 20, 2020.
United Insurance Group. "Business Auto Coverage Form." Accessed Sept. 2, 2020.
North Star Mutual. "Business Auto Coverage Form," Page 11. Accessed August 24, 2020.
Neckerman Insurance Services. "Third-party Action-over Exclusions." Accessed August 24, 2020.
IRMI. "Transit Coverage." Accessed August 24, 2020.
Progressive Commercial. "Motor Truck Cargo Insurance." Accessed August 24, 2020.
Advisor Smith. "What Does Commercial Auto Liability Insurance Exclude?" Accessed August 24, 2020.
North Star Mutual. "Business Auto Coverage Form," Page 4. Accessed August 24, 2020.