Many businesses use mobile machinery like forklifts or backhoes in their day-to-day operations. In commercial auto and liability policies, such machinery is called mobile equipment.
Liability insurance for mobile equipment can be a little confusing. Most claims against a business that arise out of the operation of mobile machinery are covered by the firm's general liability policy. However, the policy excludes certain claims that arise from accidents occurring while the machinery is driven on a public road. Such claims must be insured under a business auto policy.
What Is Mobile Equipment?
In the standard commercial auto and general liability policies, mobile equipment means a land vehicle (including any equipment attached to it) that fits any of the categories listed below:
- Bulldozers, farm machinery, forklifts, and other vehicles designed for use off public roads
- Vehicles maintained for use on or adjacent to your premises. An example is a maintenance truck that never leaves your property.
- Vehicles that travel on crawler treads. Examples are excavators and crawler tractors.
- Vehicles, whether self-propelled or not, which are used to carry shovels, loaders, diggers, road construction, and similar equipment.
- Vehicles that aren't self-propelled that are used to carry compressors, pumps, generators, cherry pickers, and other equipment that is permanently attached. (If self-propelled, such vehicles are considered autos)
- Vehicles that don't fall into any of the previous categories and are used for purposes other than the transportation of persons or cargo
What Is an Auto?
The term auto means a land motor vehicle, trailer, or semitrailer designed for travel on public roads. An auto's primary purpose is to transport people or property over public roadways. Businesses generally use private passenger autos to transport people and use trucks to transport people and property.
Besides cars and trucks, the word auto also means any other land vehicle that's subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it's licensed or principally garaged. What does this mean?
If you don't know whether you must insure your mobile machinery for liability to drive it on a public road, ask your state motor vehicle department.
Like drivers of cars and trucks, people driving bulldozers, graders, loaders, and other types of mobile machinery on public roads can cause accidents that injure third parties. To protect the public, many states have passed laws requiring machinery owners to insure their vehicles for liability if they drive them on public roads. State laws vary with regard to the types of vehicles that must be insured. For instance, a forklift may be subject to a compulsory insurance law in one state but not in another.
Key Differences Between Auto and Mobile Equipment
Vehicles categorized as mobile equipment differ from autos in three important ways. First, they're intended to be used off public roads. Secondly, they're designed to perform an operation like digging, scraping, or lifting large items. Mobile equipment may be driven or conveyed on a public road but transportation isn't its primary purpose. Thirdly, vehicles that qualify as mobile equipment are not subject to compulsory insurance or financial responsibility laws.
Whether vehicles must be insured for liability is determined by the law in the state where they are licensed or principally garaged.
How Do You Know Which Policy Applies?
Your general liability policy covers claims against your company for bodily injury or property damage that arises out of your ownership or operation of mobile equipment. This means that if you or an employee accidentally injure a third party while operating a piece of machinery at your premises or at a job site and are sued as a result, your general liability policy should cover the claim.
For example, suppose a construction company called Reliable Renovations owns a backhoe. The firm's liability policy covers claims arising from the ownership or use of the machine. The backhoe is automatically covered because it meets the definition of mobile equipment in the policy. If a Reliable employee is operating the backhoe at a job site and accidentally rams it into a car owned by another contractor, the company's liability policy should pay for the damage.
Now suppose Reliable Renovations keeps the backhoe in a storage yard when it's not in use. The yard is located in a state where backhoes must be insured for liability when driven on a public road. One day, a company employee is driving the backhoe over a public road to a job site when he accidentally hits another vehicle. If the driver of that vehicle files a claim against Reliable for bodily injury or property damage, Reliable's liability policy won't cover the claim. Because the backhoe is considered an auto when it's driven on a public road, Reliable must rely on its commercial auto liability insurance to cover the claim.
Note that the backhoe is deemed an auto only when it's driven on a public road. In all other circumstances, it's considered mobile equipment.