“I am currently working to get back an account I lost a couple of years ago. I previously wrote this account for 3 years, and recently contacted the owner to see if I could quote. When I approach old accounts like this, which I often do, one of my first objectives is to find out how satisfied the insured is with the current program, and uncover any problems, gaps, or new exposures the incumbent might be missing.
“I have found a couple of issues that I hope to be able to solve for the insured. In addition, since I last wrote the account, cyber liability coverage has become a hot topic (and big exposure) for even small to mid-size businesses, and the incumbent has not included cyber in his renewal proposal. I was able to utilize some of the information I picked up in the recent IIABL cyber seminar to put together a good quote on cyber.
“However, one exposure the insured has that I don’t think has been handled properly in her current program deals with the Business Auto Policy (BAP). The CEO (who is the principal stockholder) drives a company car. I think the Drive Other Car (DOC) endorsement should be offered, but she tells me the current agent said it wasn’t needed if symbol 1 is used for liability, since it covers ‘any auto.’ I’d like to come up with one or two examples to illustrate to her why DOC should be added. I would appreciate any suggestions.”
First, I’m very glad to see that you are discussing cyber exposures with your insureds. For most businesses, it is a very important coverage. And, as you have already discovered, important new coverages such as cyber can also help provide an entree into discussions with insureds at renewal, as well as new prospects.
The DOC (CA 99 10) may or may not be critical for this insured, but the reason the current agent gave for not including DOC (the BAP has symbol 1) is off the mark. The fact that the Business Auto Policy provides liability coverage for “any auto” with symbol 1 does not provide the complete picture of how liability coverage applies. A fundamental step in understanding coverage is to review the insuring agreement. In the BAP, liability coverage applies as follows: We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance or use of a covered "auto". Jill may be driving a covered auto, but that does not necessarily mean that she in an insured in the BAP.
Here are some scenarios which illustrate how the DOC applies. For this discussion, assume your insured is Smithco, Inc., and is the Named Insured in a BAP. There are 8 insured autos, one of which is a new Lincoln Navigator that Smithco CEO Jill Smith drives full time, for business and personal use. Symbol 1 is selected for Liability coverage. In each case, assume that Jill has an at-fault accident, injuring Sam, driver of the other car. Sam sues Smithco as vehicle owner, and Jill as driver. Jill owns no autos.
The discussion (and excerpts) below are based on ISO forms. Proprietary forms may be different.
Business Auto Coverage Form
CA 00 01 1013
Section II - Liability
1. Who Is An Insured
The following are "insureds":
a. You for any covered "auto".
b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:
(1) The owner or anyone else from whom you hire or borrow a covered "auto".
This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.
(2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.
Scenario #1: Jill is driving the Lincoln to meet a customer for an appointment.
(1) Smithco is covered in 1.a. (as owner).
(2) Jill is covered in 1.b. (as permissive user of an auto Smithco owns, hires or borrows).
(3) No need for DOC, since she is an insured simply by having permission to drive the Lincoln.
Scenario #2: Jill is driving the Lincoln to meet Kelli, an old college friend, for golf on Saturday.
(1) Smithco is covered in 1.a. (as owner).
(2) Jill is covered under 1.b. (as permissive user, even if she was on purely personal business).
(3) No need for DOC. There is no requirement under symbol 1 that the permissive use be for business only. However, if Smithco had a rule (preferably written into the employee handbook) that the Lincoln was to be used exclusively for business, then Jill would not be a permissive user, and thus not an insured in the BAP. But Smithco is still an insured.
Scenario #3: After golf, Jill and Kelli decide to meet some other friends for dinner across town. Kelli lets Jill drive her new BMW.
(1) Smithco is unlikely to be sued by Sam, unless Sam can establish some clear connection (nexus) between Smithco and Jill’s operation of Kelli’s BMW. But if such a suit is filed, Smithco is covered under 1.a.
(2) Jill is covered as a permissive user in Kelli’s PAP.
(3) Jill is not an insured in Smithco’s BAP, since coverage for permissive users only applies for an auto that Smithco “owns, hires or borrows.” (See 1.b.) Clearly, Smithco did not own, hire, or borrow Kelli’s BMW.
(4) This is a textbook situation where DOC is needed for Jill. The DOC provides coverage for Jill’s use of an auto Smithco does not own, hire, or borrow (e.g., Kelli’s BMW). Key excerpts from the DOC:
Drive Other Car Coverage
CA 99 10 10 13
B. Changes In Covered Autos Liability Coverage
1. Any "auto" you don't own, hire or borrow is a covered "auto" while being used by any individual named in the Schedule or by his or her spouse while a resident of the same household except:
a. Any "auto" owned by that individual or by any member of his or her household.
b. Any "auto" used by that individual or his or her spouse while working in a business of selling, servicing, repairing or parking "autos".
2. The following is added to Who Is An Insured:
Any individual named in the Schedule and his or her spouse, while a resident of the same household, are "insureds" while using any covered "auto" described in Paragraph B.1. of this endorsement.
(5) One caution about the DOC is that although it provides very broad coverage for Jill while driving autos other than those owned, hired or borrowed by Smithco, it excludes coverage for any autos owned by Jill or any other resident family member. (See B.1.a. above.) For example, if Jill used her husband Jack’s Ford F-150 pickup truck to deliver a piece of equipment to a customer, the DOC would not cover her, even though she is on company business (Smithco would still be covered). The ISO Personal Auto Policy covering the pickup truck would cover Jill as an insured.
Scenario #4: Jill rents a car.
(1) If Jill is on vacation, the coverage issues are essentially the same as in Scenario #3 (DOC needed).
(2) If Jill is on business, the coverage issues are essentially the same as in Scenario #1, where Jill is an insured in the BAP as a permissive user of an auto Smithco owns, hires, or borrows. (DOC not needed.)
Variations. Here are some issues beyond just the DOC endorsement.
If for some reason the DOC is not added to the BAP, Jill can obtain similar coverage by purchasing a Named Non-Owner policy (PP 03 22). The NNO would be needed if Jill (or her husband, etc.) owned no autos, and had no Personal Auto Policy.
If Jill does have a PAP, her policy excludes her use of the Lincoln, due to the exclusion for any auto that is “furnished or available for your regular use.” However, coverage under her PAP can be provided for her use of the Lincoln by the Extended Non-Owned endorsement (PP 03 06).
If Jill was added as a Named Insured to Smithco’s BAP, she would not need the DOC endorsement, since she would be covered on the same basis as Smithco, who is also a Named Insured. That is, she becomes another “you,” (see BAP Liability excerpt 1.a.), with coverage applying for “any auto” (if symbol 1 is used). Not all insurers will add individuals as Named Insureds to a BAP. Note also that under ISO rules (Rule 91), where an individual is a Named Insured, the Individual Named Insured endorsement (CA 99 17) is required to be added, but is not premium-bearing. It provides coverages similar to the Personal Auto Policy.
In several parts of the above discussion, for the sake of brevity, I said that the DOC “was not needed.” The phrase “coverage is not needed” should probably be banned from our lexicon, along with “full coverage,” “all-risk,” and “I’ll take care of that.” The DOC and PAP are not necessarily mutually exclusive. In fact, having both would simply give an insured two policies to rely on, in certain situations. However, many BAP underwriters are reluctant to add DOC if the individual has a PAP. But see discussion in the article linked below as to whether or not “the DOC is needed.”
For additional reading. Below are links to some excellent articles pertinent to your question.
Last Updated: February 12, 2015