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The PAP and Additional Insureds

Author: VU Faculty

Some employers of people who use their personal autos for business want to be named as additional insureds on their personal auto policies (PAPs). However, many companies refuse to do this on the basis that they don't want the broader exposure or that the business owner has no insurable interest. Actually, there's no need to name the business as an AI on the PAP, although there could be a need for a PAP endorsement similar to a "do nothing" endorsement in the business auto program.

Question"I have a personal auto customer that works for a large employer and he uses his personal truck to travel and call on other sites of the employer's garages. The employer wants my customer to add the employer as an additional insured on the personal policy. Some carriers will not comply with the request. He and our staff have talked to other carriers that will do this. However, some carriers are saying that they will only add the employer as an additional interest, and some have said they would add as the employer as an additional insured.
"My question #1 is why would some carriers refuse to add a corporation as an additional insured, as this is a common practice for marketing rep's to use a personal auto for business use? Question #2 is what good is an additional interest endorsement for liability claims against the employer?"

Answer?With regard to the first question, if you're talking about an ISO PAP, there is no need to add an AI endorsement to the policy since the employer is already covered if it is legally liable for the employee's negligence. The employer is an omnibus liability insured because it meets one or more of the policy definitions:
B. "Insured" as used in this Part means:
   1. You or any "family member" for the ownership,
      maintenance or use of any auto or "trailer".
   2. Any person using "your covered auto".
   3. For "your covered auto", any person or
      organization but only with respect to legal
      responsibility for acts or omissions of a
      person for whom coverage is afforded under
      this Part.
   4. For any auto or "trailer", other than "your
      covered auto", any other person or organization
      but only with respect to legal responsibility
      for acts or omissions of you or any "family
      member" for whom coverage is afforded under
      this Part. This Provision (B.4.) applies only
      if the person or organization does not own or
      hire the auto or "trailer".

As you can see, in your scenario, the employer fits the third definition of an insured for liability coverage. So, there's no need for an endorsement and ISO doesn't even have one for this.
With regard to your second question, you're right. An additional interest endorsement typically protects the other party's insurable interest in the vehicle, not its liability exposure.
Aside from those questions, as a matter of equity, since the employee is using his vehicle to conduct business for the benefit of the employer, the latter should be more concerned about extending coverage under its own BAP to the employee by providing Symbol 1 or Symbol 9 liability coverage AND adding the Employee as Insured endorsement to the BAP.  IMHO.

A Personal Auto insured that drives his or her personal vehicle while on company business for his or her employer often is required to add the employer as an Additional Insured under the Personal Auto Policy.

The employee’s insurance agent that writes the Personal Auto Policy then submits the request to the underwriter.  In most cases it seems, the underwriter refuses to add the employer, indicating that they “don’t want the exposure.”  On occasion, some also point out that the employer “has no insurable interest in the vehicle.”

The underwriter might be as surprised as the rooster to learn that the coverage is automatically built into the Personal Auto Policy.  There is no need to “add” the employer as an Additional Insured – they already are, by virtue of the definition of “Insured” in the Personal Auto Policy, as follows:

Part A – Liability Coverage
Insuring Agreement
B.  “Insured” as used in this Part means:
    3.  For “your covered auto,” any person or
        organization but only with respect to
        legal responsibility for acts or omissions
        of a person for whom coverage is afforded
        under this Part.

    4.  For any auto or trailer, other than “your
        covered auto,” any person or organization
        but only with respect to legal responsibility
        for acts of omissions of you or a family
        member for whom coverage is afforded under
        this Part.  This provision (B.4.) applies
        only if the person or organization does not
        own or hire the auto or trailer.

Essentially, the Personal Auto Policy provides vicarious third party liability through definition B.3. and B.4. of who is an “Insured.”  Thus, the employer who becomes vicariously liable through the use of a vehicle owned or operated by an employee is automatically an Insured under the PAP of the employee.  (The only exception would be in B.4., if the employer owned or hired the auto.)

In defense of underwriters, there actually is no ISO endorsement to add an employer as an Additional Insured in the PAP.  (The only Additional Insured endorsement is for Lessors.)  So their reluctance is somewhat understandable, since the company manual would have no endorsement to accomplish what the agent requests.

However, to opine that “we don’t want the exposure” is somewhat shortsighted, since the coverage is already provided in the PAP.  And the observation that “the employer has no insurable interest in the employee’s vehicle” is a little puzzling, since insurable interest is an issue only in physical damage.  The employer’s “interest” in the matter is that through law, the employer is legally liable for the acts of their employees (usually referred to as respondeat superior).

A dilemma remains.  While coverage for the employer is automatically provided by the employee’s Personal Auto Policy, there is nothing in writing that the agent can give the employer to verify this, since there is no ISO endorsement for Additional Insureds (other than Lessors).  While there are approximately 30 endorsements in the Personal Auto Program, there is none to solve this problem for the agent and his insured.

Interestingly, the Business Auto Policy has just such an endorsement – CA 20 48 - Designated Insured.  It basically provides a space to put the “Designated Insured,” but the endorsement states that “Each person or organization shown in the Schedule is an 'insured' for Liability Coverage, but only to the extent that person or organization qualifies as an 'insured' under the Who Is An Insured Provision contained in Section II of the Coverage Form.”  (In other words, “we’ll show your name on the Schedule, but the endorsement doesn’t provide any coverage not automatically contained in the policy.”)

The Personal Auto Program could probably use such a “peace of mind” endorsement that employees could provide to their employers.

One possible solution might satisfy some employers who want to “see something with my name on it.”  The agent of the employee could issue a Certificate of Liability Insurance (ACORD 25), mark the “Other” box and show “Personal Auto Policy,” and name the employer as a Certificate Holder.

Because this problem arises frequently, some individual insurers have developed a Personal Auto Additional Insured endorsement, patterned after the Business Auto endorsement CA 20 48.  The agency should inquire with the insurer, to see if they have such an endorsement.

Last Updated: May 23, 2024 


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