Automobile Insurance

The business auto policy covers the bank’s exposure to losses from automobiles owned or leased by the bank. It should also cover the bank’s liability for damages caused by employees who drive personal vehicles on bank business. Repossessed vehicles and customer-leased and rented vehicles can also be a part of the coverage.

Coverage Symbols
Commercial automobile insurance policies specify the extent of coverage provided by using symbols to indicate the breadth of the protection. The declarations page of your auto policy outlines coverage areas (liability, uninsured motorist, medical payments, etc.) with coverage symbols that apply to the type of insurance.

The applicable symbols are numbers one through nine. Symbol one is the broadest — “any auto.” Symbol nine provides coverage for non-owned vehicles only. Using symbol seven reduces the coverage to claims from vehicles listed on the policy only. Insurers sometimes use a combination of symbols, eight and nine for example, to provide coverage for hired and non-owned autos. Symbol one in the liability section would provide coverage for any auto liability claim brought against an insured. Symbol seven in the liability section would limit liability coverage to claims that come from a vehicle listed on the policy — significantly restricting the coverage.

Commercial Auto Policy Coverage Symbols

The following definitions of the commercial auto symbols are from the ISO commercial auto policy:

1 – Any “Auto.”

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 do own). This includes those autos you acquire ownership of after the policy begins.

3 – Owned Private Passenger Autos Only: Only the private passenger autos you own. This includes those private passenger autos you acquire ownership of after the policy begins.

4 – Owned Autos Other Than Private Passenger Autos Only: Only those autos you own that are not of the private passenger type (and for liability coverage, any trailers you don’t own while attached to power units that you do own). This includes those autos not of the private passenger type that you acquire ownership of after the policy begins.

5 – Owned Autos Subject to No-Fault: Only those autos you own that are required to have no-fault benefits in the state where they are licensed or principally garaged. This includes those autos you acquire ownership of after the policy begins, provided that they are required to have no-fault benefits in the state where they are licensed or principally garaged.

6 – Owned Autos Subject to a Compulsory Uninsured Motorists Law: Only those autos you own that, because of the law in the state where they are licensed or principally garaged, are required to have and cannot reject uninsured motorists coverage. This includes those autos you acquire ownership of after the policy begins, provided they are subject to the same state uninsured motorists requirement.

7 – Specifically Described Autos: Only those autos described in item three of the declarations for which a premium charge is shown (and for liability coverage, any trailers you don’t own while attached to any power unit described in item three).

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.

9 – Non-owned 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 personal affairs.

From ISO form BA0001 10 01 – Copyright ISO Properties, Inc. 2000

Automobile Liability
This part of your auto insurance provides protection for the injuries you cause (bodily injury) and the damage you do to other people’s property (property damage) in the use or ownership of motor vehicles. The most common limit of coverage is one million dollars.

The preferred coverage symbol is one, “Any Auto.” Some insurers insist on using symbol seven (Specifically Described Autos), symbol eight (Hired Autos Only), and symbol nine (Non-owned Autos Only). The coverage is, in substance, the same.

Uninsured Motorists/Underinsured Motorists
Uninsured/underinsured motorists insurance pays for the injuries to you and others in your car caused by a driver who either has no insurance or too little insurance. Your insurer pays you then “goes after” the other person.

Coverage availability varies by state. In most cases, it is best to have the limit of uninsured motorist coverage the same as your liability coverage. Recall that injured employees (while working) are most often covered by workers’ compensation insurance.

Personal Injury Protection
Personal injury protection is also known as “no-fault” or PIP insurance. Puerto Rico and twelve states operate under a no-fault system where those injured in an auto accident are limited in monetary damages they can recover from a driver who causes an accident. In such states, PIP pays for your medical bills caused by an auto accident. Under no-fault, you don’t need to sue the other party.

Medical Payments
Medical payments coverage pays the medical bills for people in your vehicle when there are injuries in an accident. In most states, this coverage is limited to some relatively small amount — $1K or $5K. It can be used to pay the deductibles and co-payments of your health insurance.

Comprehensive coverage is also called “other than collision.” This part of your auto insurance pays for the damage to your car caused by something other than an accident — fire, hail, windstorm, theft, or vandalism, for example. The coverage section also pays for the damage to your car caused by hitting an animal, as such is not considered an accident but an “act of God.”

There is usually a deductible stated — the amount you pay in the event of an accident.

Use a large deductible to control premiums. Consider removing comprehensive coverage if your vehicle is more than five model years old.

Collision insurance pays for the damage to your car or truck that has been in an accident — collision with other vehicles, objects, people, even the surface of the road. Some policies call the coverage “collision and upset” to reinforce the broad range of accidents included. The accident could be your fault or that of another driver. Your vehicle could be unattended and roll down a hill.

A deductible reduces the amount of the payment made by your insurance company. Increase your deductible and you reduce your premium.

Consider removing collision coverage if your vehicle is more than five model years old.

Towing & Labor Insurance
Pays for the cost of towing and labor expenses when your vehicle is disabled. Usually limited to some small amount — thirty five dollars, for example. This is usually not worth the premium. Don’t turn in small property claims!

Rental Vehicle Coverage
Pays for the rental of a car after an accident. Coverage is usually limited to some amount per day with a total coverage maximum.

This is another area of low severity. It may be a part of an extension endorsement provided by your insurer.

Auto Extension Endorsements
Many insurers have a policy endorsement that extends protection to many different areas. Coverage can include life insurance, additional medical payments, payments for remaining lease installments, and extensions of the coverage for a car you rent. Talk with your agent about your particular policy.

Non-Owned Auto Coverage/Liability From Employees Driving
It isn’t just the cars you own that expose your bank to liability. Every time an employee goes to a meeting or visits with a customer, the bank is exposed. If a loan officer causes an accident while driving his own vehicle on bank business, the bank could be sued.

Employees driving on bank business are the largest risk for catastrophic loss most banks face. In the blink of an eye, a VP or teller could cause an accident involving a school bus or multiple vehicles. No other area of liability puts your bank at such high risk.

Check with your agent to be sure you have non-owned auto coverage.

Drive Other Car Coverage
There is a significant gap in the coverage provided by the commercial auto policy. Employees who buy personal auto insurance do not have to worry about this gap.

The problem arises when an employee (or spouse) is provided with a bank vehicle as their only vehicle.

Personal insurance extends coverage for the insured driving a vehicle owned by a third party (a neighbor, for example). The commercial auto policy does not provide such an expansion of coverage.

Drive other car coverage, added to the commercial auto policy, protects employees who are provided company cars and don’t have their own personal auto policy. Coverage is broadened to include the employee while he is driving another vehicle.

If your bank provides employees with vehicles for personal use, discuss this exposure with your insurance advisor.

When Your Employees Rent Cars
When renting cars (short-term rentals from the well-known rental car companies located at every airport), either buy the coverage offered by the rental car company or use a credit card that provides the same insurance. Call your credit card customer service department for the details of your credit card company’s service.

The issue is not that your business auto policy is inadequate. The problem is the requirements and hassles that the credit card company will put you through. It is simply not worth the fifteen or twenty dollars a day rental car companies will charge you for the insurance. Frankly, it’s almost extortion. Here is my take on what the rental car companies say in their rental agreements:

Dear Rental Car Customer,

You are free to buy our collision damage waiver coverage. If you buy it, you can drop the keys on our counter and walk away from any responsibility to us for accidental damage.

Should you decide not to buy our coverage, here is what we are going to do:

1. We will tag your credit card for our estimate of the damages to our car. You will have no appeal or say in how much we charge you. Even the most minor damage will be at least five thousand dollars. Because we can.

2. Our fee for the damage to our car will be based on the replacement cost of the vehicle. No, not the cost to repair the damage, the cost to replace the car. We know that your insurance pays only for the cost of repair. We do not care.

3. We will charge you our highest rental fee for every day our car is not available to rent. We are the judge of the time our car is out of commission. You pay our rate even if we take our sweet time fixing our car.

4. If your credit card does not have enough limit to pay these expenses, we will call the law on you. You may have heard that we have actually had the local sheriff pull people off of planes when we could not verify adequate credit card limits. We will neither confirm nor deny that story.

5. We do not care what kind of insurance you have. The above rules apply. We leave it to you to collect what you can from your insurer, when you can collect it. (We also wish you good luck in doing so.)


Almost Every Rental Car Company

Employees as Insureds
The basic commercial auto policy provides coverage only for the named insured. In other words, the bank is protected. No insurance is provided to the employee driving the vehicle. Employees as insureds is an endorsement that extends coverage specifically to employees.

Damage to Employee Vehicles
What are the employees’ expectations for damage caused in accidents while driving their personal vehicles? Will you pay for damage to their vehicle, or should the employee rely upon his own insurance? Will you pay his deductible?

Make your plan clear in your employee handbook to avoid misunderstandings. Send an annual reminder to all employees stating your bank’s policy on employee vehicle usage.

Here’s a sample letter you can use:

Dear Employee,

From time to time it may be necessary for you to drive your personal vehicle on bank business. The purpose of this letter is to remind/advise you of our policy regarding such.

All employees using their personal vehicles for approved business travel will be reimbursed for such use at a rate of <$.xx> per mile. This fee is intended to repay you for your expenses in operating the vehicle, including the cost of gas, oil, tires, maintenance, and the cost of insurance.

We require that all employees who drive personal vehicles on bank business carry at least <$x00,000> of liability protection and uninsured motorist coverage. The purchase of “comprehensive” and collision insurance is at your discretion.

In the event of an accident while you are driving on bank business, you should look to your own insurance to protect you and your vehicle.

Remember, the auto insurance you buy is what will protect you on or off company time. Our bank automobile insurance policy provides no coverage for your vehicle.

Should you have any questions regarding this memo, please see your supervisor.

Use the Same Insurer for Auto and General Liability
Consider having the same insurer for auto and general liability to eliminate any coverage gaps or overlaps. There are times when an event falls in a gray area between auto liability and general liability insurance. It is good practice to have one insurer who provides you with both areas of coverage.

Repossessed Vehicles
How are repossessed cars covered by your auto insurance policy? “Any auto” liability coverage will protect the bank (see prior discussion on auto policy symbols).

How about damage to the repossessed vehicles — comprehensive and collision insurance? A repossessed vehicle is considered an owned vehicle by most insurers. You may be able to add coverage to your bank’s auto policy.

You may have coverage on your lenders’ single interest insurance policy. Talk with your agent.

Parking Garages
Is the exposure for your parking garage or parking lot covered? Providing parking may expose the bank to claims for damage that occurs to customers’ cars. This is certainly true if you charge a fee for parking.

What are the employees’ expectations of payment for damage to their vehicles while parked in the bank’s parking lot? Talk with your agent about your need for special coverage, known as garagekeeper’s insurance.