A client of mine gave one of his employees the afternoon off in exchange for the employee dropping off a small package of merchandise at the customer’s site not far from the employee’s home. Happy to get the afternoon off, the employee headed out the door with package in hand and his GPS searching for the customer’s address..

As you might suspect, the employee is involved in a non-injury accident. The damage to the other car is about $4,000.

I advise my client that his business is protected by the Non-Owned Auto Liability coverage we provide in his Commercial Package policy. I also advise him that liability follows ownership so he should expect that the auto liability coverage of the employee will apply first. The employee confirms that his does in fact have his own auto liability policy. What could go wrong?

The laws in California obligate the owner of an automobile to have auto liability coverage at the time of an accident. Our fender-bender looks to fit all of the requirements mandated by California law.

The problem we run into is that the low-priced auto policy secured by the employee was from a well-known insurance company that has modified their policy unlike most other insurance carriers. This modification allowed this insurance company to deny coverage for this claim. In fact, at the time of the loss, there was no coverage for the vehicle or the owner of the vehicle.

How does this happen? Well, the insurance company for the car owner cited this exclusion, not commonly found with other auto insurance policies, that will not provide coverage if the vehicle is being used to transport merchandise for their employer. No coverage… Thank goodness the employer had the Non-Owned coverage in his policy to pick up this claim. If not, we would expect the employee to be in serious trouble as it was clearly his negligence that caused the accident and his responsibility to be comply with the auto liability laws of California. He had no idea that his insurance would abandon him when he needed them most.

Had this been a large loss with injuries, you can be sure that the employers insurance company would have fought aggressively due to the lack of negligence on the part of the employer with regards to the accident itself.

For the many professional insurance agents across the state that do their best to make sure their clients do not find themselves in a situation in which the very coverage they believe they have purchased does not respond. Unfortunately, there are many agents that just want to make the sale…

Be sure your business is protected with Non-Owned Auto Liability coverage. At Garland-Sturges & Quirk we would be happy to help you with a coverage review. Please contact us at 408-227-9991 or tomq@gsq.com.