Question from an IIABNY member: We have a client that has a business auto policy. He gave permission to one of his employees to drive one of the cars and there was an accident. The driver didn't have a license, but the insured did not know that. Would he be covered for that accident?
Answer: If the policy is equivalent to the ISO Business Auto Policy, it should cover both the organization and the driver for liability. The “Who Is An Insured” provision in the Liability section of the policy states:
The following are "insureds":
a. You (The named insured shown in the declarations) 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.
(3) Someone using a covered "auto" while he or she is working in a business of selling, servicing, repairing, parking or storing "autos" unless that business is yours.
(4) Anyone other than your "employees", partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their "employees", while moving property to or from a covered "auto".
(5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered "auto" owned by him or her or a member of his or her household.
c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.
Therefore, a person using an auto owned, hired or borrowed by the named insured, with the named insured’s permission, is an insured unless he owns it, is in the auto business, or is moving property to or from a covered auto. The policy does not address the question of licensing status, so the driver’s lack of a license will not affect coverage. It might affect the underwriter’s decision-making at the next renewal, but the loss should be covered unless a policy exclusion applies.