Question from an IIABNY member: My commercial lines client wants to know if one of his employees rents a car for business, either on a company or a personal credit card, is the business covered by its commercial auto or liability policy?
Answer: I’m assuming that your client has the equivalent of the ISO Business Auto Policy, CA 00 01 03 10. The answer depends on the symbols shown in the policy Declarations for Liability Coverage. If the Declarations show symbol 1 (Any “Auto”), then there is coverage. Otherwise (assuming the employee is renting the vehicle in her own name, even if using a corporate credit card), there is no coverage unless the Declarations show symbol 9 (Non-owned “Autos” Only). In either case, however, your client’s policy would provide primary liability coverage for a loss involving the rental car only if the rental contract requires the client or employee to assume liability for use of that car. Otherwise, the car rental company’s coverage will be primary and your client’s coverage will be excess.
The policy defines symbol 9 as:
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 your personal affairs.
Recall that, in this context, the word “you” means the named insured shown in the Declarations; i.e., the name of the business. If the named insured is Acme Corp., then a vehicle rented by an employee for business purposes is one that Acme Corp. does not own, lease, hire, rent or borrow. (If the rental contract was actually between the car rental company and Acme Corp., then symbol 8, Hired “Autos” Only, would be needed. However, I think it’s more common for employees to rent cars in their own names.)
In Section IV – Business Auto Conditions, condition B.5. states:
5. Other Insurance
a. For any covered "auto" you own, this coverage form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this coverage form is excess over any other collectible insurance.
However, while a covered "auto" which is a "trailer" is connected to another vehicle, the Liability Coverage this coverage form provides for the "trailer" is:
(1) Excess while it is connected to a motor vehicle you do not own.
(2) Primary while it is connected to a covered "auto" you own.
b. For Hired Auto Physical Damage Coverage, any covered "auto" you lease, hire, rent or borrow is deemed to be a covered "auto" you own. However, any "auto" that is leased, hired, rented or borrowed with a driver is not a covered "auto".
c. Regardless of the provisions of Paragraph a. above, this coverage form's Liability Coverage is primary for any liability assumed under an "insured contract".
d. When this coverage form and any other coverage form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our coverage form bears to the total of the limits of all the coverage forms and policies covering on the same basis.
Definition H. in the policy includes the following:
H. "Insured contract" means: …
6. That part of any contract or agreement entered into, as part of your business, pertaining to the rental or lease, by you or any of your "employees", of any "auto". However, such contract or agreement shall not be considered an "insured contract" to the extent that it obligates you or any of your "employees" to pay for "property damage" to any "auto" rented or leased by you or any of your "employees".
Therefore, a car rental agreement is an insured contract. If the employee or employer assumes liability under the rental agreement, then the employer’s coverage is primary, but only if the employer has either symbol 1, symbol 8 (contract between employer and car rental company), or symbol 9 (contract between employee and car rental company.)