Combining exclusion 5. with exclusions 3. (Workers' Compensation) and 4. (Employee Indemnification and Employer's Liability) effectively removes any protection available under the BAC for an auto-related injury an employee might suffer in the course of employment (depending on who is classified as an "employee" based on entity type and law). Work-related injuries are to be covered elsewhere. The employer (the named insured) has the opportunity to purchase workers' compensation to protect it from these exclusions, but an employee has no such commercial insurance option, only a personal insurance option they may not recognize is needed.
Employees who unintentionally cause an auto-related injury to a fellow employee may be left with no insurance protection should the fellow employee file suit. Three examples of possible fellow employee gaps include:
- The employee driving a company-owned vehicle is negligent in his operation of the vehicle and is involved in an accident causing bodily injury to a co-employee riding with him (depending on the provisions of the "business use" exclusions and the meaning of "furnished for regular use" exclusion in the relevant PAP);
- The at-fault employee injures a fellow employee while using a company-owned vehicle assigned to the at-fault employee (a company car). The at-fault employee does not have the proper endorsement on his PAP (Extended Non-owned Auto) and is sued by the injured employee; or
- During a business trip, the at-fault employee rents a car in the name of his employer to travel to various appointments. He and a fellow-employee are injured in an at-fault accident and the fellow employee sues the driver.
Yes, these are all work-related injuries and the injured fellow employee will be eligible for workers' compensation benefits (provided no policy provisions have been violated). However, this does not preclude the injured employee from suing the at fault fellow employee. Workers' compensation's benefit as a sole remedy applies only to the employer, not the fellow employee; some states allow the injured party to also pursue and recover from any fellow employees causing the injury. Such allowance is based on the injury, the benefits received, and the facts of the case. Lacking the correct endorsements on the personal auto policy, the at-fault employee may end up having to pay out-of-pocket for such injuries to a fellow employee.
The
Fellow Employee Coverage (CA 20 55) endorsement removes the fellow employee exclusion from the BAC allowing the policy to respond on behalf of the at-fault employee following a vehicle-related injury to a fellow employee caused by a covered vehicle. When employers make company-owned vehicles available for employee use or allow employees to rent vehicles to benefit the company, this endorsement should be attached.
Auto Loan/Lease Gap As the name suggests, this endorsement alters the amount paid under the physical damage section of the BAC to include the difference between the actual cash value (ACV) of the vehicle and the amount remaining on the loan or the amount remaining on the lease. Basically it helps insureds who are "upside down" on their loan or lease at the time of the loss.
Obviously, the
Auto Loan/Lease Gap Coverage (CA 20 71) endorsement is a first-party coverage intended for the benefit of the insured. The coverage allows the insured to satisfy its contract with either the loss payee (lienholder) or lessor.
This endorsement pays the difference between the amount paid by the physical damage coverage and the amount owed, but only when there is a total loss. Payment is limited to the value associated with the specific vehicle. Expenses such as overdue payments, high-mileage and usage penalties, security deposits, add-on costs (i.e., credit life, etc.), and balances from prior loans or leases carried over to the current financing agreement are excluded from coverage.
Vehicle values drop so quickly and the difference between the ACV and the amount owed can be substantial. Consider this endorsement for all insureds with leased or recently-purchased vehicles.
Rental Reimbursement Insureds do not necessarily need a specific vehicle-they need the use of that or a similar vehicle. The vehicle itself is covered under the physical damage section of the BAC (under Other-Than-Collision or Collision); but the loss of use of that vehicle following a first-party comprehensive or collision loss is not covered by the unendorsed BAC.
When the insured suffers a first-party loss of a covered vehicle, he also loses the use of that vehicle while it is being repaired; a replacement must be procured.
Rental Reimbursement Coverage (CA 99 23) provides some of the necessary reimbursement to rent a replacement vehicle. This coverage is designed, as the name suggests, to reimburse the insured for the cost to rent a replacement vehicle while a covered vehicle is being repaired following a covered loss. The policy is subject to three maximums": a maximum per day limit; a maximum number of days; and a maximum total per loss, per vehicle. Further, the policy contains a 24-hour "after the loss" time deductible.
Coverage limits should be based on the type of vehicles being replaced. Private passenger autos may easily be attainable for $30 per day-depending on the size of vehicle rented. However, renting a replacement dump truck or other large work vehicle may run as high as $500 or $600 per day. The agent should be familiar with the rental market in the insured's area when selecting limits as the policy limits payment to the lesser of the actual rental cost or the limit purchased.
One last important provision of which the agent needs to be aware: there is no coverage extended from this form if the insured has a spare or reserve auto available for use. The policy pays only when the insured needs a replacement vehicle, not just because the covered vehicle is not available for use due to a covered cause of loss.
Insureds rarely have spare vehicles just sitting around waiting to be used. Generally the vehicle serves a purpose, and the loss of use of that vehicle can result in financial harm beyond the cost of rent (loss of sales opportunities, the inability to fulfill a contract, etc.). The Rental Reimbursement Coverage endorsement finances part of the cost to regain the use of a missing vehicle by replacing it with another for a short period.
Information for this article taken from,
Wow! I Never Knew That! 12 of the Most Misunderstood and Misused P&C Insurance Coverages, Concepts and Exclusions I would love to hear your feedback, please send me an email
cboggs@ijacademy.com.
Until next time,
Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS
Director of Education
Academy of Insurance
cboggs@ijacademy.com 
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