Auto insurance for a leased vehicle fleet

Coverage Q&A: Will insurance cover a fleet of vehicles leased from one company to another?

The insured plans to lease its auto fleet from another company. (Photo: Shutterstock)

Every claim is different, and some insurance policies can be difficult to interpret for unique situations. FC&S Expert Coverage Interpretation, the recognized authority on insurance coverage interpretation and analysis for the P&C industry, makes it simple to find credible answers to your complicated coverage questions. Analysis brought to you by our FC&S experts. 

Question: I have an insured business that plans to lease its auto fleet from another entity for taxation purposes. There will be a formal lease between the two companies. The CA 2001 policy indicates that the “lessor” is excluded from coverage. I believe the exclusion intends to avoid coverage in a proper lease situation, such as with a financial institution like Ford Motor Credit Company.

Is there a different additional insured endorsement that could be evaluated for the scenario of my insured?

— Pennsylvania Subscriber 

Analysis: Sometimes, an insured will take action to avoid or reduce tax liability that will not coincide with available insurance coverage. While the change might work to the insured’s benefit from a tax perspective, it may or may not be a legal transaction, and it may or may not benefit the insured in the event of an insurance claim. Before an insured makes any changes in ownership or alters the characteristics of their risk, it will be a good idea to check into the legality of the proposed transaction and whether insurance covers the risks.

Answer: To learn the answer to this week’s coverage Q&A, please log into your FC&S Expert Coverage Interpretation account.

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