Endorsements to Personal Auto Policy

Summary: The personal auto policy (PAP) of Insurance Services Office (ISO) typically provides adequate coverage for the use of nonowned autos. The liability section clearly states that the policy covers "You [the named insured] or any "family member" for the ownership, maintenance or use of any auto or "trailer." That is a very broad promise and, as mentioned, covers most nonownership situations.

Sometimes, though, an insured may need coverage for nonowned auto exposures that are excluded under the PAP. For example: a salesperson that has a company car provided to him or her has no PAP coverage for his personal use of that vehicle (the furnished or available for regular use vehicle). The business auto policy does not exclude coverage for personal use of a company car (that is a covered auto), but many persons prefer to rely on their own insurance. That salesperson may cover the liability and medical payments exposure of personal use of a company car—under his or her PAP—by purchasing endorsement PP 03 06 01 05. This endorsement—extended non-owned coverage—vehicles furnished or available for regular use—expands the regular liability and medical payments coverages to insure this additional exposure. This coverage is always excess over other collectible insurance on a nonowned auto.

Persons engaged in the auto business can obtain extended nonowned coverage for this exposure by attaching PP 03 96 01 05. This endorsement, however, provides extended nonowned coverage for that exposure only; if the insured is regularly furnished an auto, endorsement PP 03 06 must also be attached.

Prior to the 2005 edition of the PAP, coverage for an insured who drove a limo or taxi could also be covered under PP 03 06, but now endorsement PP 13 05 01 05 extended non-owned coverage—vehicles furnished or available for use as public or livery conveyances can be used to provide coverage for this exposure under the insured's PAP.

Because coverage often hinges on whether a vehicle is "available for [the named insured's] regular use," a discussion of court decisions regarding "regular use" concludes this article. The cases cited have been chosen to show various interpretations.

Topics covered: Liability exclusions deleted Fellow-employee suits Medical payments Rating Regular use

Liability Exclusions Deleted

Under the 2005 edition of the PAP, ISO has retitled PP 03 06 01 05 to reflect its use, and that is to provide coverage for a vehicle that is regularly furnished or available for regular use, but is not a "covered auto." Previously, it was called extended non-owned coverage for named individual, and it could be used not only to provide liability coverage when a company-furnished car was involved, but also when the "company car" was a limo or taxi. But now, PP 03 06 is titled "extended non-owned coverage—vehicles furnished or available for regular use," and it is used when the vehicle(s) is not used as a public or livery conveyance. The first part of this discussion deals with this endorsement. Endorsement PP 13 05 01 05, which is used when the furnished vehicle(s) is used for public or livery purposes, is discussed later.

Extended nonowned coverage is written for either the named individual, or for the named individual and family members. "Family member" is defined as the named insured's spouse or a relative of either, living in the same household. It is important to realize from the start that the endorsement broadens regular personal auto coverage only for those indicated in the endorsement. Any covered person who needs extended nonowned coverage must be indicated on the endorsement. For example, the endorsement will not automatically extend coverage to the named person's spouse or other family member unless the box for "named individual and 'family members'" is checked.

The most frequent need for the extended nonowned endorsement is to delete the exclusion for nonowned autos "furnished or available for the regular use" of the named insured or any family member. If the named insured has a company car that he or she may also use for personal purposes, the standard personal auto policy does not provide coverage for that car—while it is being used by anyone. Likewise, a car furnished to a family member of the named insured is not covered (except with respect to the named insured's use of the car).

The extended nonowned endorsement provides liability coverage for personal use of a "company car" by deleting exclusion B.2.b. (any vehicle other than a covered auto furnished or available for the named insured's regular use) and by declaring that the insurer will provide "liability coverage for any vehicle, other than 'your covered auto', which is furnished or available for the regular use of the named individual." The previous endorsement simply deleted exclusions B.2.b. and B.3., which precluded liability coverage for any vehicle (other than the named insured's covered auto) that was owned by or furnished or available for the regular use of any "family member." (The meaning of "furnished or available for regular use" is discussed in more detail later in this article under the heading Regular Use.)

An exclusion in the endorsement states that extended nonowned coverage does not provide any coverage for an auto owned by the named insured or a family member, or a temporary substitute for such an auto. This exclusion should be read in context with the coverage of the basic personal auto policy. For example: the exclusion does not eliminate coverage for an auto owned by the named insured if that car meets the definition of "your covered auto." By the same token, the exclusion does not prevent coverage for the named insured's occasional use of a resident relative's car, since that coverage is also clearly provided by the basic policy.

An instance when the exclusion could be properly applied is when the individual included on the endorsement, a family member of the named insured, is using his own car, which does not qualify as "your covered auto."

The previous edition of this endorsement deleted exclusions A.5. (vehicle used as a livery conveyance) and A.7. (use of a private passenger auto, pickup or van in business). But because endorsement PP 13 05 (discussed next) has been developed, exclusion A.5. is deleted on that endorsement. And, with the statement that the insurer will provide liability coverage for any vehicle (other than a covered auto) that is furnished or available for the regular use of the person(s) named in the schedule, there is no need to delete the exclusion for vehicles used in business. It is presumed that the vehicle probably will be used in business. Remember, though, that the PAP provides coverage for a covered auto—an owned private passenger car, pickup, or van, or trailer used with one of these—used in business. The endorsement extends the same protection to a nonowned auto used in business.

Endorsement PP 13 05 01 05, extended non-owned coverage—vehicles furnished or available for use as public or livery conveyances is much like PP 03 06 in that the person or persons to be covered must be indicated in the schedule. Coverage applies to the named individual and, if so indicated, to his or her spouse and other family members.

The endorsement, similarly to PP 03 06, states that the extended nonowned coverage provided by the endorsement does not apply to liability coverage for a vehicle owned by an individual named in the endorsement, a "family member," or to a temporary substitute for such a vehicle. But again, if a vehicle owned by the named insured meets the definition of "your covered auto," or if the named insured occasionally uses a resident relative's car, the basic policy provides coverage.

PP 13 05 deletes exclusion A.5. (vehicle used as a livery conveyance), and replaces exclusion B.2. to state that the insurer will not provide liability coverage for the ownership, maintenance or use of any vehicle, other than the named insured's "covered auto," which is owned by the named insured, or furnished or available for the named insured's regular use. However, the exclusion does not apply to the operation of a vehicle furnished or available for regular use of the named individual(s) as a public or livery conveyance. The endorsement affirmatively states that the insurer will provide liability coverage "arising out of the operation of a vehicle which is furnished or available for use of the named individual as a public or livery conveyance."

The previous edition of PP 03 06 also deleted the exclusion (A.7.) pertaining to the maintenance or use of certain types of autos in a business (not including farming or ranching) other than the business of selling, repairing, servicing, storing, or parking of automobiles, which is the subject of exclusion A.6. Normally, the exclusion rules out coverage for nonowned autos of other than the private passenger car type, pickups, or vans (or a trailer used with them) used in business. Deletion of the exclusion provided coverage for any type of nonowned auto (having four or more wheels) the named individual might use in business. A truck driver, for example, would have coverage under his own policy while driving a nonowned truck on the job. But in the current edition of the endorsement, the exclusion is not deleted and so, for example, use of a dump truck by the insured on his or her job would not be covered.

Neither of the extended nonowned endorsements deletes exclusion (A.6.), which pertains to autos used in one of the "automobile businesses" noted in the previous paragraph. An employee of an auto business, therefore, must rely upon the employer's garage liability insurance while using nonowned autos of any type on the job or add PP 03 96.

Endorsement PP 03 96 deletes part B.4. (any other person or organization …with respect to legal responsibility for acts of omissions of you…) of the Part A – Liability Insuring Agreement, as well as exclusion A.6. for coverage while employed or engaged in the auto business. However, as noted, this endorsement does not delete the exclusion for a vehicle furnished or available for regular use, so if the insured is furnished a company car—a demo to drive, perhaps—then endorsement PP 03 06 must also be added. PP 03 96 does not allow for coverage for a spouse or other family member to be added, since the intent is strictly to pick up a particular insured's exposure while employed in the auto business; for example, while test-driving a vehicle.

Fellow-Employee Suits

A specific advantage of extended nonowned coverage is protection for the named individual against suits by fellow employees arising out of work-related accidents. In an increasing number of cases, employees have been permitted to recover damages from fellow employees whose negligence caused their injuries. Although employees are customarily given insured status under their employer's automobile insurance, there is, in the business auto policy and most other commercial automobile policies, an exclusion of bodily injury to a fellow employee.

The personal auto policy does not contain such an exclusion and so the named insured and family members of a personal auto policy are covered for fellow-employee lawsuits—as long as one of the exclusions of business use does not apply. For example: if the extended nonowned coverage endorsement is not added to the policy, a fellow-employee lawsuit arising out of the use of a regularly-furnished nonowned pickup, or van in business would not be covered, nor would a fellow-employee lawsuit arising out of the use of an auto for hire. However, when the coverage is added, the named individual has coverage for fellow-employee lawsuits whose circumstances fall within the broader scope of extended nonowned coverage.

Medical Payments

If extended nonowned liability coverage is purchased, the named individual can also purchase extended nonowned medical payments coverage under the same endorsement. Endorsement PP 03 06 deletes exclusion 5.b. (injury sustained while occupying a regularly furnished vehicle) and states that the insurer "will provide Medical Payments coverage for "bodily injury" sustained while "occupying", or when struck by, any vehicle (other than "your covered auto") which is furnished or available for the regular use of the named individual."

Endorsement PP 13 05 states that exclusion 2. for injury sustained while occupying a covered auto while being used as a livery conveyance does not apply to the coverages provided by the endorsement. This seems confusing, because the coverages were never intended to apply to the insured's "covered auto." Perhaps this is by way of making sure that if the insured has purchased the coverage, there will be no question should a claim arise. The endorsement goes on to state that the insurer "will provide Medical Payments Coverage for "bodily injury" arising out of the operation of a vehicle which is furnished or available for use of the named individual as a public or livery conveyance."

Endorsement PP 03 96 deletes exclusions 5. and 6. if medical payments coverage is purchased.

Rating

Rules and premiums are found under rule 17 in the personal vehicle manual. Liability and medical payments premiums depend on the circumstances. If the named individual is furnished an auto for regular (non-livery) use, and no primary insurance is in effect on the auto, the premium charge is 90 percent of the liability premium that would otherwise apply if the auto were specifically insured for the named individual. If coverage is extended to resident relatives, including the named individual's spouse, the charge is 100 percent. If the auto has primary liability coverage in effect or is used in United States government business, the percentage charges are 12 and 13 percent, respectively.

If the regularly furnished vehicle is used for public or livery purposes, the percentage charge for the named individual is 50 percent; for named individual and resident family members, 60 percent.

For endorsement PP 03 96, the premium is 170 percent of the base liability if no primary coverage is in force; otherwise, refer to the company.

Regular Use

As mentioned earlier, extended nonowned coverage is usually purchased to delete the exclusions pertaining to automobiles furnished or available for the regular use of the named insured and family members. Thus, it is important to know what constitutes an automobile "furnished or available for regular use."

Numerous court decisions have answered this question—see 8 ALR 4th 387 for a detailed annotation—but such decisions have depended on the particular facts involved in each case. If one were to make a blanket statement regarding either coverage or lack thereof, it would be that examining all facts before making a determination is imperative, since different jurisdictions have reached different conclusions even when the facts of one situation appeared to mirror the facts in another. In general, however, courts have held that an automobile is not furnished or available for the regular use of the insured where the insured has to ask for specific permission prior to each use of the automobile. See, for example, the following: the case of General Leasing Corp. v. Anderson, 416 P.2d 302 (Kan. 1966); the case of Leteff v. Maryland Casualty Co., 91 So. 2d 123 (La. App. 1956); and Travelers Indemnity Co. v. Pray, 204 F.2d 821 (6th Cir. 1953), applying Michigan law.

A different decision was reached in the case of State Farm Mutual Automobile Ins. Co. v. Jones, 383 S.E.2nd 734 (Va. 1989).  Jones, a route salesman furnished a van, had to request permission every time he wanted to use the van for any personal purpose. The court held, however, that his usage presented "frequent, daily, and extensive use, dominion, and control," since he had full use of the van an average of six days a week. Although, as in this instance, an employer's furnishing a vehicle to an employee would appear to be an open and shut case of a vehicle's being "regularly furnished," that is not always true. In Pacific Auto Ins. Co. v. Lewis, 132 P.2d 846 (Cal. App. 1956), an auto sales agency furnished one of its salesmen an auto for demonstration purposes. He was given permission to use the auto for incidental purposes, and given special permission to drive out of town on personal business. The court ruled the auto was not furnished for his regular use insofar as the trip. Needing permission again trumped frequency of use in Acadia Insurance Co. v. Mascis, 776 A.2d 617 ( Me. 2001). Here, a girl had to ask permission to drive her boyfriend's car and so the court found such use was not "regular," even though she drove the vehicle some three to five times a week.

How frequently the insured uses the automobile prior to the accident, then, has not seemed to be as important as the insured's right to use the automobile. That is not to say the frequency of use is not considered in the decision. In one case, for example, the insured had free use of a nonowned vehicle for an indefinite period of time prior to the accident. The court ruled that the insured's personal auto policy properly excluded liability coverage for his use of this car (Spaulding v. Concord General Mutual. Ins. Co., 446 A.2d 1172 (N.H. 1982)).

In cases where the insured has had regular access to some car—not necessarily the same one—from a vehicle pool, courts have quite uniformly applied the exclusion of vehicles furnished or available for regular use. For example, in United Services Automobile Assn. v. Couch, 643 S.W.2d 668 (Tenn. App. 1982) the court ruled that a car available to an employee while working was furnished for his regular use. In that decision, the court said: "The obvious purpose of the "nonowned vehicle" coverage is to afford protection to the insured on occasions when the insured is temporarily using a vehicle not covered by the policy. . . [T]he purpose of the exclusion is to deny coverage to the insured while using a vehicle as to coverage of which he has opportunity to investigate." In other words, the insured had the opportunity to purchase the necessary coverage and chose not to do so.

Similar decisions have been handed down in cases involving a government office worker, an employee of an automobile sales agency, a bus driver, and a police officer.  (The cases are, respectively, Farm Bureau Mutual Automobile Insurance Co., v. Marr, 128 F. Supp. 67 (D.C. N.J. 1955), Farm Bureau Mutual Automobile Insurance Co. v. Boecher, 48 N.E.2d 895 (Oh. App. 1942), Venters v. Selected Risks Insurance Co., 295 A.2d 373 (N.J. Super. 1972), and O'Brien v. Halifax Insurance Co., 141 So. 2d 307 (Fla. App. 1962)). In each case, the fact that some automobile was available to the insured was held sufficient to make the particular one used at the time of the accident an automobile "furnished for regular use."

"Furnished for regular use" should not be taken to mean that the furnished vehicle is necessarily being used by the insured in the same manner or for the same reasons as he or she would use his or her personal auto. Indeed, it is enough that the insured has access, without having to request permission on each occasion, to a vehicle. Numerous cases have held that a car owned or leased by the insured's employer and provided to the insured for business use and driving to and from work is furnished or available for the regular use of the insured. For example, in Farmers Ins. Co. v. Zumstein, 675 P.2d 729, (Ariz. App. 1983), the court ruled that a truck (owned by the insured's employer) was provided for the regular use of the employee because the employee had sole possession of the keys; kept the keys at his residence; and drove the truck to work site and home again for approximately six weeks. The Kansas case of Miller v. Farmers Mutual Automobile Insurance Co., 292 P.2d 711 (Kan. 1956), which involved a government pool, held to the contrary, but this seems to represent the minority view.

Other courts have distinguished between the use a person makes of an automobile in the regular course of duties and some unusual use of it. In United States Sugar Corp. v. Nationwide Mut. Ins. Co., 475 So. 2d 1350 (Fla. Dist. Ct. App. 1985), the court held for coverage under the insured employee's policy. Even though the employer provided the car for the insured to use in business purposes, it did not meet the definition of "furnished for the regular use" of the employee when he struck a pedestrian while the insured was engaged in infrequent or casual use of the car.

In another case, the court ruled that the term "regular use" as used in the personal auto policy is ambiguous. The court ruled for coverage under the employee's policy, even though he had daily use of it for business purposes and kept it at his residence. See Metropolitan Property and Liability Ins. Co. v. Childs, 751 P.2d 254 (Utah Ct. App. 1988). (Note, however, a rehearing was granted in this case and before any further disposition, a settlement was reached; so the court's initial opinion was vacated.)

In each of the two above cases there was a holding for coverage on the ground that the automobile, though furnished for regular use of the insured, was not being employed in this "regular use" at the time of the accident. If there is ever a question as to use, however, it is safest to err on the side of caution and add coverage to the PAP.

Questions concerning regular use also arise when an insured rents a car for a short term. Does one week of rental constitute regular use? Two weeks? A month? Again, there is no definitive answer, but it may be helpful to note that the United States Court of Appeals for the fifth circuit, applying Florida law, held that a three week rental of an automobile did not constitute regular use. The case is Factory Mutual Liability Insurance Co. of America v. Continental Casualty Co., 267 F.2d 818 (5th Cir. 1959). And in American States Insurance Co. v. Tanner, 563 S.E.2d 825 (W. Va. 2002), a rental vehicle furnished to the wife when her vehicle was in the shop for repairs following an accident was not "regular use" and so the husband's auto policy, with a different carrier, provided coverage when she negligently lost control and crashed into a store.

Obviously, it is most desirable for an insurance producer to advise clients not to take a chance on a close decision going in their favor, but to purchase extended nonowned coverage whenever there is any likelihood of their driving nonowned automobiles regularly. Of course, where the insured is content to rely on protection under the owner's insurance, extended nonowned coverage may not be wanted. The client should be reminded that the coverage applies only to liability, and, if purchased, medical payments. It does not respond to any physical damage to the nonowned vehicle.