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What Does Commercial Auto Liability Insurance Cover?

What Does Commercial Auto Liability Insurance Cover?

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Commercial auto insurance is important for any business owner who relies on a company-owned or leased car or other motor vehicle to keep their business running. One of the most financially harmful risks of using a vehicle in a business setting is the possibility of an accident and subsequent lawsuit. If you’re found to be at fault for injuring a third party or damaging their property, they will likely have grounds to sue your company.

Legal expenses, judgements, and settlement costs for automotive accidents can be financially damaging to your business. That’s why a key component of commercial auto insurance is coverage for Commercial Auto Liability. This form of liability insurance can protect your business from the financial impact of a lawsuit after an accident.

What does Commercial Auto Liability Insurance cover?

Commercial Auto Liability Insurance typically covers three types of damages caused by an accident involving a covered vehicle: bodily injury, property damage, and pollution cleanup. This coverage protects your business if you or one of your employees causes injury or damage to another party while driving and are deemed to be at fault for the crash. Most states require a minimum amount of liability insurance for registered vehicles.

Bodily Injury Liability – if you or an employee is at fault for causing an automotive accident in a covered vehicle that results in bodily injury to a third party, your Commercial Auto Liability Insurance will cover the costs of any financial damages, up to your policy limits. Covered costs include:


Coverage for bodily injury liability generally has different limits that apply to “per person” and “per accident” costs. For example, there might be a policy with a $100,000/$400,000 per person/per accident limit. With these limits, the most the insurance company will pay to each injured person in a crash is $100,000, and the most they will pay for all the people injured in the crash is $400,000.


Property Damage Liability – covers the cost of any lawsuit related to third-party property damage that was caused by you or one of your employees while operating a covered vehicle. Examples of common property damage costs covered by insurance include:


Coverage for property damage liability generally has a maximum limit your insurance policy will pay for all of the property that received damage in the accident. Along with your bodily injury limits, these split limits are generally stated as maximum bodily injury payment per person/maximum bodily injury payment per accident/maximum total property damage, e.g., $100,000/$500,000/$75,000.

Combined Single Limit (CSL) Liability – this option combines the coverage of bodily injury liability and property damage liability. Combined single limit liability coverage does away with split limits and has just one total maximum payout amount per accident.


The only downside of a policy with a combined single limit liability is that it is generally more expensive. However, the upside is that you are less likely to experience a gap in coverage.

Pollution Cleanup – if you or an employee is at fault for an accident in a covered vehicle that causes bodily injury or property damage, your Commercial Auto Liability Insurance will cover the costs of pollution cleanup due to the accident.


What vehicles are covered by Commercial Auto Liability Insurance?

Depending on your policy, you may choose to purchase coverage for all of the vehicles you own or only certain types. Additionally, you have the option of specifying coverage for owned, hired, or non-owned vehicles. “Hired” means vehicles that you lease, hire, rent, or borrow, and “non-owned” means vehicles that you do not own, lease, hire, rent, or borrow (e.g., an employee’s personal car).

Your Commercial Auto Liability Insurance should automatically cover the following types of vehicles:

Out-of-State Travel

Most states require that you purchase some minimum amount of liability coverage for a registered vehicle. However, there are variations in coverage requirements between states. If your business takes you to another part of the country that requires a higher limit of insurance, your Commercial Auto Liability Insurance will temporarily award you enough coverage to meet the laws of that state.


Defense Costs

Commercial Auto Liability Insurance also provides coverage for supplementary payments, which cover the cost the insurer pays to investigate claims and defend lawsuits against the insured. The coverage often includes:


Though Commercial Auto Liability will cover most instances of bodily injury or property damage, the costly nature of auto accidents means that insurance companies must make a number of notable exclusions. While you may not be able to receive coverage for some of these exceptions through your Commercial Auto Liability Insurance, there are often other avenues for coverage, including through other insurance types like general liability insurance or adding on specific protections via endorsements.

Final Word

The primary benefit of Commercial Auto Liability Insurance is to protect your business from a potentially devastating lawsuit in the event of an auto accident. If you’re found to be at fault in an accident that causes bodily injury or property damage to a third party, any claims against your business could put your company at risk financially. The majority of states do require some degree of liability insurance for registered vehicles, so it’s important to understand exactly what coverage your commercial auto insurance is meant to provide and why you may need it. If your business relies heavily on company-owned or leased vehicles to do business, make sure you’ve setup the right safeguards to keep you and your employees protected in the event of an accident.

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