When the use of a car, truck, or van is integral to your business, Commercial Auto Liability Insurance is a must-have. In the event of a car accident, Commercial Auto Liability Insurance can protect you from the fallout of a financially devastating lawsuit. Paying to cover the cost of bodily injuries, property damage, and other mishaps can be incredibly expensive. Without the right insurance coverage, a destructive auto accident has the potential to financially cripple your business.

If you own a car, truck, or van that is primarily used for business purposes, most states require you to have minimum levels of liability insurance. Though this insurance will cover most instances of bodily injury or property damage, the costly nature of auto accidents means that insurance companies must make 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.

What are common Commercial Auto Liability Exclusions?

The liability component of Commercial Auto Insurance consists of bodily injury liability and property damage liability. Commercial Auto Liability Insurance 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. There are some notable exclusions, however, in which coverage will typically not be provided. These include:

High-risk Activities

Expected or intended injury: Bodily injury or property damage that is caused intentionally is excluded from coverage.

• Example: You own a package delivery company, and an angry customer has come by your offices to complain and yell at you for poor service. In a fit of anger, you order one of your deliverymen to drive to the customer’s house and run over his mailbox. Your company is not covered when the customer sues your business because the company intentionally directed the delivery person to cause property damage to the customer.

Pollution: Auto liability insurance exclusions relating to pollution are numerous. They include damage or injury from:

• Pollutants that you transport
• Pollutants before, during, or after being loaded or unloaded from a covered vehicle
• Pollutants that are kept, treated, disposed of, or processed in a covered vehicle
  • Example: You own a chemical supply company in northwest New Jersey. You send a driver on assignment to transport a load of toxic chemicals to a plant in upstate New York. During the trip, your driver gets into an accident and his cargo spills, seeping into the land and destroying a farmer’s crops. Your Commercial Auto Liability Insurance will not cover you if you the farmer decides to sue.

Racing: If you or any of your employees are found to have caused damage or bodily injury with a covered vehicle in any professional or organized racing, demolition contest, or stunting activity, coverage will be excluded.

War: Coverage is excluded for injury or damage resulting from a war, warlike action, insurrection, or rebellion.

Risks Covered in Other Insurance Policies

Workers’ compensation: If an employee is injured in a company vehicle while at work, any obligations you’re held liable for under workers’ compensation, like medical expenses and lost wages, are not included in Commercial Auto Liability Insurance. This exclusion should not be cause for concern, though, because most states require businesses with employees to offer workers’ compensation insurance.

• Example: You own a flower company in San Francisco that specializes in speedy deliveries. On a delivery to Westfield Mall, your employee crashes into another car going 80 mph. Your driver winds up in the hospital with broken ribs, a black eye, and a medical bill worth $50,000. Your company is able to cover his medical expenses and lost wages with workers’ compensation insurance.

Employee indemnification and employers’ liability: If an employee is injured in a company vehicle while at work and the employee or their family seeks additional damages outside of what’s covered by workers’ compensation, coverage is not included in Commercial Auto Liability Insurance. Any legal fees, judgements, or settlement costs from these types of suits should be covered by employers’ liability insurance. Notable exceptions are domestic workers who are not covered by workers’ compensation benefits, as well when liability is assumed by your business under contract.

• Example: A driver at your trucking company is involved in an accident on the highway. His medical fees are covered by your workers’ compensation insurance, but he decides to sue your business for neglecting to maintain adequate maintenance and safety standards for your fleet of trucks. Employers’ liability insurance, not your Commercial Auto Liability Insurance, would cover any legal defense or settlement costs.

Care, custody, or control: If a vehicle that is under your business’s care, custody, or control (i.e., a vehicle you own, rent, or hire) is damaged, your Commercial Auto Liability Insurance will not cover this damage. Protection for your own vehicles is covered under comprehensive physical damage coverage. If property that was being transported by your vehicle is damaged in an accident, coverage is also excluded. Coverage for goods in transit can be provided by an inland marine insurance policy.

Handling of property: Commercial Auto Liability Insurance will cover any accident that occurs while you are loading property onto, or unloading property off of, a covered vehicle. However, it does not include any bodily injury or property damage that occurs just before the loading or just after the unloading process. This can be a legal gray area, because definitions of when the loading and unloading process start can vary. General liability insurance should cover this exclusion.

• Example: You own a DJ business and have just completed a set at a customer’s house party. As you are getting ready to pack up and load DJ equipment into your truck, the customer offers to help you move some of the heavier items. As you and the customer are carrying a large turntable through the house to the driveway, your fingers slip and the turntable crashes to the ground, cracking the hardwood floor of your customer’s living room. Your state does not consider the incident to be part of the loading process, so it is not covered under your Commercial Auto Liability Insurance but is covered by your general liability policy.

Movement of property by mechanical device: Bodily injury or property damage that occurs as a result of movement of property by a mechanical device, other than a hand truck or a device that is attached to a covered vehicle, is excluded. General liability insurance should cover this exclusion.

Operation of mobile equipment: Bodily injury or property damage that results from operation of mobile equipment is excluded. Mobile equipment is defined as any equipment that is not designed for use on a public road. General liability insurance should cover this exclusion.

Hired and non-owned autos: If an employee causes an accident with a vehicle that is hired (i.e., borrowed, rented, or leased) or not owned (i.e., an employee’s personal vehicle) by the company while fulfilling business purposes, any bodily injury or property damage is excluded from coverage. Protection can be provided by hired and non-owned auto liability insurance.

Final Word

Commercial Auto Liability Insurance can protect your business from lawsuits claiming bodily injury or property damage as a result of you or an employee’s accident while driving. Commercial Auto Liability Insurance does not offer air-tight coverage for all scenarios, however, so it is important to note the exclusions in your typical auto liability policy form. Intentional damage, damage from pollutants, and injuries covered by workers’ compensation are just a few of the notable exceptions to most Commercial Auto Liability Insurance plans. While many exclusions are covered by other insurance policies, there are some perils that are simply too risky for insurers to cover.