Many business owners have a commercial general liability (CGL) policy covering their business. While CGL policies offer broad coverage for many types of losses, automobile accidents are generally not among those covered losses, due to a carefully worded exclusion. Even though CGL policies also have a limited exception to the auto exclusion, business owners should not rely on a CGL policy for auto coverage and should have separate automobile insurance.
Most CGL policies specifically exclude coverage for “bodily injury or property damage arising out of the . . . use . . . of any . . . auto . . .owned or operated by or rented or loaned to any insured.” Many states considering this exclusion have found it to be unambiguous and applicable to exclude coverage for a loss resulting in injury or death. So, the CGL automobile exclusion will likely unambiguously preclude coverage where the injury arises out of the use of an auto operated by an insured. And this will be the case regardless of whether it was an insured operating a vehicle in an individual capacity at the time of the occurrence or operating a vehicle for an insured entity such as a company, corporation or LLC. The fact remains that either scenario would be considered an insured operating an auto at the time of the occurrence, therefore triggering the exclusion.
The CGL automobile exclusion typically provides certain exceptions to the exclusion. However, these are very narrowly tailored and should not be counted on to extend auto coverage except in very limited circumstances. For example, one exception states that the automobile exclusion “does not apply to . . . bodily injury or property damage arising out of the use of any non-owned auto in your business by any person other than you.” On its face, this exception suggests that there may be coverage for auto accidents if someone other than an insured is driving a “non-owned auto.” So, you must first determine if the driver is an insured – if so the exclusion applies, and the exception does not. You next look at whether the vehicle was a “non-owned auto.” If not, the exception again does not apply. Finally, the exception requires that the non-owned auto be used “in your business” at the time of the loss. Unless all these requirements are met, the exception will not apply, and the auto exclusion will operate to preclude coverage for an auto accident. While other exceptions to the auto exclusion exist, they are equally narrow and apply in only limited situations.
To avoid the headache of trying to fit the square peg of coverage for an auto accident into the round hole of a CGL policy, the better approach is to have a separate automobile liability policy in place. The two policies together offer the broadest possible coverage for many common business liability situations.