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When analyzing coverage under an auto policy it’s very common to hear someone say, “Just list them as a driver and that way they are always covered.” Considering the number of times this statement is made, perhaps it’s warranted to look at what listing someone as a driver does do, and more importantly what it does not do.

When someone is listed as a driver on an auto policy it’s done purely as an underwriting tool to allow the company to obtain the motor vehicle report (MVR) of the person listed. For example, on a personal auto policy (PAP), most companies want to list all household residents and any other regular operators of the vehicle. On a business auto policy (BAP), most companies want to list all employees who regularly drive the insured vehicles. Listing the drivers allows the company to properly underwrite the risk, surcharge for violations or accidents, and where warranted cancel or non-renew the risk.

To determine coverage under an auto policy, the “who is an insured” section of the policy must be examined. With a PAP “who is an insured” includes the person named, resident spouse, family members who reside in the household, and anyone using the covered auto with permission. Note that nowhere does the “who is an insured” section state “those listed as a driver are also insured.” For example, Henry’s PAP names him as named insured and his daughter Samantha as a driver. Henry loans the car to his friend Mary, who is in an at-fault accident. Since Mary is a permissive user she is “an insured” under Henry’s PAP even though she is not (and does not need to be) listed as a driver. As another example, Samantha goes out of town and borrows a friend’s car, is negligent, and injures a pedestrian. Samantha is “an insured” under Henry’s PAP, not because she is listed as a driver, but because she is a “family member.” Thus Samantha is covered by the Henry’s PAP.

As an example of how listing someone as a driver does not provide coverage, consider the situation where Henry and Mary are not married and living together with Henry owning the only car in the household and having a PAP in his name. Since Mary would regularly drive Henry’s car, his PAP carrier should be notified since they will want to list her as a driver. When Mary is driving Henry’s car she is “an insured” because she is a permissive user. The fact that she happens to be a listed driver does not affect coverage. However, have Mary go out of town, rent or borrow a car and have an at-fault accident she will not be covered by Henry’s PAP, even though she is listed a driver. She is not covered because she is not the named insured, the spouse, a family member, or driving Henry’s auto. The only time Mary is “an insured” under Henry’s PAP for liability, med-pay, PIP, UM, and physical damage is when she is occupying Henry’s auto. This presents a significant gap for Mary and she is a candidate for the Named Non-Owner policy under which she can purchase liability, med-pay, and uninsured motorist coverage.

A recent court case in Louisiana illustrates this point very well. The insurance company issued a PAP to Robert, who was the only named insured. His fiancée, Jennifer, lived with him and was listed as a driver on the declarations page. Jennifer was driving a non-owned auto owned by her sister-in-law and caused bodily injury to a third party who brought suit against Jennifer and others. Jennifer sought coverage under Robert’s PAP, claiming that she was covered by virtue of being listed as a driver. The Louisiana Supreme Court found no coverage under the policy stating, “…being listed as a driver on the declarations page does not transform that person into a named insured.” The court also found that Jennifer was not a “family member” as defined by the policy. (Lemoine v. Illinois National Insurance Company, March, 2004)

The same principles apply to the business auto policy. Employees listed as drivers would have coverage while driving an auto covered under the BAP, but not while borrowing or renting another vehicle for pleasure use. They would find coverage for those situations under their own PAP or Named Non-Owner policy should they have one, or possibly by adding the Drive Other Car endorsement to the BAP.

Remember, “Listing as a driver does not affect coverage.”

” Our blogs are for general education and information only and may not represent your unique needs. Coverage will vary. Please contact your agent to verify your specific policy terms and conditions.”

Courtesy of FAIA, Authored by David Thompson, CPCU, AAI, API

Does your company need “Business Interruption Insurance?” C/O Jerry Osteryoung

Business Interruption Insurance (BII), which is intended to compensate the company for income lost in the event physical damage renders it inoperable for a period of time, can provide so much value in so many ways.

Above and beyond basic BII coverage, you have a couple of add-ons. Extended Business Interruption Insurance provides coverage for losses sustained after repairs are complete but before income returns. It is typically limited to a finite period of time. Contingent Business Interruption Insurance provides coverage for income lost as a result of physical damage, not to the insured’s property, but to the property of providers, suppliers or consumers of its products or services.

To recover BII benefits, the business must prove it sustained damage to property covered by the policy and that the damage was caused by a peril listed in the policy. Additionally they must prove the property damage caused them to lose business income. The loss must be a direct result of that interruption and not linked to any other factor.

All BII policyholders are required to use the same basic formula to calculate claims based on lost net profits. If a company sells a product for $200 and spends $170 assembling or acquiring it, its policy will cover $30 per loss. Dollar limits are determined by an estimate of the company’s total potential net profit losses.

I think BII is necessary for most businesses, but it is important to note that purchasing any coverage is not going to be good enough. You need to be so careful to select the policy that works for your business.

Recently, I worked with one firm that produces wood products in a very large factory. They purchased BII for a reasonable amount of money, and their policy has been in effect for more than 10 years. Then about six months ago, the factory burned to the ground.

The owner and managers knew they had a $3.2 million BII policy to fall back on, but for months, the insurance company refused to pay the claims citing improper paperwork. Out of desperation, the firm hired their own adjuster and is finally making progress towards getting some cash out of their policy.

This company had BII insurance, but if the owners had not been able to bankroll the operation, they would not have survived. They would have gone belly up while trying to straighten out these issues with their policy.

When I asked the company what they learned from this very difficult situation, they said they should have read their policy carefully. Their policy was 100+ pages, and they just had not taken the time to go through it when they purchased it.

Now go out and determine if you need Business Interruption Insurance. If you do, be sure to read your policy in detail so you understand the risks the insurance company is taking and the risks you are taking

At the break in a class I overheard a student say, “My husband is in the military, so we don’t need uninsured motorist (UM) coverage.” The same comment could be said by someone who had PIP coverage, auto medical payments coverage, health insurance, disability insurance, Medicare, or even workers’ compensation coverage.

Clearly, the benefits provided by the military, PIP, auto medical payments, disability insurance, and workers’ compensation can be substantial. Even as good as those benefits are, however, there are expenses not covered under those policies that would be covered by UM. Remember, UM pays what the insured is legally entitled to recover from the at-fault party. Often, monetary damages awarded by a court include things that none of the earlier referenced policies (or military benefits) will cover.

Let’s take a look at this issue by way of example and see what the benefits of UM coverage are, beyond just reimbursement for medical bills.

Suppose Bill is involved in a hit-and-run auto accident and is seriously hurt by the at-fault party. He is protected by a personal auto policy (PAP) with $50,000 of PIP (he increased the $10,000 basic limit to this higher amount after seeing the small additional premium charge) and $5,000 of auto medical payments coverage. His auto policy includes $250,000 of UM coverage and his personal umbrella includes $1 million of UM. Bill has no disability income policy. Additionally, he is covered by a health insurance policy provided by his employer.

As a result of the accident the following expenses and losses were incurred by Bill:

• $75,000 for prior medical bills.
• $175,000 for future medical bills.
• $20,000 for prior lost wages.
• $300,000 for future lost wages.
• $1,000 for a wheelchair since Bill is unable to walk now.
• $10,000 for future wheelchairs.
• $30,000 for a special van to transport Bill and his wheel chair.
• $90,000 for future vans.
• $20,000 to retrofit the house to accommodate the wheel chair.
• $25,000 for a yard service for Bill’s remaining life expectancy, since he is unable to cut the yard now.
• $100,000 for future pain and suffering.
• $100,000 for the loss of “family comfort” with his wife.
• $100,000 for the loss of the ability to coach youth softball.
• $200,000 for future loss of the enjoyment of life.

Looking at the insurance that Bill has (disregarding the UM for now) what is seen is that the PIP and auto medical payments coverage are quickly exhausted. Bill can fall back on his health insurance, but keep in mind that he will likely incur a deductible plus a co-pay each year. Once Bill’s PIP is exhausted, his wage-loss protection is gone and with no disability income policy he is “up the creek.”

Suppose, however, that the accident happened to be work related and thus covered by worker’s compensation. In such case, Bill’s medical expenses would be fully covered, subject to the provisions of the workers’ compensation law. Bill’s lost wages would be paid, typically (in Florida) at 66.67 percent of his wages. The time period for which workers’ compensation will respond for lost wages varies from two years to a lifetime, depending on the type of disability. Remember, too, wage loss benefits are subject to a maximum per week, which in Florida is around $850 per week. The wage loss benefits paid to Bill by workers’ compensation would not fully replace his salary.

With or without workers’ compensation coverage, consider the monies awarded to Bill for which he has no coverage, except under UM. The excess medical expenses, lost wages, wheelchair, van, house modifications, yard service, pain and suffering, loss of family comfort, and all the other damages listed above would be covered by UM.

Of course UM isn’t always an inexpensive coverage, but when the cost is compared to what most folks spend on cable TV, cellular service, a country club membership, or eating out for dinner twice a month, the cost for UM is probably the lowest listed.

Even if someone is in the military, is retired, and/or has “a lot of other insurance,” the protection provided by uninsured motorist coverage is very valuable. Don’t be so quick to reject this valuable coverage.

” Our blogs are for general education and information only and may not represent your unique needs. Coverage will vary. Please contact your agent to verify your specific policy terms and conditions.”

Courtesy of FAIA, Authored by David Thompson, CPCU, AAI, API 

Annual Global Road Crash Statistics

• Nearly 1.3 million people die in road crashes each year, on average 3,287 deaths a day.
• An additional 20-50 million are injured or disabled.
• More than half of all road traffic deaths occur among young adults ages 15-44.
• Road traffic crashes rank as the 9th leading cause of death and account for 2.2% of all deaths globally.
• Road crashes are the leading cause of death among young people ages 15-29, and the second leading cause of death worldwide among young people ages 5-14.
• Each year nearly 400,000 people under 25 die on the world’s roads, on average over 1,000 a day.
• Over 90% of all road fatalities occur in low and middle-income countries, which have less than half of the world’s vehicles.
• Road crashes cost USD $518 billion globally, costing individual countries from 1-2% of their annual GDP.
• Road crashes cost low and middle-income countries USD $65 billion annually, exceeding the total amount received in developmental assistance.
• Unless action is taken, road traffic injuries are predicted to become the fifth leading cause of death by 2030.

Annual United States Road Crash Statistics

• Over 37,000 people die in road crashes each year
• An additional 2.35 million are injured or disabled
• Over 1,600 children under 15 years of age die each year
• Nearly 8,000 people are killed in crashes involving drivers ages 16-20
• Road crashes cost the U.S. $230.6 billion per year, or an average of $820 per person
• Road crashes are the single greatest annual cause of death of healthy U.S. citizens traveling abroad

” Our blogs are for general education and information only and may not represent your unique needs. Coverage will vary. Please contact your agent to verify your specific policy terms and conditions.”

Courtesy of ASIRT

Why is my neighbors insurance cheaper than mine? That might be a question you’re asking yourself after finding your neighbor is paying less on their car or homeowners insurance than you are. And while that shouldn’t necessarily foster bad relations with your neighbor, there isn’t any neighborhood profiling going on that singles you out to pay more. When it comes to insurance, there’s still a mistaken notion that what neighborhood you live in and what your income is will determine a standard rate for everyone. The truth is, insurance goes with the variables of an individual’s life.

Why You Might Be Paying More for Car Insurance

You might still be confused that you’re paying a higher car insurance premium when you and your neighbor even have the same car. However, ask your neighbor what year their car is. Is the car a few years older than yours? If it is, it may explain why your neighbor pays less.

Also consider that driving records will make a considerable difference in insurance rates. It’s possible that your neighbor has never been in an accident or had a speeding ticket. Conversely, perhaps you have and should go pay that outstanding traffic ticket before it starts to compound.

Unfortunately, gender can also have much to do with rate fluctuations as well. If your neighbor is female, chances are that she pays less than you do because men are noted to have more car accidents. As unfair as this might seem, you can blame it all on the obsession over studying statistics. The real differences are usually in the policy details, limits of coverage and specific coverages. If your neighbor does not have bodily injury coverage and you do, well your neighbor is not properly insured and could have significant out of pocket expenses if they have a claim. That’s not a cost saving measure, that’s what we call self insuring without knowledge of it. 

Variables are ultimately numerous in the world of car insurance, including marital status and even how good your credit is or isn’t. The most recent factor that can make as much as a 20% difference is simply choosing to pay for the policy in full instead of making monthly payments, Or choose to do payments via EFT automatically out of your checking account each month, that also gives you a discount. But don’t think it stops here, because homeowners insurance utilizes similar circumstances, including so much more.

Why You Might Be Paying More for Homeowners Insurance

Paying a higher homeowners insurance premium than your neighbor might be more perplexing than the differences in car insurance. Coverage limits are going to make significant differences in how much you’re paying in comparison to a neighbor. Nevertheless, you can take heart in knowing that your coverage limit is significantly higher, which means you’ll have compensation after a disaster while your neighbor may not.

Also consider that some people choose to eliminate added insurance coverage for certain things like slow water leak damage or foundation coverage. While your neighbor can be deemed slightly crazy if he or she doesn’t have coverage for these possible disasters, you won’t have to worry about that designation. Regardless, if you have coverage for something that’s less likely to happen in your region, you might be able to follow your neighbor’s lead and eliminate it to equalize your premiums. Some policies do not include coverage for screen enclosures, others exclude water damage, roof damage, or just have higher deductibles. Some don’t provide replacement cost coverage but rather pay you based on depreciation. That can be a costly option when you have a claim. Claims history, payment history and financial responsibility are all factors that are specific to each person.

Florida companies are now using what is called “Single Risk Modeling”. This literally takes many factors into consideration including things you would have never thought of. The direction your house is facing could result in a different cost or even make your home ineligible, Now before you go crazy, remember it is all about the risk and the companies have years of data and millions of claims in just 2004 and 2005 to show what is a higher or lower risk. If your home has a carport it is likely to be damaged if a hurricane approaches. But the direction that the wind blows during a hurricane is known, so if your carport faces into the path of the wind from an approaching hurricane it is a higher risk. The same exact house across the street could be no problem. All I ask is that you don’t shoot the messenger. I don’t trust the weatherman anymore than I could throw him but claims data is real and computer modeling is relied on more and more. So, Wind mitigation factors are the new discount for Florida property owners. The “harder” your home is against wind, or to say it simply, the things you do to prevent damage from wind, the more cost savings your could see. Hurricane shutters can’t just be tested anymore, they have to be tested AND APPROVED in order to qualify for the discount and every opening to the home must be protected, doors, windows, skylights even the garage door must be rated to withstand wind and impact. If any of these openings are not properly protected no discount will apply for opening protection. The shape of your roof, Hip vs. Gable, the age of your roof, if your roof complies with the current building code or not and of course the type of hurricane straps your home has is also a factor that determines the price of your insurance. As with any insurance policy the best advice is to talk to your agent and determine what is best for YOU, not your neighbor. 

” Our blogs are for general education and information only and may not represent your unique needs. Coverage will vary. Please contact your agent to verify your specific policy terms and conditions.”