Words can be a very powerful tool of communication, but it is important that the correct word is chosen to convey the correct information. One word can change the whole context of a sentence or a contract. It can also be the difference between whether your client has insurance coverage in a certain situation or not. When entering into an insurance policy contained in a "driver exclusion", understanding the difference between the words contained in a "driver exclusion" is vital to ensure you fully understand the policy's coverage, and can explain it to your prospect.
Since car dealerships can have many drivers, some with undesirable driving records, insurance companies many require that a "driver exclusion" endorsement be added to the policy or a "driver restriction" becomes part of business practice. Basically, a driver exclusion is an endorsement added to an insurance policy which is signed by the policyholder and the individual named on the exclusion acknowledging that the insurance will not apply under certain circumstances described in the endorsement. It is important to note that the absence of coverage does not take away responsibility from the policyholder or the excluded driver if the excluded individual is involved in an accident. These forms can vary greatly among insurance companies. Each can have a different effect on an insurance policy and should be reviewed with by the policyholder with their agent and their attorney. Some states have determined that a driver exclusion endorsement continues to be effective into a renewal policy without executing a new endorsement. It is important to make sure that if an excluded employee's driving record has improved that this is reviewed with the insurance agent any time during the policy period, and especially at time of policy renewal.
Because driver exclusions are effective in most states in changing insurance coverage, they are added to a policy by special endorsement and become part of the insurance policy. Although the titling of these endorsements is very similar, the wording contained in the endorsement can vary greatly and have a carrying effect on the coverage.
Some endorsements show titles such as "Driver Excluded", "Driver Exclusion" and "Named Driver Exclusion." Titles such as these would make you think they all would change your coverage the same exclude coverage for a specific employee. For the endorsement to be effective in its intent, it will also include wording eliminating coverage for the dealership and all named insureds. Let's take a closer look at some of the endorsement wording to see how they may impact your client's business. Remember, each claim situation and specific state laws and regulations many change our general explanations.
The following are excerpts from one driver exclusion endorsement. "The person indicated below is excluded from coverage .. when driving any motor vehicle ... and this exclusion applies to all insureds." This endorsement appears to remove coverage only when the person named in the endorsement is driving. But it refers to any motor vehicle and does not address ownership of the vehicle. This would lead the impression that the exclusion applies to the dealership's vehicles, customer vehicles, vehicles owned by the named person and any other vehicle they may be driving and potentially involves the business.
Another driver exclusion contains the following: "The person designated ... is excluded from any coverage ... when operating any motor vehicle ... applicable to all insureds of this policy ... whether or not the operation as with expressed or implied permission ... "This is similar to the previous example, but not exact. In this endorsement, they use the term "operating" instead of "driving" and add a condition about permissive use. Is "driving" different than "operating?" If one of the mechanics named in a driver exclusion is showing a customer why they are having a certain complaint with their car by starting their car, opening a door, hood or deck lid, will this be considered "operating?" If any of the mechanic's actions cause damage to the customer and the insurance company considers his actions as "operating," then will insurance coverage will not be provided for that incident. This endorsement sample has added wording addressing permissive use clarifying that giving an excluded driver permission to use a vehicle, or the excluded driver driving without permission, will not void the endorsement.
Although this next endorsement example does not specifically state that it will not cover the policyholder, it does state that this insurance does not apply and the assumption can be made that it will not apply to any insured when an excluded driver is involved in an accident. The following wording is quite different from the previous two examples and seems to broaden, beyond "driving" or "operating", the types of situations that will not be covered. The wording is: "This insurance does not apply ... arising out of the ownership, maintenance or use ... This exclusion will also serve as a rejection of the Uninsured Motorist, Underinsured Motorist ... and Personal Injury Protection ... "In this situation, your client has a good employee with an unacceptable driving record and their insurance company is requiring this exclusion. Your client wants to keep the employee, realizing they are now excluded per the endorsement and reassigns them to detailing or washing vehicles. While performing their duties, they injure a customer. They may not have coverage if your client's insurance company considers this "maintenance."
The example endorsement wording contained in the above paragraphs is actual extractions from endorsements currently used by insurance companies that are writing insurance for auto dealerships and various garage businesses. These endorsements usually state that they modify insurance provided under the Garage Coverage Form and Business Auto Coverage Form. Both of these coverage forms contain coverages other than liability coverage, such as Garagekeepers Legal Liability, Physical Damage to inventory and other endorsements for Auto Med Pay, Uninsured Motorist, No Fault and many other optional coverages that can be effected by a driver exclusion endorsement. Advise your client to make sure their insurance agent tells them what coverage and endorsements will be effected by a driver exclusion endorsement.
Since a major part of your client's business involves the use and driving of automobiles, a driver exclusion naming any of their key employees can have a significant effect on their daily business activities and financial stability if an excluded driver is involved in a not covered claim. What can you do to help your client avoid having driver exclusions added to their policy ??
If your client asks their insurance agent to specifically find out why their insurance company wants to exclude an individual, your client along with the individual can determine if there is anything that can be done to remove the insurance company's concern and avoid having the exclusion on their policy. Upon request, the insurance agent can research other insurance companies to determine if they will demand the same restrictions excluding certain drivers and verify any significant change in pricing. If the policyholder prefers to stay with their current insurance company, advise them to suggest a driver restriction form rather than a driver exclusion endorsement. Typically, a driver restriction form is not part of an insurance policy and does not affect coverage. It is used as a management and vehicle control tool in restricting the driving activities of selected employees that have undesirable driving records. The form requires the signature of the concerned employee and the policyholder, both agreeing to its terms. Depending on the individual's position with the company and the types of driving violations, the form can restrict all driving or specifically list various situations describing when the individual is permitted to drive. This type of in-house agreement has been acceptable by some insurance companies in lieu of enforcing a driver exclusion endorsement.
Implementing a formal loss prevention program that includes a driver training program, encouraging defensive driving for employees and monitoring employee motor vehicle records may also help convince an insurance company to remove driver exclusion endorsements from a policy. In some situations, your client may also want to install GPS tracking devices allowing them to track their employees' driving habits and destinations.
If any of these suggestions are successful in removing driver exclusion endorsements from your client's insurance policy, they are worth yours, as well as your client's efforts and cost in keeping their insurance company from eliminating coverage from them and named drivers. Their insurance company may still require driver exclusion endorsements for some individuals with very poor driving history. If this happens, advise the client to make sure the endorsement is limited in its restrictions and specifies the coverages effected.
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