Business vs. Personal Insurance

If I’m driving my car for work, will my employer’s insurance cover an accident?

Many employees rely on their cars not just for transportation to and from work, but also to get around for work purposes. From traveling to visit clients, to running errands for a work lunch, many Americans mix personal and business use on a single vehicle. Besides the tax benefits — the Internal Revenue Service allows you to deduct the cost of a portion of the business use of your car from your taxes — it also saves the company from having to buy or lease a car for employees to use whenever they need to travel.

However, questions arise when an employee gets into a car accident in his or her personal car while driving for a business purpose. Is it then the responsibility of the employer’s insurance to pay for the damages, or does that fall to the employee, as it was a personal car? Sometimes the answer can be complicated, based on the situation.

Business insurance

Most businesses that use cars, trucks or other vehicles for business purposes will use an addendum to the business owner’s policy called the Business Auto Coverage Form, or BACF. The form extends the standard insurance coverage to include vehicles operated on behalf of the business, according to the Insurance Information Institute.

If covered under this form, an employee’s personal vehicle may have coverage if the employee was driving for a work-related reason. Coverage will depend on the particular language of the policy, but it could include any automobile operated on behalf of the business, be it owned by an employee, a rental agency or contractor. The breadth of the policy is up to the business owner. If your place of business purchased broad coverage, any accident you have while driving a personal car for your employer should be covered up to the policy limit. In order to trigger this coverage, you will need to clearly establish that the collision occurred on a work trip.

There are caveats in some states, though. Some states do not allow business owner insurance plans to cover accidents in the case of driver negligence, such as intoxicated driving. Even in states that do allow it, the insurance company may not allow it in the policy language.

Personal insurance

If your employer’s insurance does not covering your personal automobile, you may have to look to your own insurance. However, there are limits to that coverage as well.

Some insurers do not cover business driving because it is inherently riskier than personal driving, and it may violate the terms of your policy, according to insurance company Insureon. Some short trips may be covered under a personal policy, but if you are using a personal car frequently for business, you may want to consider purchasing a specific business policy or inform your insurance company that you are regularly using your personal car for business.

In the case of heavy use of a personal vehicle for work, you could consider a commercial vehicle insurance policy, according to Insureon.

In some cases, both types of insurance may apply because of a concept called “vicarious liability.” Essentially, the employee was acting on behalf of the business and, therefore, the business may be accountable in the event the employee drove negligently.

Insurance generally follows the car rather than the driver. Therefore, when an employee gets into an accident in a personal car, the primary insurance on the car will be the employee’s personal insurance. However, if the damages exceed those policy limits, the business insurance policy, depending on its terms, may provide a layer of secondary coverage. If the business doesn’t have applicable insurance, the business itself might be liable for injuries caused by its employee.

Before you take off in a personal car for a business purpose, make sure you understand what the parameters of your employer’s insurance and whether it will apply in case of an accident. If you think the employer’s insurance should apply while a claim is being denied, seeking the advice of a lawyer can help you sort through the complexity.