What do you consider the major liability exposure for a veterinary services organization? You might think it’s a malpractice lawsuit, a licensing board complaint or a computer hacking issue. However, how many would say automobiles, even if the business didn’t own one? About 6 million motor vehicle accidents occur each year in the United States, resulting in bodily injuries, loss of life and a staggering amount of property damage. That makes a comprehensive auto insurance program a critical component of every business’s risk-management strategy.
In most states, these three entities can be held liable for an at-fault auto accident that occurs in the course of doing business:
- The vehicle’s driver.
- The vehicle’s owner.
- The business on whose behalf the vehicle was used.
A Lunchtime Detour
This scenario could entangle a veterinary practice even if the business doesn’t own a vehicle:
Two employees drive to a fast-food restaurant for lunch. Before they depart, the office manager asks them to pick up supplies at a nearby store. Exiting the shopping center’s parking lot, one employee, driving her own car, inadvertently pulls out in front of a line of cars, starting a multivehicle accident. Several vehicles are damaged, including a truck delivering refrigerated perishable goods to grocery stores. Several people suffer assorted injuries.
Let’s add up the damage:
- Medical expenses for multiple injured people.
- Loss-of-income or short-term disability claims for victims with more extensive injuries.
- Long-term disability claims by two motorists with back and neck injuries.
- Inoperable vehicles, including the employee’s.
- Rental car expenses while damaged vehicles are repaired.
- Loss of use of the truck during its repair.
- Loss of perishable products.
Attorneys for the victims and businesses quickly realize that any hope of adequate financial restitution rests with the veterinary practice, not the young driver. These questions then arise:
- Will the practice’s auto or commercial liability insurance policy respond to claims?
- Are the policy limits high enough to cover the exposure?
- What about the at-fault employee’s auto policy? Will it protect her and the business?
Personal vs. Business
To answer those questions, you must understand the difference between the insurance types:
- Personal auto insurance is for vehicles not titled in a business’s name. Most states mandate a minimum amount of liability coverage. However, the lower limits tend to be inadequate in today’s litigious environment. Personal policies won’t respond to claims when the vehicle was used to conduct business at the time of an accident.
- Business auto insurance covers cars, trucks, trailers, vans and other vehicles titled in the name of a business or organization. All practice-owned vehicles must be insured through a business auto policy. If your practice owns more than one, you can select different amounts and types of coverage depending on each vehicle’s value and utility.
These classifications come into play when a business-related vehicle is in an accident:
- Owned: The company name is on the title.
- Non-owned: The company doesn’t own the vehicle but uses it for business purposes. Typically, an employee, volunteer or unrelated third party owns the vehicles.
- Hired: The company borrows, rents or leases a vehicle for business purposes.
Most states require a business to purchase liability insurance covering bodily injury, property damage, uninsured or underinsured motorists, and medical expenses. Coverage for physical damage to vehicles is recommended.
A policy typically has these coverages and limits:
- Auto liability: This part of a business insurance policy has a standard coverage limit of $1 million per occurrence, with no corresponding deductible. It covers injury to passengers in vehicles involved in the accident, injury to pedestrians, and damage to personal and commercial property. It typically won’t cover punitive damages from intentional acts such as reckless driving.
- Uninsured or underinsured motorists: This portion of a commercial insurance policy has a standard coverage limit of $1 million per occurrence. It reimburses medical expenses and property damage that would have usually been paid if the at-fault driver had been adequately insured.
- Personal injury protection and medical payments: The no-fault section of a commercial policy typically has a standard coverage limit of $2,500 per occurrence. It might pay for medical expenses, lost wages and even funeral expenses without regard to fault. The coverage goes by multiple names, and state laws might require it.
- Collision: This portion of a commercial policy has a standard coverage limit equal to the vehicle’s cash value. Deductibles apply. This coverage pays for repairing the insured vehicle. The term “totaled” is often used when the repair cost exceeds the vehicle’s value. In those cases, the insurer will pay the cash value instead of the repair bill.
- Comprehensive: Like collision coverage, comprehensive coverage pays up to the vehicle’s cash value for expenses related to damage incurred in a non-collision incident. Examples include vandalism and theft.
- Non-owned auto liability: It provides coverage when a business benefiting from a vehicle it doesn’t own is sued after an accident. Note that the policy typically covers the company, not the driver. The driver’s personal policy protects up to the limits.
- Hired auto liability: It covers the business and driver when a vehicle is borrowed, rented or hired. Coverage for vehicle damage can be part of the business’s auto policy or purchased from the rental company.
I recommend taking these four steps:
- If your veterinary practice owns one or more vehicles, carry hired and non-owned coverage under your business auto policy.
- If your practice doesn’t own a vehicle, maintain a comprehensive business liability policy that includes hired and non-owned auto coverage.
- Carry ample excess liability insurance. Umbrella policies are inexpensive when you consider their additional financial protection.
- Ensure that your umbrella policy responds to an owned, hired and non-owned claim if the primary limits are exceeded in your business liability or business auto policy.
Auto insurance documents are filled with legal jargon that the average person has difficulty understanding. Purchasing an online or low-cost policy without professional assistance can be a catastrophic mistake for a business. An insurance agent who understands the exposures associated with veterinary services will ensure your business is adequately protected.
Take the time to assess your practice’s assets and insurance exposures. Immediately make appropriate policy changes if you are underinsured or have coverage gaps.
WHO’S BEHIND THE WHEEL?
Veterinary practices can minimize their exposure by limiting the number of employees who drive on company business and by ensuring that those who drive have:
- A valid driver’s license.
- Good driving habits.
- A good driving safety record.
- Adequate auto insurance if they use a personal vehicle.