Q. Our insured has a corporate policy of no personal use of business autos used by employees. Recently, an employee used an auto for personal use and totaled the vehicle. Our insured has told the adjuster the employee did not have permission and the adjuster has denied coverage under the BAP collision coverage. Is this correct?
A. No, the named insured is still covered under the BAP for liability and physical damage. There isn’t an exclusion in the physical damage portion of the BAP regarding permissive use. What is not covered is the employee as an insured under Who Is An Insured for their liability. If there was any third-party BI or PD in this accident the named insured is still covered, but the employee is not because they weren’t a permissive user.
If the employee has a PAP there still won’t be any coverage on that policy as two exclusions may apply. In the liability section of the TDI PAP where there is both liability and physical damage coverage for non-owned autos there is an exclusion for using a vehicle without a reasonable belief that person is entitled to do so. There is also an exclusion for any vehicle other than your covered auto which is furnished or available for your regular use.
In the ISO PAP, the liability portion also has the same reasonable belief exclusion and furnished and available exclusion. In the coverage for damage to your auto portion of the ISO PAP, where coverage is found for damage to non-owned autos (providing you have a covered auto insured for physical damage), the definition of non-owned auto excludes autos furnished or available for the regular use. There is also an exclusion for loss to any non-owned auto when used without a reasonable belief that you or any family member are entitled to do so.