Don’t Let Driver Exclusions Leave Your Insured Bare

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Words can be an extremely powerful tool for communication. However, it is essential that the correct word be chosen to communicate the correct information. A single word can alter the context of a sentence, or even a contract. It could also make a difference in whether or not your client is covered by insurance for a particular situation. Understanding the difference between “driver exclusion” words and the insurance policy is crucial to make sure you understand the coverage and that you can explain it clearly to your prospect.

Because car dealerships often have multiple drivers, many of whom may have bad driving records, insurance companies will require that a “driver exemption” endorsement be added or that a “driver restriction” is included in the policy. A driver exclusion is essentially an endorsement to an insurance policy that is signed by both the policyholder and the individual on the exclusion. It states that insurance will not be applied in certain circumstances. Not having coverage does not mean that you are no longer responsible for the actions of the excluded driver or policyholder if they are involved in an accident. These forms may vary from one insurance company to the next. Each form can have different effects on an insurance policy. The policyholder should discuss these forms with their agent and attorney. Some states have decided that driver exclusion endorsements can still be used in renewal policies without the need to execute a new endorsement. It is important that an exclusion endorsement be reviewed by the insurance agent at renewal and during any policy period.

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Driver exclusions can be used to change insurance coverage in most states. They are added to an insurance policy through a special endorsement and are part of the policy. These endorsements are very similar in titling, but the endorsement wording can be quite different and may have an impact on coverage.

Some endorsements have titles such as Driver Excluded, Driver Exclusion and Named Driver Exclusion. You might think that these titles would mean they would all affect your coverage, but not for an employee. The endorsement must also contain language that eliminates coverage for the dealer and all named insurers in order to be effective. Let’s examine some endorsement wordings to find out how they might impact your client’s company. Keep in mind that each state’s laws and regulations may change the general explanations.

Below are excerpts of a driver exclusion endorsement. “The person listed below is not covered when they drive any motor vehicle… This exclusion applies to all insureds.” This endorsement seems to exclude coverage if the endorsement is being used. However, it covers all motor vehicles and does not cover ownership. This could lead to the assumption that the exclusion applies only to dealership vehicles, customer vehicles, or vehicles owned and operated by the named person.

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Another driver exclusion states that the person so designated…is excluded from coverage when operating any motor car… this applies to all policyholders… whether the operation was with explicit or implied permission …”. This is similar but not exact to the previous example. This endorsement uses the term “operating” rather than “driving” and includes a condition regarding permissive usage. Is driving different from operating? Will “operating” be defined as a mechanic who shows a customer why their car is having problems by opening the door, opening the hood, or deck cover? If any mechanic’s actions cause injury to the customer or the insurance company considers them “operating,” then insurance coverage for the incident will be void. This endorsement sample now includes language addressing permissive usage. It clarifies that an exclusion driver can use a vehicle without permission and the driver who is not allowed to drive with permission will not be void.

This endorsement does not explicitly state that the insurance will not cover the policyholder. However, it does say that the insurance does not apply. It can also assume that the insurance will not apply to an insured if an exclusion driver is involved in an incident. The following is a slightly different formulation than the two previous ones and appears to extend the coverage beyond operating or driving. This is the text: “This insurance doesn’t apply… due to the ownership, maintenance, or use… This exclusion will also serve a rejection to the Uninsured motorist, Underinsured motorist…and Personal Injury protection . Your client has a great employee, but their insurance company has required this exclusion. Your client wants to keep this employee, but they realize that they are no longer covered by the endorsement. They reassign them to washing cars or detailing vehicles. They injure customers while performing their duties. Your client’s insurer may consider this “maintenance” and deny coverage.

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The following paragraphs contain an example endorsement. It is a selection from endorsements that insurance companies currently use to write insurance for car dealerships and other garage businesses. These endorsements often state that they will modify the Garage Coverage Form and Business Auto Coverage Form. These coverage forms include coverages beyond liability. They also cover Garagekeepers Legal and Physical Damage to Inventory. You can also add endorsements for Uninsured Motorist and No Fault, as well as endorsements for Auto Med Pay, Garagekeepers Liability, Garagekeepers Legal Liability, and other endorsements. It is important that your client asks their agent to inform them of the coverage and endorsements that a driver exemption endorsement will provide.

Because your client’s business revolves around the use of automobiles, an exclusion naming key employees may have a significant impact upon their day-to-day business activities and financial stability. What can you do for your client to avoid driver exclusions being added to their policy?

Asking your client to ask their insurance agent why they want to exclude an individual from their insurance policy will help them and your client determine what can be done. The agent can also research the pricing of other insurance companies and determine if any restrictions are being placed on certain drivers. If the policyholder wishes to remain with their current insurer, suggest that they use a driver restriction form instead of a driver exclusion endorsement. A driver restriction form is typically not part of an insurance policy. It does not affect coverage. This form is used to manage and control the driving habits of employees with poor driving records. Both the employee concerned and the policyholder must sign the form. They both must agree to the terms. The form will vary depending on the individual’s driving record and their position in the company. It can either restrict driving or list specific situations that allow the individual to drive. Some insurance companies accept this type of in-house agreement as an alternative to enforcing driver exclusion endorsements.

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A formal loss prevention program which includes driver training, driving safety education and employee records can help an insurance company remove driver exclusion endorsements. Sometimes, your client may want to add GPS tracking devices that allow them to track the driving habits and destinations of their employees.

These suggestions will be worth your while if they succeed in removing driver exemption endorsements from your client’s insurance policy. Some individuals with a very poor driving record may require driver exclusion endorsements from their insurance company. If this is the case, tell the client to check that the endorsement does not contain any restrictions and that it specifies the coverages.