Commercial Auto Insurance 101: Avoiding A Sticky Situation

Maybe you are a contractor, a plumber, an electrician, a painter, a locksmith or a gardiner. Maybe you are a one man (or woman) show and you hop into your truck or van each day and off you go. Or, maybe you own a large plumbing company with employees and multiple vehicles. Or, maybe your CPA, Tax Attorney, Brother-In-Law or other trusted advisor told you to register your personal vehicle in the name of your business for tax or other purposes.

Now, I won’t ask you all to raise your hands, but answer this question to yourselves. “Is your vehicle that you use for business on your personal auto insurance policy?” I’m sure many of you are nodding or uncomfortably looking around the room. Now, those of you, and you know who you are, who answered in the affermative, I have an additional question for you. Suppose you are at a client’s house, in the middle of a remodel and need to bring in those custom made cabinets from your truck. If you accidentally shatter your client’s glass sliding door bringing the cabinets inside, who is going to pay for that? Well, your personal auto policy offers no coverage for that. But, your commercial auto policy would.

Let me give another example. Let’s say you are Paul the Painter and you are a one man show and you use your pick-up truck for work. You have two other vehicles that you wouldn’t dream of getting paint or paint supplies near that are simply your personal cars. You’ve got a personal auto insurance policy that covers all three vehicles. Now, let’s see what could happen to you, Mr. Paul the Painter.

You get up in the morning, shower, have breakfast, hugs and kisses to the family and you are out the door to your first job of the day. You stop by the paint store to pick up the colors you need and various brushes and supplies that you are going to need for the day. On the way from the paint store to your first client’s house, something catches your eye and you look away from the road for a moment. *POW* Doing the right thing, as you always try to do, you immediately pull over and see what you hit. Unfortunately, in that split second, little Johnny and his mother were crossing the street and you hit them. The ambulance arrives and carts them off to the hospital where you later find out that mom is ok, but sadly, Little Johnny is going to be wheelchair bound for the rest of his life.

Of course, you put the claim in under your auto insurance policy and prepare for a long claims process. Unfortunately, you have a false sense of security that while all of the events leading up to this point were horrific on Little Johnny, his mother and yourself, you feel confident that your personal auto insurance policy will pay the claim.

Well, during one of the interviews, your claims adjuster asks where you were going and where you were coming from when the accident happened. You honestly explain that you are a painter, were at the paint store and was subsequently off to your client’s house. Guess what? Your personal auto policy specifically excludes losses that happen during the course of business. Why is that? Because that is what a commercial auto policy is for. We will go over the different coverages available on each policy and why it is imperative to have the proper policy for the proper vehicle/use in just a moment.

Needless to say, your claim is denied and now you have to go through the litigation expenses on your own. You may have to sell your home, your business, drain your own child’s college fund or perhaps even declare bankruptcy in this case. Paul, we want you to avoid this catastrophe on top of a catastrophe.

So, that was the unfortunate tale of Paul the Painter, who did not have the right type of policy. Here at Goldhammer Insurance Services, we want to help the Pauls of California avoid his fate.

On a much lighter note, let’s go over how your commercial auto insurance policy works and the major coverages provided therein.

The following coverages will be similar to those on a personal auto insurance policy:

1. Liability – In the case of Paul the Painter, if he had a commercial auto insurance policy for his truck, the liability portion of the policy would pay up to the policy limits for the associated medical bills, lawsuit settlements, etc. The liability coverage pays “the other guy”.

Now, here is a major difference between a personal auto policy and a commercial auto policy. Included in the liability coverage on a commercial auto insurance policy is a coverage called “Loading & Unloading”. On your personal car insurance, if you injure someone or damage property while loading up your truck or unloading it, there would generally be no coverage. However, on your commercial auto insurance policy, your liability coverage would extend further to offer coverage in this scenario.

2. Uninsured Motorist – If, for example, you are involved in an accident that is determined to be “the other guy’s” fault, and he does not have insurance, your uninsured motorist coverage would pay you what you would have collected had the other guy had insurance.

3. Comprehensive and Collision coverage – These are the coverages that are available to fix any physical damage to your vehicle in the event of a covered loss. As on a personal auto policy, your collision coverage covers accidents involving actually colliding with something. Comprehensive coverage covers incidents that are other than collision. Fire, theft, vandalism hitting an animal, etc would all be covered under your comprehensive coverage.

Ok, everyone still with me? Good. There’ll be punch and cookies at the end. Now, the following are the coverages offered on a commercial auto insurance policy that are not offered under a personal auto insurance policy.

1. Employer’s non-ownership liability – Ok, let’s say Paul the Painter has his commercial auto policy in force. Paul has a part-time employee who helps him with some jobs, but mostly runs errands such as dropping off the daily deposit at the bank. So, let’s say Paul’s employee, Franz, is going to the bank one day and hits Bobby Bicyclist in the parking lot. Bobby could sue Franz, and when it comes out that Franz was running an errand for his employer, Bobby could sue Paul as well. This employer’s non-ownership liability coverage would protect Paul’s interests. Otherwise, poor Paul could find himself in the same financial situation as he did when he accidentally hit Johnny and his mother and had the wrong type of policy for his truck!

2. Hired auto – Paul won a bidding war for a huge painting job and realizes he’s going to need to rent a couple of more trucks and hire a few more employees for this job. Are those rented trucks covered under his policy? YES! The hired auto coverage can be set up in such a way that those rented trucks are insured the same as if they were owned by Paul.

3. Drive other car – Ok, let’s give Paul a break for now. I have a good friend Greg the gardiner. Greg is a single guy and the only vehicle he owns is his work truck. He has it properly insured on a commercial auto policy. If Greg goes on a road trip with his buddies and they rent a car, Greg’s commercial auto policy would cover him driving another car, as long as he had this coverage.

Hopefully, getting through all of that was relatively painless…well for everyone except Johnny and his mom. In any event, those are the major points to cover in our commercial auto policy and the reasons to properly insure vehicles commercially as opposed to on a personal policy if they are used for commercial use.

As always, if you have a question, would like a quote or simply have a comment, please do not hesitate to email us at, leave a comment in the space provided, give us a ring at 1 800 947 8887, or come on by the office at 21820 Burbank Blvd #226 Woodland Hills, CA 91367.

And remember, when you are sick and tired of the sledgehammer sales approach, come to Goldhammer Insurance where you are always in good hands with our white glove treatment.

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