The Bank Deposit Run: Personal Auto, Business Auto, and Which Policy Is Primary
Dale owns a landscaping sole proprietorship. His business auto policy is written on symbol 1 (any auto), limits $250,000/$500,000/$100,000, with hired auto and employer's non-owned auto coverage. His daughter Erin, 22, works part-time in the office. On a Friday she drove her own 2016 Civic - insured on her personal auto policy at 50/100/25 with a $500 collision deductible and no business-use endorsement - to make the weekly bank deposit. She ran a red light and struck a cyclist, who incurred $288,000 in medical bills and lost wages plus $12,000 for the destroyed bicycle and gear. The Civic is not a scheduled auto on the business policy and Erin is not a paid driver. Dale's agent says, 'The business policy is primary - she was working.'
1. Which policy is primary, and how much does each insurer pay?
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The personal auto policy is primary. Erin was driving a covered auto on her own PAP. The PAP's course-of-employment exclusion applies only to non-owned autos, and a personal policy contains no general 'business use' exclusion for the insured's own listed vehicle. Making a bank deposit is therefore covered activity. Her Part A limits are 50/100/25:
- Bodily injury: $50,000 per person (the per-accident limit adds nothing on a single claimant).
- Property damage: $12,000, under the $25,000 PD limit.
The business auto policy is excess. The BAP's Other Insurance condition states that coverage for an auto the insured does not own is excess over any other collectible insurance. Employer's non-owned auto coverage exists to sit above the employee's own policy, not beside it.
Payment: PAP pays $50,000 BI + $12,000 PD = $62,000. The BAP then pays the remaining bodily injury of $238,000 - within its $250,000 per-person limit - for a total of $300,000. The agent is half right: the business policy responds, but second.
2. Suppose Erin had been driving her roommate's car, which is not a covered auto on her PAP, on the same errand. What changes?
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The result flips, because the PAP's course-of-employment exclusion now bites. The PAP extends liability coverage to a non-owned auto only when it is used with a reasonable belief of permission and is not being used in the insured's course of employment. Erin was running a company errand, so her PAP owes nothing.
That leaves the BAP as the only liability coverage. With no other collectible insurance below it, the excess clause has nothing to sit above - the BAP drops down and responds first, up to $250,000 per person / $500,000 per accident for bodily injury and $100,000 for property damage. On these facts it would pay the full $300,000.
Two practice notes:
- If the roommate's own policy were in play (permissive use), that policy would be primary and the BAP excess again - the excess clause keys off ownership, not employment.
- Dale should confirm the BAP's hired/non-owned coverage was not written on a symbol that excludes employee-owned autos, and should consider a drive-other-car endorsement or a simple written policy requiring personal vehicles to carry at least the BAP's limits.
3. Now assume the cyclist's total damages are found to be $700,000, and Erin is also named personally. What is the total insurer payment and what is her exposure?
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Liability limits cap the insurers, not the verdict. The PAP pays its $50,000 per-person limit; the BAP pays its $250,000 per-person limit. Combined available coverage is $300,000, leaving a $400,000 shortfall against a $700,000 judgment.
Who bears the gap:
- Erin personally, for her own negligence.
- Dale and the business as well, under respondeat superior - she was acting within the scope of employment on a company errand - which means the shortfall can reach business assets. The policy limits cap the insurer's duty; they do not cap the employer's liability.
- The employer's non-owned auto coverage protects the business as an insured, but it pays the same single per-person limit; it does not add a second $250,000 for Erin.
Lessons for the agent: the gap here is a limit-selection problem, not a coverage-trigger problem. A $2,500 collision deductible and a $500 deductible on the Civic were carefully chosen while the liability limits - the only numbers that can bankrupt a household - were left at 50/100/25. A personal umbrella sitting over both the PAP and the BAP is the standard, inexpensive fix, provided the umbrella carrier is told about the business use of the vehicle.