Small business owners have it tough these days. Most are working on a shoestring budget and doing everything they can to keep their expenses as low as possible – especially in this brutal economy. Some small business owners have been told or have found that insuring their business vehicles under a personal policy is usually less expensive than insuring the vehicle under a commercial policy. Sometimes this offers no issues, depending on the situation and use of the vehicle.

For instance, if you own a small accounting firm and the extent of your business vehicle use is driving to your office or the occasional client’s office, having your vehicle titled in your personal name and insured the vehicle under a personal policy may not be an issue. The general extent of the vehicle use is to carry the business (and vehicle) owner back and forth without delivery of goods. However, if your business entails delivery of goods (even small enough to be delivered using a hand cart), your personal policy could be woefully inadequate and not actually offer you the coverages you need.

Depending on the insurance carrier and wording of each carrier’s policy form, many Commercial Automobile policies include the liability coverage for delivery, including items delivered using a hand cart (sometimes called a “dolly”) within the form. Liability would include Bodily Injury and Property Damage due to the delivery and movement of the materials. Most Commercial General Liability coverages specifically exclude coverage for events that would be included with a Commercial Automobile policy. Additionally, a Personal Automobile policy will also exclude coverage for events that would be covered under a Commercial Automobile policy and Commercial General Liability policy.

This could mean that you do not actually have coverage for items you are delivering, or for the liability involved with the movement of these items to your customer. Once an item is delivered and the customer takes ownership of the item (specifying that the operation is completed), the liability for this item will move to your General Liability coverage (under your Products / Completed Operations limit). However, until that moment when the delivery is completed, your Commercial Automobile policy may still be responsible for the liability issues of the delivery. A Personal Automobile policy will most likely not offer any coverage should a liability loss occur.

Do you have questions or concerns about the above article? Our Small Business Division would be happy to discuss the above situation or any other insurance questions you might have. Please do not hesitate to contact us at [email protected].

Please note that the information contained in this document is designed to provide authoritative and accurate information, in regard to the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.