Insurance best practices for leased cars and trucks

Question: I am looking for your opinion concerning payment of tax and title on leased vehicles. I have been discussing this with co-workers and we need some clarification: When there is a total loss on a leased vehicle, do we owe the tax and title? If so, who is paid?

― Ohio Subscriber

Answer: For personal lines, the policy clearly states that: "If we pay for loss in money, our payment will include the applicable sales tax for the damaged or stolen property." If the insured paid tax and titles, then it should be paid. The loan/lease endorsement does not address taxes so the policy language stands. Coverage is excess over any other collectible coverage. The commercial auto policy has similar language; "If we pay for the "loss", our payment will include the applicable sales tax for the damaged or stolen property." Likewise, the endorsement does not discuss taxes, so the policy language applies.

Leased vehicle vs. owned vehicle

Question: Our insured has symbol 2, owned autos only, to describe the covered autos on his business auto policy. The question has come up recently whether coverage could be denied for a leased auto that the insured uses. This is a long-term lease, and the insured considers the auto to be his own. Would symbol 2 preclude coverage for the car if an accident happened?

― Indiana Subscriber

Answer: Coverage could very well be denied. The BAP specifically lists leased autos as covered autos through the use of symbol 8, hired autos only. The intent here seems to not consider leased autos as owned autos. Both symbols 2 and 8 can be insured under the same policy. It may be that some insurers would accept long-term leased autos as owned based on company underwriting philosophy. But it is just as reasonable to think that other insurers would not accept a leased auto as an owned auto because of the language on the BAP. To prevent any unpleasant surprises to the insured in the event of an accident, it would be best to check with the insurer ahead of time to see how it views a leased auto. Regardless, the policy must have the proper symbols in order to provide coverage.

Coverage for bank-owned vehicles

Question: The insured has a personal auto policy (PP 00 01 01 05) endorsed with the auto loan/lease coverage (PP 03 35 09 93). The insured had a covered auto accident. The insured vehicle was a total loss. The ACV of the vehicle was $10,000. The collision policy deductible is $500. The amount paid under Part D (coverage for damage to your auto) was $9,500 after deductible. Now, at the moment of the auto accident, the amount due to the bank for the loan was $12,500. Assume that the $12,500 due to the bank is all covered under the auto loan lease coverage. In others words, the $12,500 does not includes any overdue lease payments, financial penalties, etc. Does the auto loan/lease coverage endorsement provide coverage for $3,000, the difference between $12,500 and $9,500, or for $2,500, the difference between $12,500 and $10,000 (ACV covered loss)? If the auto loan/lease coverage endorsement provides coverage for the $3,000 then the collision deductible of $500 will be assumed by the loan/lease coverage and the insured will benefit from this. If the auto loan/lease coverage endorsement provides coverage for $2,500 then the insured will have to pay $500 (collision deductible) to the bank in order to cancel the loan.

― Georgia Subscriber

Answer: The endorsement states that the insurer will pay any unpaid amount due on the lease or loan less the amount paid under part D of the policy. Since part D paid $9,500, and the loan amount due was $12,500, the endorsement will pay the difference between the $12,500 and the $9,500, or $3,000.

Business auto coverage symbol distinctions

Question: I recently wrote an account that has another entity, different named insured with separate business policies. The other entity has an auto schedule titled in the name of the entity I insure and my insured prefers to keep it that way. If the entity I insure has a long-term lease with this auto to this other entity and symbol 1 is on the insured's policy, would this auto still be covered under my insurance policy? Please advise.

― Kentucky Subscriber

Answer: Symbol 1 is "any auto" and that is what it means. If the insured has symbol 1, then any auto is a covered auto and if the insured is liable for the use of the covered auto, the BAP applies — unless, of course there is an applicable exclusion based on the facts of the claim.

When a friend crashes your leased car

Question: Our insured was driving a non-owned car insured by its owner for physical damage subject to a $500 deductible. He was involved in an accident that damaged the car. He carries physical damage on owned vehicles with a $100 deductible, and has filed a claim on his policy for $400 — the difference in deductibles. Do you think this will be covered?

― California Subscriber

Answer: A personal auto policy pays for damage to a non-owned vehicle on an excess basis over any other collectible source of recovery. In this case, the physical damage coverage held by the owner of the car will pay first, with the insured driver's non-owned coverage applying as excess. The excess amount is therefore the difference in deductibles, or $400. See also: Top 15 private passenger auto carriers for 2017, as ranked by NAIC