Extended nonowned coverage, PP 03 06, is available written for either the named insured or a family member of the named insured. “Family member” is defined as a relative of the named insured or spouse, living in the same household. It is important to realize from the start that the endorsement broadens regular personal auto coverage only for the individual named in the endorsement. Any covered person who needs extended nonowned coverage must be specifically named in the endorsement. The extended nonowned endorsement broadens liability coverage by deleting four exclusions. The need for the coverage is best understood by examining these exclusions.

The most frequent need for the extended nonowned endorsement, perhaps, is to delete the exclusions of nonowned autos “furnished or available for the regular use” of the named insured or any family member. If, for example, the named insured has a company car that he or she may also use for personal purposes, the personal auto policy does not provide coverage for that car—while it is being used by anyone. Likewise, a car furnished to a family member of the named insured is not covered, except with respect to the named insured's use of the car.

The extended nonowned endorsement provides liability coverage for personal use of a “company car” by deleting both exclusions. The meaning of “furnished or available for regular use” is discussed in more detail later in this article.

An exclusion in the endorsement states that extended nonowned coverage does not provide any coverage as to an auto owned by the named insured or a family member, or a temporary substitute for such an auto. This exclusion should be read in context with the coverage of the basic personal auto policy. For example: the exclusion does not eliminate coverage for an auto owned by the named insured if that car meets the definition of “your covered auto.” By the same token, the exclusion does not prevent coverage for the named insured's occasional use of a resident relative's car, since that coverage is also clearly provided by the basic policy.

An instance when the exclusion could be properly applied is when the individual named in the endorsement, a family member of the named insured, is using his own car, which does not qualify as “your covered auto.”

The endorsement deletes two other exclusions, both of which are related to use of automobiles in a business or occupation. The need for deletion of these exclusions often follows the need for deleting the first two. If a car is furnished for the regular use of an individual, often it will be used, at least part of the time, in the named individual's business or occupation.

If the individual's business or occupation is transporting persons or property for a fee, the deletion of one exclusion is especially pertinent—”liability arising out of the . . . operation of a vehicle while it is being used as a public or livery conveyance.” When the exclusion is deleted, a taxicab driver, for example, has coverage under his own policy while using the employer's taxi on the job. This is, of course, excess coverage over whatever insurance the employer carries on the taxi.

The other deleted exclusion pertains to the maintenance or use of certain types of autos in a business (not including farming or ranching) other than the selling, repairing, servicing, storing, or parking of automobiles. Normally, the exclusion rules out coverage for nonowned autos of other than the private passenger car type: pickups, panel trucks, vans, and larger. Deletion of the exclusion provides for any type of nonowned auto (having four or more wheels) the named individual might use in business. A truck driver, for example, would have coverage under his own policy while driving a nonowned truck on the job.

However, the extended nonowned endorsement does not delete the usual exclusion of any nonowned auto in one of the “automobile businesses” named above. An employee of an auto business, therefore, must rely upon the employer's garage liability insurance while using nonowned autos of any type on the job.

A specific advantage of extended nonowned coverage is protection for the named individual against suits by fellow employees arising out of work-related accidents. In an increasing number of cases, employees have been permitted to recover damages from fellow employees whose negligence caused their injuries. Although employees are customarily given insured status under their employer's automobile insurance, there is, in the business auto policy and most other commercial automobile policies, an exclusion of bodily injury to a fellow employee.

The personal auto policy does not contain such an exclusion and so the named insured and family members of a personal auto policy are covered for fellow-employee suits—as long as one of the exclusions of business use does not apply. For example: if the extended nonowned coverage endorsement is not added to the policy, a fellow-employee suit arising out of the use of a nonowned pickup, or van (or larger vehicle) in business would not be covered, nor would a fellow-employee suit arising out of the use of an auto for hire. However, when the coverage is added, the named individual has coverage for fellow-employee suits whose circumstances fall within the broader scope of extended nonowned coverage.

If extended nonowned liability coverage is purchased, the named individual can also purchase extended nonowned medical payments coverage under the same endorsement. The coverage is obtained by the deletion of two exclusions and the modification of a third. The deleted exclusions are those that eliminate medical payments in autos furnished or available for the regular use of the named insured, or for family members.

The third exclusion affects autos used in any business or occupation (including an auto business and farming or ranching) of a covered person. Normally, the exclusion eliminates coverage for business use of any auto except a private passenger auto (owned or not). The exclusion also eliminates coverage for an owned pickup, or van, or a trailer used with any of these vehicles; that is, nonowned trucks of any kind are excluded when used in any business or occupation.

The extended nonowned endorsement modifies this exclusion to allow medical payments coverage for a nonowned pickup or van, or a trailer used with any of these vehicles, in any kind of business, automobile or otherwise. Recall that the liability portion of the endorsement does not delete the regular policy exclusion of pickup, or van type vehicles when used in an automobile business. It is important to note, however, that coverage is restricted to certain types of vehicles. The liability portion of the endorsement does not have this restriction.

Extended nonowned coverage does not delete the medical payments exclusion for autos being used as a public or livery conveyance. This is because the medical payments exclusion, unlike its counterpart under liability provisions, applies only to “your covered auto.” The exclusion does not affect coverage of nonowned autos, and consequently does not need to be deleted through this endorsement.

Rules and premiums are found under rule 17 in the personal vehicle manual. Liability premiums depend on the circumstances. If the named individual is furnished an auto for regular use, and no primary insurance is in effect on the auto, the premium charge is 50 percent of the liability premium that would otherwise apply if the auto were specifically insured for the named individual. If the auto has primary liability coverage in effect or is used in United States government business, significantly lower premiums are taken from the rate pages.

Liability premiums in all other situations are taken from yet another rate table. These premiums apply when the named insured is not actually furnished an auto. They would be used, for example, for an insured that purchases extended nonowned coverage merely to protect against fellow-employee suits.

Medical payments premiums are taken from another rate table, with slightly higher rates for individuals who are furnished an auto for regular use.

As mentioned earlier, extended nonowned coverage is usually purchased to delete the exclusions of automobiles furnished or available for the regular use of the named insured and family members. Thus, it is important to know what constitutes an automobile “furnished or available for regular use.”

Numerous court decisions have answered this question—see 8 ALR 4th 387 for a detailed annotation—but such decisions have depended on the particular facts involved in each case. In general, however, courts have held that an automobile was not furnished or available for the regular use of the insured where the insured had to ask for specific permission prior to each use of the automobile. See, for example, the following: the Kansas case of General Leasing Corp. v. Anderson, 416 P.2d 302 (1966); the Louisiana case of Leteff v. Maryland Casualty Co., 91 So. 2d 123 (1956); and Travelers Indemnity Co. v. Pray, 204 F.2d 821 (1953), decided by the United States court of appeals for the sixth district, applying Michigan law.

A different decision was reached in the Virginia case of State Farm Mutual Automobile Ins. Co. v. Jones, 383 S.E.2nd 734 (1989).  Jones, a route salesman furnished a van, had to request permission every time he wanted to use the van for any personal purpose.  The court held, however, that his usage presented “frequent, daily, and extensive use, dominion, and control,” since he had full use of the van an average of six days a week.

How frequently the insured used the automobile prior to the accident has not seemed to be as important as the insured's right to use the automobile. However, the frequency of use is usually considered in the decision. In one case, for example, the insured had free use of a nonowned vehicle for an indefinite period of time prior to the accident. The court ruled that the insured's personal auto policy properly excluded liability coverage for his use of this car (Spaulding v. Concord General Mut. Ins. Co., 446 A.2d 1172 (1982)).

In cases where the insured has had regular access to some car—not necessarily the same one—from a vehicle pool, courts have quite uniformly applied the exclusion of vehicles furnished or available for regular use. For example, in United Services Auto. Assn. v. Couch, 643 S.W.2d 668 (1982) the court ruled that a car available to an employee while working was furnished for his regular use. In that decision, the court said: “The obvious purpose of the “nonowned vehicle” coverage is to afford protection to the insured on occasions when the insured is temporarily using a vehicle not covered by the policy. . .[T]he purpose of the exclusion is to deny coverage to the insured while using a vehicle as to coverage of which he has opportunity to investigate.” (The insured has had the opportunity to purchase the necessary coverage and has chosen not to do so.)

Similar decisions have been handed down in cases involving a government office worker, an employee of an automobile sales agency, a bus driver, and a police officer.  (The cases are, respectively, Farm Bureau Mutual Automobile Insurance Co., v. Marr, 128 F. Supp. 67 (1955), Farm Bureau Mutual Automobile Insurance Co. v. Boecher, 48 N.E.2d 895 (1942), Venters v. Selected Risks Insurance Co., 295 A.2d 373 (1972), and O'Brien v. Halifax Insurance Co., 141 So. 2d 307 (1962)). In each case, the fact that some automobile was available to the insured was held sufficient to make the particular one used at the time of the accident an automobile “furnished for regular use.”

The Kansas case of Miller v. Farmers Mutual Automobile Insurance Co., 292 P.2d 711 (1956), which also involved a government pool, held to the contrary but seems to represent the minority view. Numerous cases have held that a car owned or leased by the insured's employer and provided to the insured for business use and driving to and from work is furnished or available for the regular use of the insured. For example, in Farmers Ins. Co. v. Zumstein, 675 P.2d 729, (1983), the court ruled that a truck (owned by the insured's employer) was provided for the regular use of the employee because the employee had sole possession of the keys; kept the keys at his residence; and drove the truck to work site and home again for approximately six weeks.

Other courts have distinguished between the use a person makes of an automobile in the regular course of duties and some unusual use of it. In United States Sugar Corp. v. Nationwide Mut. Ins. Co., 475 So. 2d 1350 (1985), the court held for coverage under the insured employee's policy. Even though the employer provided the car for the insured to use in business purposes, it did not meet the definition of “furnished for the regular use” of the employee when he struck a pedestrian while the insured was engaged in infrequent or casual use of the car.

In another case, the court ruled that the term “regular use” as used in the personal auto policy is ambiguous. The court ruled for coverage under the employee's policy, even though he had daily use of it for business purposes and kept it at his residence (Metropolitan Property and Liability Ins. Co. v. Childs, 751 P.2d 254 (1988)).

In each of the two above cases there was a holding for coverage on the ground that the automobile, though furnished for regular use of the insured, was not being employed in this “regular use” at the time of the accident.

Questions concerning regular use also arise when an insured rents a car for a short term. Does one week of rental constitute regular use? Two weeks? A month? Again, there is no definitive answer, but it may be helpful to note that the United States court of appeals for the fifth circuit, applying Florida law, held that a three week rental of an automobile did not constitute regular use. The case is Factory Mutual Liability Insurance Co. of America v. Continental Casualty Co., 267 F.2d 818 (1959).

Obviously, it is most desirable for an insurance producer to advise clients not to take a chance on a close decision going in their favor, but to purchase extended nonowned coverage whenever there is any likelihood of their driving nonowned automobiles regularly. Of course, where the insured is content to rely on protection under the owner's insurance, extended nonowned coverage may not be wanted.