One of the most common situations in which extended nonowned coverage is advisable is the case of a company car. Sometimes an employer may furnish the insured with a car for the insured's use, both business and personal. Other times, the employer may make one available, as where no single car is assigned to the employee, but some car from a vehicle pool is regularly available. Although the employer's auto insurance usually covers the insured (employee) while on company business, it may also stipulate that the employee is not covered while on personal business. Extended nonowned coverage deletes from the PAP the exclusion of “furnished or available” autos and guarantees that the insured will have his or her usual scope of auto insurance while driving the company car, on or off the job.

Note that the furnished or available exclusion is not limited to company cars. A client may just be taking care of a neighbor's car while the neighbor has gone on a long trip. If, even with the best of intentions, the client gets into the habit of using the car for running errands, there is a possibility that the client's insurer may view the car as one furnished for the insured's regular use and deny coverage for any resulting liability.

Customarily, employees are covered under their employer's insurance while driving a company car with the employer's permission. Even so, some employees choose not to rely entirely on the employer's insurance. This may be because the employee does not have faith in the employer's ability to keep the insurance in force. Or, the employee may know that the employer has lower limits than the employee deems adequate.

A sound reason for any employee who drives a company owned pickup, van, or larger truck on the job to have extended nonowned protection is that fellow-employee suits are becoming more common. That is, an increasing number of courts are allowing one employee to sue another (at fault) employee for injuries sustained in the course of employment. The employee's auto policy excludes business use of a truck, and the employer's policy usually excludes bodily injury to a fellow employee. Thus, the employee is left without protection under either policy. The simplest way of covering this exposure is endorsing the employee's policy with extended nonowned coverage.

Incidentally, if it happens that extended nonowned coverage comes into play, it is excess over whatever other insurance is collectible. If there is no other insurance, then the employee's insurance will step in to pay from the “first dollar.”

Although, as a general rule, an employee is covered under his own policy for occasional use of a nonowned private passenger car in business, this is not the case for employees of an automobile business—a garage, service station, parking lot, automobile dealership, or any other business that takes custody of customers' autos. Here, the employee's use of even a private passenger car he does not own will be excluded.

The regular extended nonowned endorsement discussed up to this point does not delete the auto business exclusion, but there is (for use with the personal auto policy) a special extended nonowned endorsement for auto business employees that does delete the exclusion. That endorsement is PP 03 96. PP 03 96 does not delete the other liability exclusions that are deleted in the regular extended nonowned endorsement. Thus, for example, the auto business endorsement does not cover under any circumstances the named individual's use of a car furnished for his regular use. When an employee of an auto business wants his policy to cover a furnished car or any of the other liability exposures covered by PP 03 96, that particular endorsement must be used. If the employee wants this coverage to apply while he is at work in an auto business, then the auto business endorsement should be added as well.

Another situation in which extended nonowned coverage is sometimes recommended is when the insured rents a car or some other vehicle on a long term basis. The rental firm may provide insurance for the renter's benefit (which the renter may for some reason have to accept), usually with relatively high limits of liability; $250/500/100,000 for bodily injury and property damage liability coverage are not unusual. But does this insurance have narrower coverage than that which the insured has normally relied upon? Or is there some provision in the rental agreement that, if violated, will terminate the renter's coverage under the rental firm's policy? Or is it possible that the insured has rented an uninsured car from a friend, or taken a loaner from a garage for an extended period?

In any of these cases, the insured may have to rely upon his or her own insurance in the event of an accident and these situations may bring any coverage into dispute due to questions over what is meant by “furnished or available for regular use.” There is no definitive guideline on when a car becomes furnished for regular use—is it two weeks? a month? six weeks?—and so there is always the possibility that after the insured has used a car a certain amount of time the insurance company will deny coverage for any ensuing claims involving that car. Attachment of the extended nonowned endorsement to the insured's policy eliminates this uncertainty of coverage.

The extended nonowned endorsement covers only the individual named in the endorsement. If it is anticipated that a family member might drive the car in question, this person too should be named in the endorsement.

Rating for extended nonowned coverage is explained in the personal vehicle manual. Under the rules in the manual, the charge for extended nonowned coverage can vary depending upon the circumstances. For example, when no primary liability insurance is in effect on the auto, the charge is 50percent of the liability premium that would apply if the furnished auto were being specifically insured as an owned auto by the individual insured. When there is primary liability insurance in effect on the auto, the premium charged is found on the rate pages of the personal vehicle manual and is on a per person basis. Also, if the insured is employed by a garage, the rating changes. If the garage has no liability insurance, the charge for extended nonowned coverage is 170percent of the base rate for liability. When the garage has liability insurance, a referral to the insurer is required.

As for medical payments coverage under PP 03 06, a referral to the rate pages in the manual is required. Also, medical payments coverage is available only if single limit liability or bodily injury and property damage coverages are extended.

The client who has purchased extended nonowned coverage should be reminded that it applies only to liability and (optionally) medical payments coverage. It does not eliminate any of the exclusions on the PAP for the purposes of collision or comprehensive physical damage coverage. The PAP does offer physical damage coverage to nonowned autos (as defined on the policy), but the extended nonowned coverage endorsement does not affect this coverage.