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Learning that an employee was involved in an accident on company time is alarming. Even more troubling is when you find out the at-fault driver doesn’t have coverage or is underinsured. While most states require drivers to maintain auto insurance, according to recent study by the Insurance Research Council (IRC), one in eight motorists remain uninsured.

Uninsured motorist (UM) and underinsured motorist (UIM) are coverage options added to your commercial auto policy for transferring risk in such unfortunate circumstances.

Coverage Overview

In the event a driver or passengers are injured due to the negligence of an uninsured or underinsured driver, you may seek compensation for injuries and damages through the UM and UIM portions of your policy:

  • Uninsured motorist (UM) coverage is used when the at-fault driver can’t pay due to lack of insurance.
  • Underinsured motorist (UIM) coverage is used when the driver’s liability limits are lower than the costs of the accident.

The coverage typically has two components, but it varies from state to state:

  • Coverage for bodily injury provides insurance for medical bills, funeral expenses, lost wages, pain and suffering, disfigurement and permanent or partial disability.
  • Coverage for property damage provides insurance for auto repairs, total loss, rental car and damage to personal items carried in the vehicle. Oklahoma statutes do not allow for property damage coverage on UM.

The following are additional coverage considerations:

  • For UM/UIM to pay, it must be established that the other driver was at fault. Comparative negligence allows for more than one person to be at fault for an accident. As a result, your company can reduce the settlement of your uninsured/underinsured motorist claim by the percentage of fault attributable to you.
  • UM coverage pays losses up to the coverage limits from an accident caused by a hit-and-run driver, but be sure to report the accident promptly.
  • Commercial excess liability policies typically exclude UM/UIM coverage.

Coverage Limits

A risk management best practice for UM/UIM is to set the limits equal to your commercial auto bodily injury and property damage limits. Since UM and UIM coverage protects you, adequate limits are critical.

Additional Coverage Considerations

If your employee is injured in an auto accident while operating the vehicle for business purposes, workers compensation will apply to the employee’s injuries. Excluded officers could use UM for bodily injuries.

Passengers or family members could use UM for injuries. Other areas of recovery for bodily injury to passengers or family members would be personal health/disability insurance or UM available on a personal auto policy.

Officers or employees using vehicles for personal use do not have workers compensation benefits available. Further, if the officers or employees do not own a personal vehicle, you would want to consider naming the individual on a Driver Other Car Endorsement (DOC) plus spouses. Or purchase a personal auto policy with Named Nonowned UM/UIM coverage.

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