Form CA 99 47: Employee Hired Autos
The CA 99 47, titled "Employee Hired Autos" (or often referred to as "Employee as Lessor"), is an endorsement to the standard Business Auto Policy (BAP) (CA 00 01). Its primary purpose is to modify the BAP to provide liability coverage for automobiles that are leased or hired by an employee of the named insured, in the employee's own name, for use in the named insured's business or personal affairs. Crucially, this endorsement treats the scheduled auto as if it were an owned auto by the named insured, rather than a hired, borrowed, or leased one. This distinction is significant because it typically means the coverage provided under the BAP becomes primary for that specific vehicle.
Classes of Business It Applies To
This endorsement is most relevant for businesses where employees, particularly owners or key personnel, lease their personally-owned vehicles back to the company for business use. This scenario often arises when:
- An owner or executive wants to use their personal vehicle for company business and have it covered under the commercial auto policy.
- A company wants to provide a vehicle for an employee but prefers the employee to lease their own vehicle to the company.
- The business wants to ensure primary coverage for a vehicle that is integral to its operations but is technically owned and leased by an employee.
Real-world example: The president of a small construction company owns a pickup truck that she uses daily for site visits and transporting materials. To ensure the truck is properly insured for business use under the company's BAP with primary coverage, the company and the president (as an individual) enter into a formal lease agreement, and the CA 99 47 endorsement is added to the company's auto policy, scheduling that specific truck.
Special Considerations
There are several important factors to consider when using the CA 99 47 endorsement:
- Formal Lease Agreement: A formal, written lease agreement between the employee (lessor) and the named insured (lessee) is highly recommended and often required by underwriters. This agreement should detail aspects such as the vehicle description, insurance responsibilities, maintenance, and permitted use. Without a proper lease, there can be ambiguity regarding insurable interest and coverage application.
- Primary Coverage: By deeming the scheduled auto as "owned" by the named insured for coverage purposes, this endorsement generally makes the BAP primary for that auto, rather than excess over the employee's personal auto policy (PAP). This is a key reason for using this endorsement.
- Employee as an Insured: The endorsement specifically adds the employee who leases the auto to the named insured as an "insured" under the policy for that scheduled auto.
- Not for All Hired Auto Situations: This endorsement is specific to the "employee as lessor" scenario. It's different from endorsements like the CA 20 54 (Employee Hired Autos), which addresses situations where an employee rents a car in their own name for business purposes without a formal lease-back arrangement to the company.
- Potential for PAP Primacy Issues: Without this endorsement and a formal lease, the employee's PAP would typically be primary if they are using their own vehicle for business purposes, with the BAP potentially providing excess coverage for the employer's liability. The CA 99 47 clarifies the BAP's role as primary for the scheduled vehicle.
Real-world example: If a sales manager leases her personal car to her employer for business travel, and the CA 99 47 is not attached, her personal auto policy would likely respond first in an accident. If the CA 99 47 is attached along with a formal lease, the company's BAP is intended to be primary for that vehicle.
Key Information for Agents and Underwriters
Agents and underwriters need to pay close attention to several aspects when considering the CA 99 47:
- Underwriting Scrutiny: Due to the extension of primary coverage and the inclusion of the employee as an insured for the scheduled vehicle, underwriters will typically scrutinize these arrangements carefully. This includes reviewing the employee's driving record (MVR) and the details of the lease agreement.
- Pricing/Rating: The scheduled auto is typically rated as an owned vehicle on the BAP, which may have different premium implications than rating it as a hired auto.
- Coverage Gaps Avoidance: This endorsement helps to avoid potential coverage disputes and gaps that can arise when an employee's personally owned vehicle is regularly used for business purposes. It clarifies which policy is intended to be primary.
- Legitimacy of Use: Underwriters will assess whether the arrangement is a legitimate business need rather than an attempt to secure commercial coverage for what is primarily personal use at potentially more favorable rates or terms. Questions to ask include the percentage of business versus personal use and the employee's duties.
- Physical Damage Coverage: The endorsement also means that if physical damage coverage is provided on the BAP for "owned" autos (e.g., comprehensive and collision), it would extend to the scheduled employee-leased vehicle.
- Alternative Endorsements: It's important to distinguish when the CA 99 47 is appropriate versus other endorsements. For example, if an employee occasionally uses their own car for errands without a formal lease to the company, the "Employees as Insureds" (CA 99 33) endorsement might be more suitable to provide excess coverage for the employee while protecting the named insured for non-owned auto liability. If an employee rents a car from a rental company in their own name for a business trip, the CA 20 54 "Employee Hired Autos" would be more applicable.
Real-world example for underwriting: An underwriter receives a request to add an employee's sports car to the company's BAP using the CA 99 47. The employee is an accountant with minimal travel needs. The underwriter would likely question the business purpose and the extent of personal use, potentially declining the endorsement or requesting more information to justify the exposure to the commercial policy, especially if it seems like an attempt to cover a high-risk personal vehicle under the business policy.