A prospective personal lines customer owns an auto repair business. The auto repair business operates as a limited liability company (LLC). This prospective insured allows his employees to drive two of his personal vehicles for activities related to his auto repair business.

The ISO personal auto policy appears to exclude liability coverage for the employees of the auto repair business while operating these vehicles for business use. These employees are employed by his LLC and not by him as an individual.

Q: Will liability coverage extend from his PAP to the employees as insureds while using these vehicles for business use?

Response 1: I don't believe the employees have coverage. The auto business is in the name of the LLC, not the PAP insured. The employees would normally qualify as “insureds" on the PAP as permissive operators. However, the employees are operating the vehicle as an auto business. The exclusion says:

A. We do not provide Liability Coverage for any insured:

6. While employed or otherwise engaged in the business of:

a. Selling;

b. Leasing;

c. Repairing;

d. Servicing;

e. Storing; or

f. Parking;

vehicles designed for use mainly on public highways. This includes road testing and delivery. This Exclusion A.6. does not apply to the ownership, maintenance or use of your covered auto by:

(1) You;

(2) Any family member

(3) Any partner, agent or employee of you or any family member.

The exception to exclusion A.6. for an employee of “you," the named insured, while operating “your covered auto" in the auto business does not apply because these are employees of the LLC, not the PAP named insured. 

Response 2: This observation is spot on. The exception granting employees an auto business coverage for using an insured's auto only applies to employees of the policyholder, not employees of another legal entity. The exclusion would apply to all employees of an auto business other than employees of the policyholder, even if they were using the vehicle personally. 

Response 3: The use of a PAP in this way is totally unacceptable. These autos need to be insured on the garage auto policy, which will allow such use. The prospect isn't worth the trouble you will have if there is ever a loss. 

Response 4: Those employees would have to be listed as operators on his PAP. Also, any underwriter worth their salt would require those cars to be insured on a commercial auto policy because they are being used in his business. 

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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