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How to minimize liability from potential auto accident.
Q: I drive a car that I lease through my practice but insure on my personal policy. Could my practice be sued if I'm in an accident? If so, what can I do to minimize my exposure to liability?
A: Commonly, business owners' insurance policies written for physician practices contain protection for "hired" autos (vehicles rented on practice business) and "non-owned" autos (employees driving their own vehicles while on practice business). The practice-lease arrangement, however, makes a vehicle an "owned" auto under insurance policy definitions, negating coverage under the business owners' policy.
Three ways to protect your practice:
2. If your insurance carrier allows it, add your practice entity as an "additional insured" on your personal automobile policy. If you choose this option, make sure your personal policy has enough coverage to support both your exposure and the exposure of the practice in the event of an accident. Keep in mind that a practice entity with significant assets or receivables creates a deep pocket for a plaintiff, and that sharing your coverage may mean less protection for you personally.
3. Amend the vehicle lease so that it's in your personal name, thereby making the vehicle a "non-owned" auto such that your practice's business owners' policy provides protection for your practice. Your tax accountant may need to help you run the figures on this option. But the savings when compared with purchasing a business automobile policy may justify it.
Your practice still may be liable in the event of an accident while you (or any other employee of the practice) are traveling on practice business. As long as such accidents occur with a "non-owned" vehicle, however, your practice will be protected by its business owners' policy.
Send your money management questions to firstname.lastname@example.org. Answer provided by John W. Miller II, principal of Sterling Risk Advisors in Marietta, Georgia.