6 Questions to Assess Vehicle Insurance

Managing the money of the church includes being up-to-date on insurance policies.

After Hurricane Harvey struck southeast Texas, an Oklahoma church sent 150 people to help with disaster relief.

Before they left, church leaders worked to bolster safety on the nearly 1,000-mile round trip: They rented 18 newer-model vans and required volunteer drivers to complete an online training course.

This was in addition to making sure the vehicles, drivers, and passengers had insurance coverage.

“God forbid, if we had an accident with a van load full of people—you can run up some pretty high medical expenses,” said John Trotter, elder and administrator for the Oklahoma church.

Managing the money of the church includes being up to date on insurance policies—knowing what types of coverage are essential, that policies include all possible drivers and vehicle scenarios, and that the limits are adequate.

Here are six questions to help church leaders when evaluating vehicle insurance coverage.

1. When does a church need vehicle insurance?

Of course, if a church owns a vehicle, it clearly needs a policy to cover that vehicle. Also, if a church plans to rent a vehicle, it needs appropriate insurance through its own company or through the rental company. (Whether or not to purchase insurance through a rental company is handled later in this article.)

In most cases, a volunteer driving his or her own vehicle on the church’s behalf will need personal auto insurance, which typically will be that person’s primary coverage. The church’s policy generally is responsible for damages and liability beyond the personal auto policy, said Scott Figgins, vice president of underwriting for Brotherhood Mutual Insurance Company.

However, laws vary by state, so the church should discuss specifics with its insurance company.

Churches should discuss “non-owned and hired” (NOHA) insurance coverage with their agent, said Tom Strong, GuideOne Insurance’s senior loss control manager. NOHA will offer protection when they rent a vehicle (hired) and when volunteers drive their own vehicles (non-owned), Strong said. In most states, for volunteers driving their own vehicles, their personal insurance is the primary coverage and the NOHA is for additional coverage.

Churches should make sure their policy includes noninsured motorist coverage, said Eric Spacek, GuideOne’s former risk management and loss control director. That coverage is important “if you’re involved in an accident, even if it’s not the church driver’s fault, but the other vehicle doesn’t have coverage,” Spacek said.

Vehicle insurance for an employee typically will exclude medical coverage “because they should be covered under workers’ compensation statutes,” noted Zach Lutzke, underwriter for Church Mutual. But to keep from being caught off guard, a church should check to make sure employees are fully covered, Lutzke stressed.

2. What specific types of insurance are needed for church employees and volunteers?

Types of vehicle insurance that churches might need include: liability, property damage, uninsured/underinsured motorist (depending on the state), auto medical coverage (this, too, varies by state), hired/non-owned/rental, and various miscellaneous items that could apply to a church, Lutzke explained.

“The most important piece of advice that I can give is for churches to understand their activities and exposures and then discuss those exposures with their insurance representative,” Lutzke said. “The representative should be able to provide insight into what options are available and how each coverage option would apply. “

Most commercial auto policies cover any permissive user, including employees and volunteers, Figgins noted. The policies exclude anyone using a church vehicle without permission.

A personal auto policy “follows you no matter what car you get in,” Figgins explained. “So if you are driving your neighbor’s car, you’re covered. If you are driving a rental car, you’re covered, etc.”

A commercial policy, on the other hand, he said, is “like putting the policy in the glove box of the vehicle, and anyone who operates it (with permission) is covered.”

That means churches need to be careful if they provide a vehicle, for example, to a pastor for his personal use as part of his compensation package. If the vehicle is the only car the pastor has, he could have a gap in coverage if he were to operate another vehicle, Figgins said.

“To avoid this [gap], you can add an endorsement to a commercial auto policy called ‘Drive Other Car Coverage,'” Figgins said. “This would provide named individuals with coverage that would follow them to other vehicles.”

3. What should a church know before allowing someone to drive on its behalf?

The church should check the driving record of a potential driver and verify that the person has insurance coverage that meets the minimum damage and liability limits under state law.

“If the church is submitting an application for insurance, we’ll ask them for [the names of] the primary drivers using the vehicle, and we’ll run a Motor Vehicle Record (vehicle report) on those drivers,” Figgins said.

Charlie Cutler, managing partner for ChurchWest Insurance Services, said that too often a pastor asks someone to drive for a church event who has a couple of accidents and a DUI that nobody in the church knows about. Or, he added, this individual could have a medical condition—such as epilepsy—that could make driving hazardous.

“The main thing to look at [besides insurance history] is whether somebody is physically able to drive and perform the task,” Cutler said.

“A lot of accidents are the result of inexperienced drivers who aren’t familiar with how to operate [certain church-owned vehicles],” Figgins added. “So, we have online training and other resources for people who are regularly going to operate those vehicles, and we think it’s a really good idea to get some practice driving before you put them on the road with a van full of people.”

It’s also crucial that the person is licensed to drive a particular vehicle. In most states, a commercial driver’s license is required for vehicles designed to seat 16 or more passengers, including the driver, Figgins said. In many states, a 15-passenger van is the largest vehicle that can be driven without a special endorsement. But in some cases, even that requires a commercial license. Church leaders should make sure they know state requirements.

4. Exactly how much vehicle insurance coverage does a church need?

The figure most often given by the experts interviewed: $1 million in coverage.

“That’s certainly adequate in most circumstances,” Figgins said. “Then again, if you have a bad accident, it can be significantly more than that. It’s not beyond the realm of possibility to have a multimillion-dollar loss from an automobile accident.”

With such medical and liability concerns in mind, a church should thoroughly discuss coverage options with its insurance company and its board or insurance committee.

5. What about purchasing insurance from the rental company?

“Churches can buy coverage at the time of a rental, and that’s always a valid option,” Figgins said. But in most cases, it’s better for a church to have its own insurance that covers all scenarios—be it owned, rented, or borrowed vehicles driven on the church’s behalf. If a church depends exclusively on buying insurance on a case-by-case basis, there’s probably going to be a time when purchasing insurance is overlooked and the church ends up not properly covered, he said.

Also, a church’s own insurance policy is usually cheaper than buying additional insurance when renting vehicles, especially if the church rents regularly, Lutzke said.

However, there could be exceptions to that general practice, he added: “Depending on the value of [the vehicle or vehicles] being rented, that limit of insurance may or may not be sufficient in the event of a loss. Every policy will also have a limit of insurance for liability; depending on the contract that is being signed with the rental company, there may be a need for higher limits of insurance. For example: a contract might require $1 million in auto liability coverage, but the [church] may only have $500,000 liability limits.”

Another possible benefit of purchasing coverage when renting: liability could shift to the rental company. “Depending on contractual agreements that are made, purchasing insurance through the rental company may transfer all of the liability exposure to the rental company. In the event that a claim exceeds limits, the obligation to pay further may fall upon the rental company instead of the [church],” Figgins said.

Figgins noted another possible benefit of purchasing insurance through a rental company: The rental company’s insurance might not have a deductible, which would be better than a church’s insurance policy that includes a deductible.

“Also, if you have an accident with a rental vehicle, [the rental company] may also charge additional costs for things like the administrative cost of handling the claim, loss of rental income while the vehicle is out of service for repair, diminished value, etc.,” Figgins said. “Usually the coverage provided by the rental car company includes these expenses, whereas the standard commercial auto policy may not. Therefore, it is important to include these potential extra expenses when deciding how to manage this exposure.”

Another consideration: Many credit-card companies include coverage as a value-added benefit if the rental is paid with that particular card, Figgins said. “Having someone who has this protection on a credit card rent the vehicle could also be a cost-savings method,” he explained.

Finally, the decision of whether or not to have coverage for rental vehicles through the church’s insurance policy might come down to frequency of using rental vehicles.

“Generally, I would say that if you plan to only rent vehicles for a few days per year, you are probably better off to purchase the coverage from the rental company,” Figgins advised.

6. What can a church do to promote safety and are there ways promoting safety can also save money on insurance?

Ongoing maintenance on church-owned vehicles is just as important as vetting drivers, Figgins said. That includes regularly inspecting tires, particularly on vans and buses.

“When I talk about vehicles, I talk about not only the driver component, which is very important, but also the equipment,” said Frank Sommerville, attorney and a senior editorial advisor for Church Law & Tax. “Because if you have a church-owned vehicle, typically there’s not anyone who’s responsible for its maintenance, not like a personal vehicle.”

“Churches [generally] don’t use their vehicles that often,” Figgins added. “So even if a tire is new and has good tread on it, if it has sat in one spot for a long time, that can create a problem and de-tread . . . and you can have a blowout that can often result in a significant loss.”

Regarding safety issues, Sommerville expressed great concern about the use of 15-passenger vans.

In 15-passanger vans, there are “stability issues, weight distribution issues, driver issues, because the center of gravity is much higher and different than a car,” Sommerville said.

(An article on ChurchLawAndTax.com, “Q&A: Are New 15-Passenger Vans Safer?” has more information on problems related to 15-passenger vans.)

Working to help ensure safety can also save churches money. Insurance can be less expensive for a church that can demonstrate it vets drivers and takes steps to prevent accidents. A lot of companies offer credits for safe drivers and vehicle safety measures, such as antilock brakes and collision avoidance systems, Figgins said.

But beyond financial considerations, Figgins encourages churches to always keep something else in mind: “Insurance doesn’t bring kids back that lose their lives in an automobile accident. So, to protect the people of the church and its reputation, it’s important to do the things that are necessary. Not just making sure you have enough insurance, but also [doing what you can] to prevent the accident from happening in the first place.”

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