Commercial automobile liability: Overview, definition, and example
What is commercial automobile liability?
Commercial automobile liability is a type of insurance coverage that protects businesses from financial losses if their vehicles cause injury, death, or property damage. This insurance applies to company-owned, leased, or rented vehicles used for business purposes, including delivery trucks, service vans, and company cars.
For example, if a business’s delivery truck is involved in an accident and causes damage to another vehicle, commercial automobile liability insurance covers the cost of repairs and any legal claims that arise.
Why is commercial automobile liability important?
Commercial automobile liability insurance is essential for businesses that use vehicles as part of their operations. It protects companies from expensive lawsuits, medical costs, and property damage claims resulting from accidents. Many states and contracts require businesses to carry this coverage to operate legally and minimize financial risk.
For businesses, having the right commercial automobile liability policy ensures compliance with local laws, protects company assets, and provides peace of mind when employees are on the road.
Understanding commercial automobile liability through an example
Imagine a catering company owns several vans to transport food to events. One of its drivers accidentally runs a red light and hits another car, causing injuries to the other driver and damage to their vehicle. The catering company’s commercial automobile liability insurance covers:
- Medical expenses for the injured driver.
- Repair costs for the damaged vehicle.
- Legal fees if the injured driver sues the catering company.
Without commercial automobile liability insurance, the business would have to pay these costs out of pocket, which could be financially devastating.
An example of a commercial automobile liability clause
Here’s how a commercial automobile liability clause might appear in a contract:
“The Contractor shall maintain commercial automobile liability insurance with coverage of not less than [$X] per occurrence for bodily injury and property damage arising from the use of vehicles in connection with the performance of this Agreement.”
Conclusion
Commercial automobile liability insurance protects businesses from financial losses due to vehicle-related accidents. It ensures compliance with legal requirements, covers damages and injuries, and helps businesses operate safely and responsibly. For companies that rely on vehicles, having proper coverage is a crucial risk management strategy.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.