Media Center

By Erin E Blevins

Professional athletes and coaches are often given vehicles from luxury automobile manufacturers or high-end auto dealerships with the intent of promoting a specific brand.

While not expected to make monthly lease payments, the arrangement may come with a non-monetary consideration for the vehicle loan, such as signed merchandise and memorabilia, appearances or commercials, and tickets to games and events.

In these arrangements, the auto manufacturer or dealership retains the registration and title of the vehicle, but the matter of insurance can be quite unclear.

Typically, a formal contract agreement will outline the duration and other key elements of the arrangement. Careful review of the agreement by your insurance professional is crucial to ensuring the proper insurance placement for the vehicle and appointed drivers. The agreements will typically identify the following:

1. Parties in the agreement
2. If and how the dealer/brand would like to be listed on the policy
3. Consideration, in lieu of a monthly monetary payment
4. Duration of the agreement
5. Vehicle usage restrictions
6. Insurance responsibilities

It is not unusual for high-profile individuals to establish shell corporations or other entities, designed to capture and account for income and incentives from endorsements and events.

If the agreement for the vehicle loan is made between the car manufacturer, auto dealer and the client’s entity, the insurance that is placed must include protection for the entity.

The inclusion of these entities on a personal auto policy, either as a named or additional insured, requires special underwriting consideration. Not all personal insurance carriers will approve this.

Insurance carriers willing to consider these arrangements will require reassurance that the client is the sole member of the entity, and that the entity is not associated with other business activities.

To qualify coverage acceptability, the insurer will require details surrounding the compensation or consideration of the arrangement, the frequency and use of the furnished vehicle, and personal information for any possible drivers.

The dealer or auto manufacturer may ask to be included as a loss payee and/or additional insured on the insurance contract, since they will continue to hold the title and registration of the vehicle.

The agreements may also define who is permitted to drive the car, where the vehicle may be taken, along with other restrictions.

In some cases, the personal auto policy may afford automatic or limited auto liability and physical damage coverage, in the same way it would for a rented vehicle.

The duration of this automatic coverage will vary by insurance carrier, and associated insurance contract language, which typically limits non-owned auto coverage to 30, 60 or 90 days. If the duration of the agreement exceeds the non-owned coverage time limit, it will be necessary to add the furnished vehicle to a personal auto policy for coverage to apply, subject to a prorated premium charge.

Contractual agreements executed by the auto manufacturer may already include auto liability coverage for the authorized driver(s) of the furnished vehicle. However, they may not provide coverage for medical payments, uninsured/underinsured motorist bodily injury, or vehicle physical damage.

To eliminate this gap in coverage, the brand ambassador’s insurance carrier may require that the vehicle be fully insured by an automobile policy, even if auto liability is already provided by the car manufacturer’s insurance coverage.

Finally, the vehicle should be added to the personal umbrella policy to ensure the broadest coverage. If the client’s entity is part of the arrangement, the entity should also be listed or otherwise included on the umbrella policy to afford coverage.

For help with your coverage, contact me at eblevins@oswaldcompanies.com or 513-716-6001.

This article originally appeared in 2017 and has been updated.

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