Finding the best auto coverage - Warner Corp. reduces insurance costs

Nation's Business, Feb, 1994 by John S. DeMott

With 180 plumbing, heating, and air-conditioning service vans scurrying about the Washing. ton, D.C., metropolitan area, Warner Corp. has more than a casual interest in getting the best auto-insurance coverage for its money.

To help it toward that end, the company puts its 220 driver-mechanics through monthly auto-safety courses at its 16 service branches. It also checks on job applicants' driving records and requires them to submit to drug testing.

These steps, says Liz Trotter, manager of Warner's human-resources department and daughter of CEO Tom Warner, played a big role in holding the company's commercial auto-insurance premium to about $15,000 a month for both 1992 and 1993, slightly less than it was at the beginning of the 1990s. The company buys its coverage from Aetna Life & Casualty, of Hartford, Conn.

Prevention--taking vigorous measures to reduce auto-insurance claims before they happen--is the first lesson any business can learn about holding autoinsurance rates at bay. Says Trotter: "The insurance companies look at what you do to prevent losses, so we're always building on our safety program."

The company's employees appreciate the safety program, too. According to Trotter, "the drivers like to brush up. They don't want to have an accident."

The second lesson is knowing what your business auto policy covers and what it doesn't cover. This can be tricky, says John A. "Chappy" Chapman Jr. Of the Heffron, Ingle, McDowell & Cooper agency in Charleston, S.C. What a policy covers is designated on the policy declaration page by numerical Symbols 1 through 9. Symbol 1 coverage applies to cars that the business owns, rents, or leases, and any other cars that could be cited in a claim. Covered, for example, would be an employee using a personal car on company business who got into an accident that led to a claim against the employer.

Symbol 1 extends protection to nearly all liability exposures a small-business owner could face. As the symbol numbers get higher, coverage narrows. Symbol 2, for example, covers only those cars owned by the policyholder, not those rented, leased, or owned by employees.

Symbol 3 is similar, but it covers only private passenger cars; if a business owner adds a truck, for instance, it won't be covered unless an endorsement for it is made part of the policy.

Bill Groves, a senior vice president of the CIMA Cos., in Alexandria, Va., put together a package of coverages for Warner that gives the company what it needs but doesn't force it to pay for coverage it doesn't need or that is not cost-effective.

When it comes to auto-accident medical coverage, Symbol 2 protection would cover all trucks and any other vehicles in Warner's fleet, but it's probably not necessary. The reason, Groves says, is that workers' comp would cover a worker's medical costs and that the employees behind the wheels of those trucks would be on company business almost all the time.

If a Warner vehicle hits another vehicle, Warner's insurance would pay for the damage to the other vehicle. But Warner pays out of pocket for damage to its truck. By arranging coverage so Warnet selfinsures in such instances, Groves estimates, the company's insurance premium is reduced by $47,000 annually.

Most of the coverage-level provisions used in the industry are set by the Insurance Services Office, an industry group in New York City, in consultation with major insurers. They're poured into a "simplified-language" form called the business auto policy, or BAP,, which has been available since 1978 and was last revised in June 1992.

Most insurers use the BAP form as a basis for coverage. Some stick to it literally; others elaborate on it.

As to what coverage you should have, this is what agents recommend for smallbusiness buyers of auto insurance:

* Buy insurance to cover the risks you face in your business every day. Do not buy insurance just to cover state-mandated minimums at the lowest price.

* Buy Symbol 1 liability coverage at all times. If for some reason your carrier won't sell it to you, shop for another carrier. Although rates vary widely throughout the country--from about $1,000 per vehicle in Washington, D.C., to as much as $3,200 per vehicle in Philadelphia-in the long run the more comprehensive coverage will wind up costing less than a cheaper policy that falls short when you need it.

If the price for Symbol 1 liability protection is too high, make up for it by trimming back on property-damage protection by raising deductibles. Says Chapman: "If you lose an entire vehicle, you know what your loss is going to be, a finite value. But you get into liability, and you don't really know."

* If cars are owned and insured in the company's name (most vehicles used in business are, for tax purposes), be aware that you might not have auto-insurance coverage if you rent or borrow a car in your name and not your company's. To avoid this problem, have a "drive-othercar" endorsement added to the business auto policy. This effectively gives pernal automobile-type coverage when the business owner is driving someone else's car.