Named driver exclusions: when your insurer refuses to cover one driver

What the endorsement removes

A standard business auto policy covers more people than you might expect. Under the ISO form, with a few exceptions, anyone driving a covered auto you own, hire, or borrow with your permission is an insured. A named driver exclusion carves one person out of that group, by name, for every vehicle on the policy. The other way a policy limits drivers, covering only those on an approved list, is explained in NEMT insurance exclusions.

Maryland’s insurance code shows how wide the carve-out can be. On a policy that excludes a named driver, the endorsement can remove all coverage while that person is driving a covered vehicle, whether or not anyone gave permission, for:

• the excluded driver;
• the vehicle’s owner;
• family members living in the household of the driver or owner;
• anyone else, apart from the medical, hospital, and disability benefits and uninsured motorist coverage the state requires, when no other policy provides them.

Why an insurer offers one

Maryland’s law frames the exclusion as the alternative to a worse outcome. When an insurer could cancel, non-renew, or raise the premium on a commercial auto policy because of the claims or driving record of some, but not all, of the people it insures, it may instead offer to keep the policy and exclude the person whose record caused the problem. It may also issue a new policy with that person excluded where it could have refused the policy outright. The premium on the excluded policy may not reflect the excluded driver’s record.

The record behind the decision is usually the driver’s motor vehicle record. Brokers set their own limits on that record as well, and the driver approval guide covers how insurer and broker standards fit together.

Where states limit it

State law decides whether a commercial policy can exclude a named driver, and the answers vary:

• Maryland. Allowed on commercial policies under the terms above.
• Virginia. Every auto liability policy on a vehicle principally garaged or used in the state must cover anyone who drives with permission from the named insured, and any endorsement that cuts that required coverage is void apart from listed exceptions. The only driver exclusion the section allows is on a personal umbrella or excess policy, requested in writing by the first named insured and acknowledged in writing by the excluded driver.
• New York. The state’s insurance regulator concluded in 2003 that a commercial auto endorsement excluding a named employee who drives with the employer’s consent is not allowed, and the policy is enforced as if the endorsement were not there. The NEMT insurance exclusions guide covers that opinion.
• Michigan. The insured must authorize the exclusion, and it is valid only with a printed warning that all liability coverage is void when the excluded person drives.

Ask your agent which rule applies where your vans are garaged before you accept an exclusion.

If the excluded person drives anyway

Where the exclusion is valid, a crash with that person at the wheel can leave the company paying the claim itself, and under Maryland’s form that holds even if nobody gave the person permission to drive. Treat the endorsement as a ban on that person driving any covered van. What it means for a broker trip, and how to keep the person off the roster and schedule, is in the driver approval guide. A second claim can follow: negligent entrustment makes the company answer for handing the keys to a driver it knew was a risk. File the endorsement where dispatch can check it before every assignment.