An omnibus clause is a provision that is often included in an auto insurance policy to make sure that an automobile is covered regardless of who is actually driving the vehicle.

Facts About Omnibus Clauses

In commercial auto policies, it's common to use comprehensive wording. This is frequently referred to as an omnibus clause. Typically, you can find these clauses in the section of the policy dedicated to auto liability. The specific heading is usually titled “Who is an Insured Driver.” Automobile insurance policies include omnibus clauses to guarantee that there is coverage in place no matter who is operating the automobile.

The number of drivers covered by a policy can be expanded through the use of an omnibus clause. However, the extent of this coverage is determined by how granting authority is legally interpreted.

Clauses can require that the status of property be altered even if that property has not been named specifically. You can include a clause in a variety of legal documents, including:

  • Decrees
  • Security agreements
  • Wills

For instance, when writing a will you could include a clause that states all property that has not been named in the will be left to one person.

Omnibus clause can also refer to a law that is focused on attempted interference with application of the Internal Revenue Code.

Who is an Insured Driver?

When discussing an omnibus clause, it's important to understand who is considered an insured driver. Generally, insured drivers under an omnibus clause fall into one of three categories:

  1. The Named Party: This is the person who is named in the contract as the insured.
  2. Permissive Users: These are drivers who are covered by an insurance policy with the express permission of the policy holder.
  3. Vicariously Liable Parties: These are people who could be held legally liable for the action of the person named in the policy or any permissive users.

The Extent of Omnibus Clause Coverage

The person who is named in an auto insurance policy is able to permit the use of their vehicle, and coverage, to another individual not named in the policy. This unnamed individual is known as the first permittee. Once this person has been given permission, they can allow a second permittee to drive the vehicle covered by the policy. As an example, you may allow your child to drive your car, and then your child lets one of their friends get behind the wheel.

In some cases, courts require that the person named in the policy provide their explicit permission to every person that wishes to drive their vehicle. However, in other circumstances, it may be decided that when the insured person allows someone else to use their vehicle without restrictions, this person can allow the vehicle to be used by additional drivers without seeking permission from the insured.

On the other hand, if the policyholder forbids the first permittee from letting another person drive their vehicle, a second permittee is usually not covered if they drive the car and get into a wreck.

Vicarious Liability Coverage

When an auto insurance policy includes an omnibus clause, people that could hold legal liability for your negligent actions, or the negligent actions of someone you allow to use your car, are automatically covered. Essentially, vicarious liability means someone can be held responsible for negligent actions that they themselves did not commit and may not have been aware occurred. Generally, when someone is vicariously liable, it is because they have a legal relationship with the person who has committed an act of negligence.

Holding Someone Vicariously Liable

An easy to understand an example of vicarious liability is an employer who is legally responsible for a car accident that was the result of the negligent actions of their employee. When an employee is negligent while performing their job duties, their employer will be liable for their actions under common law. If, for example, a general contractor causes an auto accident and they are sued, the auto insurance policy of the subcontractor may cover the lawsuit if the policy includes an omnibus clause.

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