Key Takeaways

  • An omnibus clause (or omnibus wording) in insurance policies extends coverage to individuals beyond the named insured, often including permissive users and those with vicarious liability.
  • Common in auto liability policies, it ensures that a vehicle is covered regardless of who is driving, as long as use is with permission.
  • The scope of coverage varies by policy terms and state law—some allow first permittees to grant use to others, while others require direct permission from the policyholder.
  • Omnibus wording also appears in other legal contexts, such as wills, decrees, security agreements, and statutes, to cover unspecified items or broad situations.
  • Vicarious liability provisions mean that employers or other responsible parties can be automatically covered for negligence committed by an insured driver.

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.

Types of Omnibus Wording in Legal Contexts

While the term “omnibus wording” is most often associated with auto insurance clauses, it is also used more broadly in legal and contractual drafting. In insurance, the wording is designed to extend coverage beyond the named insured to permissive drivers or other liable parties. In other legal documents, omnibus wording serves to capture property, rights, or obligations not specifically listed. For example:

  • Wills and Trusts: An omnibus clause can ensure that all assets not specifically mentioned are transferred to a designated beneficiary.
  • Corporate Agreements: Omnibus wording may define the responsibilities and relationships of multiple parties within a single agreement.
  • Statutory Provisions: Certain tax or criminal statutes use omnibus clauses to cover a wide range of prohibited conduct, such as interfering with the application of the Internal Revenue Code.

This flexibility makes omnibus wording a powerful drafting tool for creating comprehensive coverage, whether in insurance or other legal contexts.

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.

Defining Permissive Users Under Omnibus Wording

Under most omnibus clauses, a “permissive user” is any person operating the insured vehicle with the express or implied consent of the named insured. However, the exact definition of permission can vary:

  • Express Permission: Direct, verbal, or written consent from the policyholder.
  • Implied Permission: Circumstantial evidence suggests consent, such as past usage patterns or the relationship between the parties.
  • Conditional Permission: Permission given with specific restrictions, which if violated, may void coverage.

Courts may interpret permission broadly or narrowly, depending on jurisdiction and the wording of the policy. In some cases, even if the driver deviates slightly from permitted use, they may still be considered insured under omnibus wording.

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.

Judicial Interpretations of Omnibus Wording

Court rulings play a significant role in defining the extent of coverage under omnibus clauses. For instance, the “initial permission” rule in some jurisdictions holds that once the named insured gives initial consent, subsequent users are covered, even if they violate restrictions. Conversely, other jurisdictions follow the “strict construction” approach, requiring each driver to receive explicit permission from the policyholder.

Factors courts consider when interpreting omnibus wording include:

  • The specific policy language.
  • The nature of the relationship between the insured and the driver.
  • State statutes governing auto liability coverage.

Understanding how your jurisdiction applies these interpretations is crucial for both policyholders and potential drivers.

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.

Omnibus Wording and Employer Liability

In a business context, omnibus wording can extend liability coverage to employers when employees cause accidents while performing job duties. This protects employers from direct financial responsibility for employee negligence. For example, if a delivery driver causes an accident while using a company vehicle, the omnibus clause can ensure that the employer is covered under the employee’s or company’s policy.

Employers should ensure that their policies explicitly include omnibus wording to avoid coverage disputes, especially when vehicles are frequently used by multiple drivers.

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.

Frequently Asked Questions

  1. What is omnibus wording in insurance?
    It’s policy language that extends coverage to people other than the named insured, typically permissive users and those with vicarious liability.
  2. Does omnibus wording always cover secondary drivers?
    Not always—coverage depends on policy language, the type of permission granted, and applicable state law.
  3. Can omnibus clauses apply outside insurance?
    Yes. They appear in wills, contracts, and statutes to broadly include unspecified property or conduct.
  4. How does state law affect omnibus wording?
    Some states interpret it broadly under “initial permission” rules, while others require strict, explicit permission for coverage.
  5. Why is omnibus wording important for employers?
    It can shield employers from liability when employees cause accidents during work-related driving.

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