When an employee is injured in a vehicle accident while working, many business owners assume workers’ compensation will handle everything. It certainly plays a role, but it does not cover the entire financial picture after a serious crash. That gap is one reason uninsured and underinsured motorist bodily injury coverage deserves attention in a business auto policy.
Consider a common scenario. An employee is driving a company vehicle to a job site or making a delivery when another driver causes an accident. The employee is injured and the other driver is clearly at fault. The problem arises when the at fault driver has little or no liability insurance.
Workers’ compensation responds immediately. It pays medical bills and replaces a portion of the employee’s lost wages regardless of who caused the accident. But workers’ comp has limits. It does not compensate the employee for pain and suffering, and wage replacement is only partial. In a serious injury case, the employee may still face significant financial loss.
Normally the injured employee could pursue a claim against the driver who caused the accident. If that driver carries adequate liability insurance, the claim may eventually produce a settlement. But if the driver has no insurance, or only minimal limits, there may be little or nothing to recover.
That is where uninsured and underinsured motorist bodily injury coverage comes in. UM and UIM coverage essentially stand in for the insurance the at fault driver should have carried. If the driver is uninsured, the coverage can respond to the injury claim. If the driver’s limits are too low to cover the damages, underinsured motorist coverage may help fill the gap.
The interaction with workers’ compensation is also important. Because the accident was caused by a third party, the workers’ compensation carrier usually has subrogation rights. If the injured employee recovers money from the at fault driver or from UM or UIM coverage, the workers’ compensation insurer may seek reimbursement for the benefits it already paid.
That reimbursement does not necessarily leave the employee empty handed. Workers’ compensation pays medical bills and partial wage loss, but it does not cover other elements of injury damages. UM and UIM claims often include those additional damages, so even after the workers’ compensation carrier is reimbursed, there may still be funds available to compensate the employee more fully.
There are also situations where this coverage becomes even more important. Business owners, partners, or corporate officers are sometimes excluded from workers’ compensation. If one of them is injured by an uninsured driver while operating a company vehicle, UM or UIM coverage may be the only meaningful source of recovery.
Despite these realities, many businesses carry very low limits for uninsured and underinsured motorist coverage on their commercial auto policies. The focus is usually on liability coverage that protects the business from claims brought by others. That is understandable, but it can leave a gap when an employee is injured by a driver who failed to carry adequate insurance.
Workers’ compensation and UM/UIM coverage address different parts of the same problem. Workers’ compensation provides immediate protection for medical bills and wage loss. Uninsured and underinsured motorist coverage can create an additional source of recovery when the at fault driver lacks adequate insurance. Together they can make a significant difference after a serious accident involving a company vehicle.
