Auto Leaseback Agreement Insurance Purposes

Before we get to legitimacy, we need to tackle a dangerous assumption: ownership. Never assume that every vehicle listed in the car schedule belongs to the insured. In addition, do not assume that a car that the insured is trying to add during the insurance period belongs to the insured person or is properly rented to him. Lawyer: So you`re telling me that a listed car is not a covered car? Legal persons have the same rights as natural persons: the right to own property, the right to sell property, the right to enter into contracts, the right to sue and the right to be sued. In contract law, there is the right to assume responsibility for certain persons and activities. If a legal employer chooses to enter into a car rental agreement in the possession of an employee, the insurer should have no difficulty extending the requested coverage – based on the acceptance of other insurance considerations. These leases create the dual ownership of a plot of land – an automobile. Since dual ownership is created (the vehicle belongs to the employee and contractually to the employer), specific information must be included in the leasing contract. An “acceptable” formal lease includes (these are the minimum requirements): Could the owner of the vehicle have been protected by the police? Yes, if the facts indicated that the addition of her personal car was legitimate, an official lease had been concluded and the endorsement CA 99 47 – Employed as lessor had been attached. With the lease agreement concluded, the owner of the vehicle is contractually protected. However, if the wording of the contract compensation is unclear, possible legal problems may remain. To ensure that there are no gaps in the protection of the vehicle owner, CA 99 47 must be installed.

If the addition of the personal car to the BAP is deemed legitimate and appropriate, two steps must be taken to provide coverage to the vehicle and the owner: (2) your “employee” if the covered “car” belongs to that “employee” or a member of their household. Conversely, in an LLC or partnership where self-employment tax is an issue, the car rental agreement is a business expense and directly reduces income and thus reduces taxes on the self-employed. This deal can be a good idea if you can`t take advantage of an S Corp election (foreign investor) or if it doesn`t make sense (income below break-even). The second issue concerns depreciation and financing. Since you charge your company for a lease for the use of the vehicle, you also can`t add depreciation and financing costs. These figures represent a large part of the AAA`s operating costs. You can only pass on operating costs in proportion to business usage. However, these expenses can be deducted on Schedule E of your individual tax returns, such as in rental properties. “Acceptable” leases contain information on points 1, 2, 3, 8, 9, 11 and 12.

If any of this information is missing, the rental agreement is not acceptable and the personal car should not be planned in the policy. “Above average” leases are those that contain everything in an “acceptable” lease plus answer 7 above. A “Superior” lease addresses the 12 points. Expert: No, I`m telling you, the person driving the vehicle is not an insured driver. If the company, the said insured, were sued, the policy would provide coverage. However, it`s not the company being sued, it`s the driver and owner of the vehicle — and it has no coverage under the company`s business car policy. A third requirement to properly subscribe to this requested extension of coverage is confirmation and the requirement that a formal lease be used. Since a leasing contract is a legally binding document and is therefore subject to contract law, a simple paragraph stating that the employee agrees to rent his vehicle to the employer/insured is not a formal leasing contract and is not sufficient. However, there may be employment relationships and/or work requirements that lead a business unit (the insured) to explicitly attempt to include an employee-owned car as a covered car in their BAC. In this way, the company can extend the insured status in the BAC to the employee/driver for the use of the specified car (even if it belongs to the employee). Without the transfer of ownership to the company, the insured/employer can achieve both of these objectives by: 8) The duration of the lease, which may be indefinite.

b. Anyone else who uses a covered “car” that you own, rent, or lease with your permission, except: Each year, AAA publishes the annual cost of driving a car, and the cost is broken down by small sedan, midsize sedan, large sedan, sport utility vehicle, and minivan. From there, the cost is set at 10,000 miles, 15,000 miles and 20,000 miles. If the person who leases the vehicle to that insured person does not meet the definition of an “employee”, the status of insured person should not be extended to the person and the car should not be granted covered car status. However, if the person is an employee, the first hurdle is overcome and further review of the subscription is required. B. Although each covered “car” described in the Schedule is leased to you by one of your “employees”, the provision that is insured under the covered automobile liability insurance will be amended to include that “employee” as “insured”. Since the aforementioned insured business unit mainly covers this “rented” car (regardless of its use), contractual specificity is required. The insurance follows the vehicle and once the vehicle is specifically included in the policy, the insured`s BAC covers all liabilities arising from the legal use of the vehicle. If you have less than a minimally acceptable rental agreement, do not extend the protection of the insured car to the vehicle or the insured status to the owner. Carefully review the agreement before renewing protection. There are certain fixed costs such as insurance, registrations and financing.

There are some variable expenses such as gasoline, tires and maintenance. Then there are quasi-variable expenses, namely depreciation. Depreciation accelerates as mileage increases each year. Think Kelly Blue Book, Edmund, or rental rates – depreciation due to mileage becomes more severe when mileage exceeds 15,000. A kind of curvilinear equation. Before making the decision to attach note CA 99 47, the insurer must obtain detailed information about the employee, the use of the vehicle and the formality of the lease. Only with these facts can an appropriate underwriting decision be made. The same can be achieved with your car. You would be renting a car you own to your company. This is not considered the same as the company that rents the car from a dealership. This creates a self-rental agreement between you and your business. And why would you want to do that? Although the owner`s name is not required for confirmation, the insurer still needs car records.

The owner is like any other driver and can be more strictly insured as the carrier now offers 24/7 coverage while using the intended car. Keep in mind that “sale-leaseback” agreements create dual ownership of the vehicle, but make the named insured solely responsible for providing insurance coverage. Ultimately, the designated insured – the company – primarily covers the “rented” car, 24 hours a day, 7 days a week and regardless of how it is used. This fact puts the carrier on the hook for any loss caused by the listed vehicle. Such increased exposure requires a detailed lease, and the BAP carrier has the right to request such a lease. How is the break-even point evolving? Good question. Honestly, AAA tends to be cumbersome when it comes to costs. Thus, when the average cost of running an automobile decreases or is lower than the AAA thinks, the break-even point decreases. As the market rental rate increases from the $400 used above, the break-even mileage increases.

Due to dual ownership, the ability for sole proprietors or partnerships to rent and expand an employee-owned car can be personally detrimental to the insured. Obviously, the insured`s decision to rent a car is a business decision; however, no air carrier should encourage or legitimise the decision by freely offering to extend coverage. .

Tjip de Jong

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