Omnibus Clause - Explained
What is an Omnibus Clause?
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Back To: INSURANCE & RISK MANAGEMENT
What is an Omnibus Clause?
An omnibus clause refers to a clause used in an automobile liability insurance policy clause. It offers coverage to individuals who are not covered in the policy. It is applicable to those individuals who can use an insured automobile.
How Does an Omnibus Clause Work?
Though an omnibus clause included in the policy of an automobile insurance increases the prospects of covering a large number of people, but the number of people that can be covered depends on the way the authority is offered. The very first non-named person, known as the first permittee, after receiving permission from the policy holder, can allow the next permittee in the row called the second permittee to start using the vehicle. For instance, when a child gets permission from his or her parents to take the family car out, and then he or she (the child) further gives permission to his or her friend to drive the same car. It is at the discretion of the named policyholder if he or she wants to explicitly permit every party or individual for being covered under a policy. There are many cases where courts may say that if the named insured party offers unhindered use of a vehicle, it informs that the party who gets permission has further the right to offer permission to other parties or individuals. However, if the named insured restricts the first permittee to further allowing someone to use the vehicle, then there is no coverage offered to the second permittee. It is crucial to know who has the authority to drive. For instance, a real estate organization permits their agent to pick up and drop prospective clients to a site for viewing purposes. Though the firm has expressly mentioned that it is the agent only who has the authority to drive the companys vehicle, the agent further gives permission to one of the clients to use the vehicle. And upon driving, there is an occurrence of an accident. In this case, omnibus clause wont provide any coverage as it is the insured party who needs to either express or imply their permission to the other person, or the second permittee to drive the vehicle.
Omnibus Clause and Vicarious Liability
According to the omnibus clause, any individual who is responsible for your carelessness or for the carelessness of a permissive individual (the one who will be vicariously responsible for carelessness caused by you, meaning the named policyholder, or an approved user). Vicarious liability occurs even when the concerned party doesn't do anything irresponsible or out of carelessness, but is still held liable for somebody else's act. It can be possible because of the presence of a lawful relationship. Say, a company's employer can be held vicariously liable for a car accident committed by a careless employee or worker.
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