Does your business own mobile machinery or equipment, like a backhoe or a truck-mounted crane, that may be driven on a public road? If the answer is yes, it is essential to make sure your vehicle is property insured.

What is Mobile Equipment?

Movable machinery is referred to as mobile equipment under a typical commercial general liability (CGL) or commercial auto policy. Mobile equipment is not an auto.

An auto is a vehicle used to transport people or property over public roads. Mobile equipment, on the other hand, is used primarily off public roads. Its main function is to perform an operation, like digging, scraping, or moving large items (think crane or forklift). Mobile equipment may be driven or conveyed on a public road to get from one location to another, but transportation is not its primary purpose.

CGL Covers Equipment Operation

A CGL policy covers bodily injury or property damage that arises out of the operation of mobile equipment at the insured’s premises or at a job site. For example, Larry’s Landscaping owns a mobile digging machine. Larry’s CGL policy covers the equipment while it is stored on Larry’s premises or while it is being used at a customer’s location. The equipment is covered automatically and does not need be listed on Larry’s CGL policy.

Suppose that Larry’s Landscaping has been hired to construct a garden on a customer’s property. One of Larry’s employees is operating the digging machine when he accidentally rams the machine into the side of the customer’s car.

When the customer demands that Larry’s Landscaping pay for the damage, Larry’s CGL policy should cover the loss.

Assume that Larry’s Landscaping has completed one job and is traveling to another job site. An employee is driving the machine on a public road when he accidentally rear-ends the car in front of him. If the car owner sues Larry’s Leasing for the damage, will Larry’s CGL policy cover the claim? The answer may be no.

Some Equipment Qualifies as an Auto When on a Road

The definition of mobile equipment found in most CGL and commercial auto policies excludes land vehicles that are subject to a compulsory or financial responsibility law in the state where they are licensed or principally garaged. In other words, if state law requires the vehicle owner to purchase liability insurance for that vehicle, the vehicle is treated as an auto under both commercial general liability and commercial auto policies when the vehicle is driven on a public road. The operation of the vehicle as a digging machine or other piece of equipment is always covered under the CGL policy.

The types of vehicles for which liability insurance is required vary from state to state. For instance, a forklift may be subject to a compulsory insurance law in State X but not in State Y. Under CGL and commercial auto policies a forklift garaged in State X will be considered an auto while traveling on a public road. In State Y the forklift would qualify as mobile equipment whether it being was driven on the insured’s premises, at a job site, or a public road.

Because mobile equipment that is subject to compulsory insurance laws is deemed an auto when driven on a public road, it is covered by commercial auto liability insurance. Like any auto the insured owns, it should be scheduled on the insured’s policy. Also considered an auto is mobile equipment that is being carried or towed by an auto.