Contingent auto liability insurance is a commercial product primarily designed for leasing companies that own vehicles they lease to others. Contingent liability is different than secondary liability, when one or more insurance companies have similar policies on the same vehicle and must decide who provides primary benefits in a claim. A contingent auto liability policy is designed to be secondary insurance by default, and typically protects only the lessor, the owner of the vehicle.
When a company leases a vehicle to another person, it remains the legal owner even though it does not regularly use the vehicle. Therefore, if the lessee is involved in an accident and causes injury or damage, the lessor could be named in a resulting lawsuit. Lessors can buy contingent auto liability to protect them in this event.
Though lessors are a common customer for contingent auto liability policies, others that can benefit from this protection, too. The commercial trucking industry is complex and involves several businesses working together. Trucking brokers often match privately owned trucks with hauling jobs, and therefore assume a certain amount of liability on the truckers' behalf. The broker could be named in a lawsuit resulting from a trucking loss -- similar to the risk that lessors face.
Theoretically, both personal and commercial auto liability policies should list the vehicle's owner and any other interested parties on the policy. This way, if the vehicle is involved in a loss, the insurance company can extend the benefits to the lessor, broker or whoever else is named. Contingent auto liability exists because the world doesn't always work this way. For a variety of reasons, the interested party may not be listed on the policy, leaving it exposed in a lawsuit. Similarly, the primary policy may be invalid, canceled or denied in a claim. The contingent policy protects the owner or broker in these instances.
Lessors can purchase other types of contingent coverage to protect their interest in a vehicle. Because they own the vehicle, they may want to ensure that it gets repaired after a loss. They can buy contingent physical damage policies to provide this benefit if the primary policy fails. They can also buy excess liability if they feel the liability limits on the regular contingent policy are insufficient. Large leasing companies may want several million dollars of liability protection to protect their vast assets.