Omnibus Clause: What It Means, How It Works

What Is an Omnibus Clause?

An omnibus clause is a provision in standard automobile liability policies that extends coverage to individuals not named in the policy. The omnibus clause applies to individuals who are authorized to use an insured vehicle. As long as the individual has permission to drive the car, they are covered by the omnibus clause.

Understanding an Omnibus Claus

An omnibus clause in an automobile insurance policy that expands the number of people who can be covered. However, how far this coverage extends depends on legal interpretations of how authority is granted.

Once the individual named in the policy provides permission to the first non-named individual, called the first permittee, that individual may then allow another party, the second permittee, to use the vehicle. This may be the case if a parent allows their child to borrow the family car, and the child then allows a friend to drive the vehicle.

Courts may differ on whether the named policyholder needs to explicitly provide permission to each party in order for them to be covered under a policy. In some cases, courts may rule that the named insured granting unrestricted use of a vehicle is an indicator that the party given permission can subsequently give permission to other people. If the named insured expressly prohibits the first permittee to allow anyone else to use the vehicle, then coverage may be denied to the second permittee.

Determining who is authorized to drive is important. For example, a real estate company allows an agent to drive potential clients to a property for a viewing. The company expressly indicates that only the agent is permitted to drive the company vehicle. However, during the course of the day, the agent allows one of the clients to drive, and an accident follows. An omnibus clause that requires the insured’s permission to be either expressed or implied would deny coverage in this case because the insured openly stated that the first permittee was not allowed to let anyone else drive the vehicle.

Omnibus Clauses vs. Vicarious Liability

The omnibus clause automatically covers anyone who could be held liable for your negligence or for the negligence of a permissive user—this means anyone who is vicariously liable for negligence committed by you (the named insured) or an authorized driver.

Vicarious liability refers to liability that is attributed to someone even though that party did not directly commit a negligent act. A person or company may be held vicariously liable for someone else's negligence because of a legal relationship. For instance, an employer may be held vicariously liable for a car accident caused by a negligent employee.

Special Considerations

Omnibus Clauses in Last Will and Testaments

When an omnibus clause is included in a last will and testament, it may also be called a residuary clause. In a last will and testament, an omnibus clause ensures that any assets from the estate that are leftover are transferred to a specific, named beneficiary after all other gifts have been made.

Omnibus Clauses in Federal Statutes

Omnibus clauses also appear in federal statutes. For example, the federal obstruction of justice statute—18 U.S. Code § 1503—includes an omnibus clause that is intended to criminalize any attempt to obstruct justice by threat or force directed at a juror, officer of the court, or magistrate judge. According to the Supreme Court, this omnibus clause is categorized as “a catchall, prohibiting persons from endeavoring to influence, obstruct, or impede the due administration of justice.”