Ch. 11 - Commercial Auto Coverage

What is the maximum the Business Auto Coverage Form will pay per day for loss of use of a hired auto? a. $20 b. $25 c. $30 d. $35

a. $20 If the insured hires a vehicle per a written rental contract or agreement, and without a driver, the Loss of Use Coverage Extension pays for loss of use expenses to the hired auto if loss is caused by a covered loss. The most paid for loss of use is $20 per day, up to a maximum $600.

Under Commercial Auto policies, all of the following are common exclusions for liability coverages, except: a. War or rebellion b. Defense costs c. Expected or intended injuries d. Organized racing or stunting activity

b. Defense costs The insurer has a duty to defend the insured against claims or suits relating to coverage provided by the policy, and expenses incurred in connection to the defense are covered by supplementary payments, without reducing the limit of liability. Expected or intended injuries, injuries resulting from war or racing activities, and injuries covered by Workers' Compensation are some common exclusions for liability coverage.

The passage of the Motor Carrier Act of 1980 resulted in all of the following, except: a. Mandatory minimum liability limits b. Deregulation of the trucking industry c. Prohibition of rating bureaus to develop motor carrier rates d. Increase in truckers' wages

d. Increase in truckers' wages The Motor Carrier Act of 1980 deregulated the trucking industry, allowed motor carriers to set their own rates, and authorized the Department of Transportation to enforce minimum financial responsibility requirements for motor carriers. As a result of regulation, the number of motor carriers doing business increased, meaning consumer costs of products decreased, as did truckers' wages.

All of the following statements about liability coverage provided by the Business Auto Coverage Form are correct, except: a. It generally excludes contractual liability coverage b. It covers liability from mobile equipment while being towed c. It provides no-fault coverage in states that require it d. It covers injuries to employees

d. It covers injuries to employees Injuries to employees would be covered under Workers' Compensation, so those injuries are excluded by all other commercial liability forms. If liability coverage is provided by the policy, mobile equipment is considered a covered auto while being carried or towed by a covered auto. Coverage is provided for liability arising out of insured contracts and liability that would have existed in the absence of the contract.

Physical damage coverage under the Business Auto Coverage Form could include all of the following, except: a. Specified causes of loss coverage b. Collision coverage c. Comprehensive coverage d. Uninsured motorists coverage

d. Uninsured motorists coverage The three types of physical damage coverage available under the BAP are collision, comprehensive, and specified causes of loss. Uninsured motorists is a separate coverage that must be added by endorsement.

Which vehicle would not be eligible for coverage under an unendorsed Business Auto Coverage Form? a. A forklift used in the business b. A trailer that is used to carry a backhoe c. A private passenger auto that is used in the business d. A van that is used by a delivery firm

a. A forklift used in the business Being mobile equipment, a forklift is not eligible for Business Auto coverage, other than by endorsement. The transportation of mobile equipment, however, is covered by the form.

Which of the following is a General Condition in Section IV of a Business Auto policy? a. Bankruptcy b. Appraisal for Physical Damage Loss c. Legal Action Against Us d. Transfer of Rights of Recovery

a. Bankruptcy Bankruptcy is one of the policy's General Conditions, which also includes Liberalization, Premium Audit, Other Insurance, and Two or More Coverage Forms or Policies Issued by Us. These apply to the policy generally. Loss Conditions, which apply in the event of a specific loss, include Appraisal for Physical Damage Loss, Legal Action Against Us, Transfer of Rights of Recovery, and Duties in the Event of a Loss.

An insured has two coverage forms issued by the same insurer that apply to a covered loss to a commercial auto. The Two or More Coverage Forms or Policies Issued By Us condition specifies that: a. The maximum payment is the highest applicable limit of insurance b. The maximum payment is the sum of both limits c. The form with the higher limit is primary, and the form with the lower limit is excess d. The forms will pay on a contribution by equal shares basis

a. The maximum payment is the highest applicable limit of insurance The Two or More Coverage Forms or Policies Issued by Us condition states that the maximum payment for the covered loss is the highest applicable limit of insurance.

Under Section II - Covered Autos Liability Coverage, all of the following are considered an insured, except: a. An employee using an auto owned by the business b. An employee using an auto owned by their spouse for the insured business c. An executive officer using an auto owned by the business with the named insured's permission d. The named insured while using a hired auto

b. An employee using an auto owned by their spouse for the insured business An employee is not considered an insured while they are using an auto that is owned by them or a family member, even if use is in the course of the insured business.

An employee for a corporation does not own a car, but they are furnished with a company car. The Drive Other Car - Broadened Coverage for Named Individuals Endorsement on the corporation's Business Auto policy may be used to provide which of the following coverages for the employee's use of a rental car? a. Liability coverage only b. Any coverage scheduled on the endorsement c. All coverages provided for the company car, as declared on the policy's Declarations page d. Liability coverage and physical damage coverage only

b. Any coverage scheduled on the endorsement These other cars, like cars this employee rents or borrows, are insured for coverages scheduled on the endorsement. They do not have to match the coverages provided for autos covered by the base policy.

The Business Auto Coverage Form provides coverage for clean-up costs for fuel spills from a covered auto that result from a covered accident. This coverage is provided: a. As a supplementary payment b. As an exception to the Pollution exclusion c. As a coverage extension d. Only by endorsement

b. As an exception to the Pollution exclusion Pollution is typically an exclusion of Section II, but an exception exists that allows coverage for expenses to respond to pollutants needed for the normal functioning of covered autos. This exception would apply in the event that there is a fuel spill or similar that resulted from a covered accident.

An employee for a corporation does not own a car, but they are furnished with a company car. The Drive Other Car - Broadened Coverage for Named Individuals Endorsement on the corporation's Business Auto policy may be used to provide which of the following coverages for the employee's use of a rental car? a. All coverages provided for the company car, as declared on the policy's Declarations page b. Liability coverage only c. Any coverage scheduled on the endorsement d. Liability coverage and physical damage coverage only

c. Any coverage scheduled on the endorsement These other cars, like cars this employee rents or borrows, are insured for coverages scheduled on the endorsement. They do not have to match the coverages provided for autos covered by the base policy.

Which type of Commercial Auto policy would be best suited for a parking garage business? a. Business Auto Coverage Form b. Motor Carrier Coverage Form c. Garage Coverage Form d. Truckers Coverage Form

c. Garage Coverage Form The Garage Coverage Form is designed to provide coverage for businesses engaged in the sale, service, parking, or storage of automobiles. Eligible businesses include automobile vehicle dealerships, sales agencies, repair shops, service stations, storage garages, and public parking places.

Which of the following sections of the Garage Coverage Form covers the insured's legal obligations for damage to a customer's car? a. Auto Liability b. General Liability c. Garagekeepers Coverage d. Physical Damage

c. Garagekeepers Coverage Section III - Garagekeepers Coverage provides coverage for loss or damage to a customer's vehicle or equipment while it is in the insured's care for servicing, repair, parking, or storing.

As defined by the Business Auto Coverage Form, a hired auto includes all of the following autos, except: a. An auto rented by an employee to use for business purposes on a sales trip b. An auto hired by the insured c. An auto leased by the insured d. A borrowed auto owned by an employee

d. A borrowed auto owned by an employee Hired autos are those that the insured does not own, but that they lease, hire, rent, or borrow. This does not include any auto leased, hired, rented, or borrowed from an employee, as autos owned by employees and used in the business are considered non-owned autos.

Symbol 8 - Hired Autos Only includes all of the following autos, except: a. An auto the insured leases b. An auto the insured rents c. An auto the insured hires d. An auto the insured borrows from an employee

d. An auto the insured borrows from an employee Symbol 8 - Hired Autos Only includes coverage for autos leased, hired, rented, or borrowed by the insured, unless the auto is owned by an employee. Autos owned by employees are covered by Symbol 9 - Non-owned Autos Only.

What is the maximum total amount the insurer will pay for temporary transportation expenses after a covered private passenger auto is stolen? a. $800 b. $200 c. $600 d. $400

c. $600 Offered as a Coverage Extension, transportation expenses are paid up to $20 per day, up to a maximum of $600 total, for temporary transportation expenses in the event a private passenger auto suffers a total theft loss. Coverage begins 48 hours after the theft of the auto.

What coverage of the Truckers Coverage Form provides physical damage coverage for non-owned trailers and equipment in the insured's care under a written agreement? a. Liability Coverage b. Commercial Truckers Coverage c. Trailer Interchange Coverage d. Truckers Physical Damage Coverage

c. Trailer Interchange Coverage Section III - Trailer Interchange Coverage provides physical damage coverage for trailers and equipment the insured is responsible for under a written trailer interchange agreement. This coverage is primary insurance.

Businesses eligible for the Garage Coverage Form include all of the following, except: a. A business that transports goods for other companies b. Public repair shops c. A business that is given custody over other people's vehicles d. Attended parking lots

a. A business that transports goods for other companies The Garage Coverage Form is meant for auto businesses that have customer's autos (not customer's goods or other property) in their care, custody, or control. A business transporting goods for other companies would not benefit from a Garage policy, and would need separate insurance to cover the property of others.

ABC Company's Business Auto policy provides liability coverage for autos used in the business. All of the following autos are automatically considered covered autos by the policy, except: a. A power crane being used to unload freight b. A trailer designed for use on public roads that has a one-ton load capacity c. A bulldozer being carried to a construction site by a covered auto d. A temporary substitute for a private passenger vehicle, used for business purposes, that is out for servicing

a. A power crane being used to unload freight For Business Auto policies that provide liability coverage, the policy considers covered autos to include trailers with a load capacity of up to 2,000 pounds that are designed for use on public roads, mobile equipment while being carried or towed by covered autos, and temporary substitute autos. Mobile equipment in use, and not simply being transported, are not covered by the policy, unless an endorsement is added.

Which type of Commercial Auto policy would be best suited for a company whose employees used their own vehicles to make sales calls? a. Business Auto Coverage Form b. Garage Coverage Form c. Motor Carrier Coverage Form d. Truckers Coverage Form

a. Business Auto Coverage Form The BAP covers owned, leased, hired, rented, or borrowed private passenger autos, trucks, trailers, and semitrailers that are owned or used by the insured. This includes autos owned by employees while being used in the business, indicated by symbol 9.

According to the Loss Payment condition of a Business Auto policy, after a loss, the insurer may do any of the following, except: a. Return stolen property without paying for damage caused by the theft b. Repair the damaged property c. Replace the damaged or stolen property d. Pay for the loss, including the applicable sales tax

a. Return stolen property without paying for damage caused by the theft The insurer, at its option, may pay for, repair, or replace the damaged or stolen property. If the insurer recovers and returns stolen property, it must pay for any damage that resulted from the theft.

Which section of the Garage Coverage Form provides physical damage coverage for the insured's covered autos? a. Section IV b. Section I c. Section III d. Section II

a. Section IV Section IV of the Garage Coverage Form provides physical damage coverage for covered autos the named insured owns, hires, rents, leases, or borrows, in the same fashion that the Business Auto Coverage Form provides physical damage coverage.

Which of the following is true about the Individual Named Insured Endorsement? a. The endorsement's coverage applies to the named insured's resident family members b. The endorsement protects the named insured when using a non-owned auto c. Coverage is provided only to those individuals listed on a schedule d. The endorsement adds commercial coverage to a Personal Auto policy

a. The endorsement's coverage applies to the named insured's resident family members The Individual Named Insured Endorsement adds Personal Auto coverage to an auto owned by an individual or sole proprietor for business use. The endorsement extends coverage to the named insured as well as all family members living in the named insured's residence. Coverage is automatically provided for the named insured and their family members, so a schedule is not necessary.

Under the Auto Dealers Coverage Form, Section III - Acts, Errors, or Omissions Liability Coverages provides coverage for damages an insured must pay due to a negligent act, error, or omission arising out of any of the following, except: a. Inaccurate disclosure of odometer mileage to consumers b. Discrimination that violates a customer's civil rights c. Defect in title connected to an auto sale d. Failure to disclose credit or lease terms to a customer

b. Discrimination that violates a customer's civil rights Section III provides coverage in the event the insured is liable for damages arising out of covered negligent acts, errors, or omissions. These include negligent acts, errors, or omissions arising out of the failure to comply with laws concerning the disclosure of credit or lease terms, the failure to comply with laws concerning the disclosure of accurate odometer mileage, a defect in title, or the insured's capacity as an insurance agent to transact insurance in connection with the sale or lease of an auto. Damages arising out of discrimination is excluded from coverage.

Liability coverage provided by a Business Auto policy includes all of the following, except: a. Bodily injury coverage b. Physical damage coverage c. Property damage coverage d. Court costs associated with a defense provided by the insurer

b. Physical damage coverage Physical damage coverage is provided by Section III of the BAP and refers to damage to the insured's covered autos. Section II - Covered Autos Liability Coverage provides coverage for the insured's bodily injury and property damage liability, and it provides supplementary payments for expenses related to the insurer's duty to defend the insured in the event of a claim or suit.

Which of the following is correct concerning the limit of insurance applying to liability coverage under the Business Auto Coverage Form? a. The limit is determined by the number of the insured's vehicles involved in the accident b. The limit is the most the policy will pay for any single accident c. The limit is the most the policy will pay for each vehicle involved in a single accident d. The limit is determined by the number of vehicles scheduled on the policy

b. The limit is the most the policy will pay for any single accident The limit of insurance is the most the policy will pay for covered damages and costs resulting from any one accident, regardless of the number of autos, insureds, premiums paid, claims made, or vehicles involved in the accident. The limit is typically written as a combined single limit.

All of the following statements regarding a common carrier are correct, except: a. A common carrier carries the general public from one place to another for a fee b. A common carrier can be insured on the Motor Carrier Coverage Form c. A common carrier must use the Truckers Coverage Form d. A common carrier could include a trucker who transports goods belonging to several customers at the same time

c. A common carrier must use the Truckers Coverage Form A common carrier is a business, individual, or organization that carries the general public or property belonging to the general public for hire, like a trucker. Common carriers can obtain auto insurance through the Truckers Coverage Form or the Motor Carrier Coverage Form.

Under Commercial Auto policies, an auto can include a self-propelled vehicle with permanently attached: a. Power crane b. Drill c. Cherry picker d. Scraper

c. Cherry picker If a vehicle is self-propelled and has a permanently attached cherry picker, other device used to raise and lower workers, air compressor, pump, or generator, then that vehicle is considered an auto. If the vehicle is not self-propelled and has any of that equipment, it is considered mobile equipment. Any vehicle providing mobility to power cranes, loaders, diggers, drills, and road construction or resurfacing equipment (like graders, scrapers, and rollers) is considered mobile equipment.

Acts, errors, or omissions liability coverage on an Auto Dealers Coverage Form provides coverage if the insured is liable for damages resulting from any of the following, except: a. An error in placing physical damage insurance coverage on an auto a customer bought b. Failure to property disclose accurate odometer mileage to a customer c. Injury to a customer on the dealership premises d. Failure to properly disclose credit or lease terms to a customer

c. Injury to a customer on the dealership premises Bodily injury to customers resulting from the dealership's premises exposure would be covered by Section II - General Liability Coverages. Section III - Acts, Errors, or Omissions Liability Coverages covers damages the insured must pay resulting from negligent acts, errors, or omissions that cause other types of losses, such as financial loss.

An auto repair business is protected on the Garage Coverage Form. Coverage is provided for all of the following losses, except: a. While servicing a customer's auto, an employee accidentally breaks a side-view mirror b. After arriving at the shop to pick up their auto, a customer is hurt by a falling tire display c. An employee driving a company car is at-fault in an accident that results in bodily injury to the other driver d. A customer gets into an accident because the repair shop replaced a part with a product that had been recalled

d. A customer gets into an accident because the repair shop replaced a part with a product that had been recalled Section II - Liability Coverage provides general liability coverage for the insured's business operations and auto liability coverage for the business' autos used in the business. However, coverage is not provided for damages resulting from product recall. Damage to a customer's auto while it is in the insured's care, custody, or control is provided by Section III - Garagekeepers Coverage.

Which Commercial Auto endorsement would allow a corporation to extend Personal Auto coverage to a car furnished to employee for business purposes? a. Auto Medical Payments Coverage b. Uninsured Motorists Coverage c. Individual Named Insured d. Drive Other Car - Broadened Coverage for Named Individuals

d. Drive Other Car - Broadened Coverage for Named Individuals The Drive Other Car - Broadened Coverage for Named Individuals Endorsement is similar to the Individual Named Insured, except that it provides coverage to individuals scheduled on the endorsement. This endorsement is used when the named insured is designated as an LLC, partnership, or corporation, rather than an individual or sole proprietor.

Under a Business Auto policy with physical damage coverage for specified causes of loss, which peril is not covered? a. Malicious mischief b. Earthquake c. Flood d. Glass breakage

d. Glass breakage Specified perils include fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief or vandalism, and the sinking, burning, collision or derailment of a conveyance transporting the covered vehicle. Glass breakage is a comprehensive peril, though coverage could also be provided by collision coverage if the breakage results from a collision.