16. Commercial Auto

The liability coverage in the business auto coverage form covers all of the following EXCEPT: A) damage to the covered auto itself. B) bodily injury suffered by the insured while driving a covered auto. C) damage to property as a result of an accident involving a covered auto. D) expenses to settle claims for losses due to an accident.

Answer: A Liability coverage covers bodily injury or property damage resulting from the ownership, maintenance, or use of a covered auto and expenses to defend, investigate, and settle claims. Damage to a covered auto would be covered by the policy's physical damage coverage.

Bob's Trucking Company contracts with boat companies to haul its boats as well as boat parts. Bob is concerned that he has enough coverage if he is contracted to haul a trailer owned by the boat company. What coverage should be used to provide this coverage? A) Trailers in insured's possession. B) Specifically described autos. C) Hired autos. D) Nonowned trailers.

Answer: A One of the coverage symbols specific to the truckers coverage form allows coverage to trailers in the insured's possession under a written agreement. Adding this symbol will cover Bob's exposure using another company's trailer.

Jim, the vice president of ABC Sales, is taking his son to college next weekend. ABC Sales owns a fleet of panel vans, and Jim plans on borrowing one of the vans to move his son. Which of the following endorsements is the best choice for protecting Jim and ABC Sales? A) Drive other car coverage. B) Individual named insured. C) Additional insured. D) Employees as insureds.

Answer: A The drive other car endorsement enables a commercial auto policy to provide liability insurance to employees, their spouses, and members of their household while using company cars for nonbusiness exposures. This coverage would also apply to the owners of a corporation who, are by definition, employees of the firm.

Fred operates a delivery service. One day while a customer was directing Fred as he backed his delivery van up to the customer's loading dock, Fred accidentally hit a parked car. The owner of the car filed a claim against both Fred and the customer. Fred's business auto policy will do which of the following? A) Defend Fred but deny coverage for the customer who needs his own policy. B) Defend the customer but deny coverage for Fred because he wasn't liable. C) Not defend Fred or the customer because the loss occurred on the customer's premises. D) Defend both Fred and the customer up to the policy limits.

Answer: D Insureds under the business auto policy are the named insured for any covered auto; anyone else while using, with permission, a covered auto the insured owns, hires, or borrows; and anyone else who otherwise is not excluded and who is liable for the conduct of an insured. Both Fred and the customer will be defended.

What is the purpose of MCS-90, the endorsement for motor carrier policies of insurance for public liability? A) It covers the company when parking a trailer in an interstate location for pickup. B) It excludes pollution only in the event the auto liability is assumed under a contract. C) It provides for coverage for the company when hit by an uninsured driver. D) It provides proof that the company carries an amount of insurance required by law.

Answer: D Motor carriers of property operating commercial motor vehicles in interstate commerce must have at least the minimum amount of insurance required by the Motor Carrier Act of 1980. The MCS-90 endorsement provides proof of compliance with this law.

Which one of the following is NOT a use of auto symbols in the commercial auto policy? A) To identify which coverage applies to which vehicle. B) To customize the policy to the insured's needs by selecting the appropriate coverage. C) To determine how coverage will apply to vehicles acquired after the policy effective date. D) To determine which rating territory applies to the covered autos.

Answer: D The BAP uses a system of nine covered auto symbols to denote the vehicles to which each of the policy's coverages applies. Though there is some use of the auto symbols in policy rating, territory determination is not one of them.

Joe's Plumbing has leased a fleet of vans to be used by his plumbers while going from job to job. Which of the following endorsements is especially important in this situation? A) Mobile equipment. B) Drive other car coverage. C) Individual named insured. D) Additional insured--lessor.

Answer: D The leasing company that leased the vans to Joe's Plumbing has an insurable interest in the vans and will want to be noted as such on the company commercial auto policy. The additional insured--lessor endorsement will give the leasing company this protection.

Which of the following is NOT an exclusion in the commercial auto policy liability section? A) Bail bonds. B) Completed operations. C) Contractual liability. D) Care, custody, and control.

Answer: A A coverage extension in the commercial auto policy allows up to $2,000 for bail bonds as a supplementary payment. It also pays for the cost of bonds to release attachments in any suit the insurer defends.

After business hours, someone breaks into the insured's lot behind his car dealership and steals a customer's auto. Which of the following coverages would apply to this loss? A) Garagekeepers coverage in the garage coverage form. B) Liability coverage in the garage coverage form. C) Liability coverage in the business auto coverage form. D) Premises-operations coverage in the commercial general liability coverage form.

Answer: A The liability coverage in the garage coverage form excludes damage to property of others in the insured's care, custody, or control. This coverage is provided by the form's garagekeepers coverage. This type of loss would not be covered under the business auto or commercial general liability forms.

Ted has expanded his restaurant to include a parking lot next door with valet service. His insurance agent is recommending that Ted buy garagekeepers coverage. He advises Ted that all of the following exposures would be covered by this coverage EXCEPT: A) a nearby gas station explodes and a car parked in the lot is damaged. B) a car stored in the parking lot is stolen by a restaurant employee. C) collision damage to a customer's car while being parked by Ted's employee. D) a car stored in the parking lot is stolen.

Answer: B Garagekeepers coverage is a type of bailee coverage available to automobile parking lots. It provides coverage for damage to the automobiles of others while in the custody of the parking lot while parking or storing. Theft by an insider is excluded.

In the garage policy, aggregate limits of insurance apply to garage operations for all the following exposures EXCEPT: A) host liquor liability coverage. B) owned autos. C) nonowned autos. D) broad form products coverage.

Answer: B No aggregate limit applies on covered autos owned by the business.

Symbol 4 of the Business Auto policy applies to only those autos owned by the business: A) that are over 50 ton. B) that are not private passenger autos. C) that are over one ton. D) that are specified in the policy.

Answer: B Symbol 4 refers to a category of autos that are owned by the insured but are not private passenger vehicles.

The business auto coverage form uses symbols to denote the vehicles to which each of the policy's coverages applies. Which symbol is the most restrictive? A) Symbol 9. B) Symbol 7. C) Symbol 1. D) Symbol 2.

Answer: B Symbol 7 is the most restrictive because it applies only to autos specifically listed in the policy. Symbol 1 is the least restrictive as it covers any auto. Symbol 2 covers owned autos only. Symbol 9 covers nonowned autos, those owned by employees or partners of the insured.

The garage policy covers all of the following EXCEPT: A) insured's automobile liability. B) insured's medical bills. C) insured's premises and operations. D) insured's products and completed operations.

Answer: B The garage policy is a package policy and includes coverage for both general liability as well as auto exposures. The health expenses of the insured are not covered

Bob's Trucking Company contracts with boat companies to haul its boats and boat parts. The trailers are left at an interchange for pickup. What physical damage coverage is important for Bob to have to cover this exposure? A) Liability. B) Trailer Interchange Coverage. C) Physical Damage Coverage. D) Truckers Conditions.

Answer: B This coverage provides physical damage loss protection for which the insured is legally liable for trailers not owned by the insured and left at an interchange for pickup. This coverage is specifically designed for the truckers policy.

Which one of the following commercial auto coverages covers automobiles in the insured's care? A) Liability. B) Comprehensive. C) Garagekeepers. D) Business auto.

Answer: C Garagekeepers insurance covers customers' automobiles while in the care of the insured. Garagekeepers coverage is a special type of insurance necessary because the auto is entrusted to the business.

Which business auto coverage symbol allows coverage of all vehicles, including owned, nonowned, and hired autos? A) Symbol 4. B) Symbol 8. C) Symbol 1. D) Symbol 3.

Answer: C Symbol 1 affords the broadest coverage. It applies to any auto the insured will use during the policy period, including autos that are owned, leased, hired, rented, or borrowed. However, Symbol 1 can be used only for liability coverage. Symbol 3 covers owned private passenger autos. Symbol 4 covers owned autos other than private passenger autos. Symbol 8 covers hired, leased, rented, or borrowed autos.

When an employer has employees use their own autos in connection with the employer's business, the employer should purchase: A) extended employee liability. B) third-party auto liability. C) nonowned auto liability. D) hired auto liability.

Answer: C Under a business auto policy, a nonowned auto represented by Symbol 9 is any auto owned by an employee or partner while used in the insured's business or personal affairs.

The Motor Carrier Act of 1980 mandated that trucking operators file proof of pollution liability. These financial responsibilities apply to 3 types of freight transports. Which of the following is NOT a type of eligible transport? A) For-hire transportation of nonhazardous property in interstate commerce valued at no less than $750,000. B) For-hire or private transportation of hazardous substances with a minimum value of $5 million. C) For-hire or private transportation of oil listed as a hazardous material with a minimum value of $1 million. D) Private transportation of nonhazardous property in foreign commerce valued at no less than $750,000.

Answer: D Type 1 freight transport is for-hire transportation of nonhazardous property in interstate or foreign commerce and must carry at least $750,000.