ACSR 8 - Commercial Auto Loss Exposures and the Business Auto Coverage Form

Hold-Harmless Agreement

An auto rental agreement or lease may contain a ____ in which the renter, or lessee, agrees to indemnify the owner for the owner's liability to others arising out of use of the hired auto.

Liability

An auto used as a temporary substitute for a covered auto that is out of service because of its breakdown, repair, service, loss, or destruction is also covered for ____ insurance only.

Employers nonownership liability

An employer's liability for its employees' operation of their autos in the employer's business.

Personal Loss Exposure

Anyone who could suffer injury in an auto accident—either while occupying an auto or as a pedestrian—has a ____. In many cases, an auto accident victim can sue or otherwise make a liability claim against the responsible party, in which case the responsible party may also incur a liability loss.

Symbol 9—Nonowned "Autos" Only

Autos used in insured's business or personal affairs; includes autos owned by insured's employees, partners, members, or members of their households

Symbol 1

Because symbol ____ covers owned, hired, and nonowned autos, showing symbol ____ for liability coverage has essentially the same result as showing symbols 2, 8, and 9.

Liability

Commercial auto insurance covers ____ of the insured that arises out of the "ownership, maintenance, or use" of a covered auto.

Symbol 8—Hired "Autos" Only

Does not include autos leased, hired, rented, or borrowed from employees, partners, or members, or members of their households

B. Auto physical damage on hired autos

During busy delivery periods, the Iota Corporation hires autos for short periods of time. Iota has a contractual agreement to return the vehicles to their owners in the same condition as when hired, except for normal wear and tear. Firms like Iota normally insure such vehicles for any damage by purchasing which one of the following? A. Contractual liability insurance B. Auto physical damage on hired autos C. Bailees customer insurance for hired autos D. Auto property damage liability for use of covered autos

C. John, who drives the business's van to a catered event

Ellen owns a local catering business that employs six people. She insures the business's two delivery vans under a Business Auto Coverage Form that includes covered autos liability coverage. Which of the following entities or individuals are considered insureds for liability coverage under Ellen's BACF? A. An auto rental company that rents a car to Ellen for a business trip B. Ellen's assistant, John, who drives his car to a supermarket to buy ingredients for the next catered event C. John, who drives the business's van to a catered event D. Howard, who works for an appliance store, when loading a new refrigerator into the business's van

D. Liability arising out of employees' operation of their own autos in the employer's business

Employers nonownership liability arises out of which one of the following? A. Bailee liability for damage to a customer's property B. Liability because autos are leased rather than owned C. Liability for borrowed autos that are used in the employer's business D. Liability arising out of employees' operation of their own autos in the employer's business

Coverage Symbol

Every auto covered under the BACF is designated with a ____ that categorizes it for coverage purposes. A ____ is entered in the policy's Schedule of Coverages and Covered Autos beside each coverage the insured has selected.

Symbol 2—Owned "Autos" Only

For liability coverage, ____ also includes nonowned trailers attached to owned power units.

Symbol 7—Specifically Described "Autos"

If ____ is shown for a coverage, autos acquired during the policy term are covered from the time of acquisition only if both of these conditions are met: - The insurer insures all autos owned by the named insured, or the newly acquired auto replaces a covered auto. - The named insured asks the insurer to cover the newly acquired auto within thirty days of the acquisition.

Covered Auto

If a ____ is destroyed, stolen, or disabled by a covered cause of loss, the insurer will reimburse the insured, up to a stated limit, for the cost to rent a substitute vehicle.

Symbols 1-6

If an insured acquires a vehicle during the policy period, then the coverage for any of symbols ____, or 19, shown in the existing policy for the same type of vehicle automatically applies to the newly acquired vehicle.

D. Symbol 7—Specifically Described "Autos"

If an organization insures only vehicles listed in the policy declarations of its Business Auto Coverage Form and for which a premium is shown, which one of the following symbols should be entered in the policy's Schedule of Coverages and Covered Autos? A. Symbol 4—Owned "Autos" Other Than Private Passenger "Autos" Only B. Symbol 5—Owned "Autos" Subject to No-Fault C. Symbol 9—Nonowned "Autos" Only D. Symbol 7—Specifically Described "Autos"

Symbol 2

If symbol ____ is used for signaling liability coverage of owned autos only, then symbols 8 and 9 must also be shown to provide liability coverage for hired and nonowned autos.

2,000

If the coverage form provides liability insurance, trailers with a load capacity of ____ pounds or less are covered automatically for liability insurance.

Business Auto Declarations

In addition to the usual information contained in any version of this form, the ____ form can include extensive schedules for recording applicable coverages, covered autos, limits, deductibles, premiums, and rating and classification information.

Symbol 1—Any "Auto"

Includes any vehicle that meets the policy definition of auto

Symbol 19—Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only

Land vehicles that would qualify under the policy definition of "mobile equipment" if not subject to compulsory or financial responsibility law

Symbol 7—Specifically Described "Autos"

Listed in policy declarations; for liability coverage, also includes nonowned trailers attached to owned power units listed in declarations

Symbol 4—Owned "Autos" Other Than Private Passenger "Autos" Only

May include trucks, trailers, and buses for liability coverage, also includes nonowned trailers attached to owned power units

Coverage Symbols

Numeric symbols used in a commercial auto policy to indicate which autos are covered for particular coverages.

Auto Liability

One organization may assume by contract the ____ of another organization.

Single Accident

Repeated exposure to essentially the same circumstances is considered to be a ____. An example of this is if a truck is driven across a sidewalk repeatedly over several months, all of the damage it causes to the sidewalk.

Symbol 5—Owned "Autos" Subject to No-Fault

Required to have no-fault benefits in state where licensed or garaged

B. An insured's employee driving a covered vehicle to pick up lunch

Section II of the Business Auto Coverage Form covers various entities in addition to the named insured under the unendorsed form. Which one of the following would have coverage under this form? A. The owner of an auto borrowed by the insured to pick up a customer B. An insured's employee driving a covered vehicle to pick up lunch C. An employee of a local auto repair service test driving a covered vehicle D. A customer that is unloading one of the covered vehicles used for a delivery

D. Liability Coverage.

Section II of the Business Auto Coverage Form is A. Business Auto Conditions. B. Physical Damage Coverage. C. Covered Autos. D. Liability Coverage.

Section II—Covered Autos Liability Coverage (It also covers expenses related to cleaning up pollution resulting from such accidents.)

Section ____ of the Insurance Services Office (ISO) Business Auto Coverage Form (BACF) covers all sums an insured is legally required to pay as damages for bodily injury or property damage caused by an accident arising from the insured's ownership, maintenance, or use of a covered auto.

Bailee Liability Exposure

Some auto businesses, such as dealers and repair shops, have a ____ for customers' autos.

A. Employers nonownership liability.

Some employees use their own cars in the course of their employment. The type of coverage found in commercial auto policies for an employer's liability for its employees' operation of their autos in the employer's business is known as A. Employers nonownership liability. B. Bailee liability. C. Liability assumed under contract. D. Garagekeepers vicarious liability.

Symbol 2 (If, for example, the insured wanted to cover liability for all owned autos and nonowned autos but not hired autos, symbols 2 and 9 would be shown for liability coverage.)

Symbol ____ is more likely to be used if the insured does not want liability coverage for either hired autos or nonowned autos.

Symbol 5—Owned "Autos" Subject to No-Fault

Symbol ____: Activates personal injury protection on autos that are required by law to have it.

Symbol 6—Owned "Autos" Subject to a Compulsory Uninsured Motorists Law

Symbol ____: Activates uninsured motorists coverage on autos that are required by law to have it.

Symbol 4—Owned "Autos" Other Than Private Passenger "Autos" Only

Symbol ____: Applies to all autos owned by the named insured except private passenger autos; examples are trucks or buses.

Symbol 2—Owned "Autos" Only

Symbol ____: Applies to all autos owned by the named insured. When used to signal liability coverage, this coverage symbol also applies to nonowned trailers (or semitrailers) while attached to owned power units. ("Power unit" is not defined in the coverage form, but the term refers to a truck tractor used to pull a semitrailer.) In addition to liability coverage, this symbol is also used for physical damage and medical payments coverages.

Symbol 7—Specifically Described "Autos"

Symbol ____: Applies to autos specifically described in the policy and for which a premium is shown in the policy; includes, for liability coverage only, a nonowned trailer while attached to a covered power unit.

Symbol 19—Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only

Symbol ____: Applies to land vehicles that would otherwise fall under the policy's definition of mobile equipment (and therefore not be covered under the policy) if they were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where they are licensed or principally garaged.

Symbol 8—Hired "Autos" Only

Symbol _____: Applies to autos leased, hired, rented, or borrowed by the named insured but not to autos leased, hired, rented, or borrowed from the named insured's employees or family members (which are covered by Symbol 9). This symbol is commonly used for liability and physical damage coverage.

Symbol 3—Owned Private Passenger "Autos" Only

Symbol _____: Applies to private passenger autos owned by the named insured.

C. Section IV

The Business Auto Coverage Form consists of five sections. Which one of the following sections consists of business auto conditions? A. Section I B. Section III C. Section IV D. Section V

B. Damage to a customer's property being transported by a covered auto

The Business Auto Coverage Form's Section II—Liability Coverage applies to all of the following, EXCEPT: A. Sums an insured is legally required to pay as damages for bodily injury or property damage caused by an accident arising from the insured's use of a covered auto B. Damage to a customer's property being transported by a covered auto C. Expenses related to cleaning up gasoline from a ruptured gas tank in the insured's covered auto following an accident caused by the insured D. Costs of defending the insured in a lawsuit for damages for bodily injury arising from an auto accident

Business Auto Coverage Form (CA 00 01)

The Insurance Services Office, Inc.'s (ISO's) ____ covers liability arising out of the ownership, maintenance, or use of autos and physical damage to autos owned, leased, or hired by the named insured.

Insurer

The ____ also agrees to defend the insured in lawsuits asking for damages for bodily injury, property damage, or covered pollution expense arising from auto accidents and to pay defense costs.

Business Auto Coverage Form (BACF)

The ____ consists of five sections: Section I—Covered Autos Section II—Covered Autos Liability Coverage Section III—Physical Damage Coverage Section IV—Business Auto Conditions Section V—Definitions

Garage Coverage Form

The ____ contains optional garagekeepers coverage for insuring loss to customers' autos while the autos are in the custody of the insured auto or trailer dealer.

Covered Autos Liability

The ____ coverage provisions of the Business Auto Coverage Form include a coverage agreement, a definition of who is insured, coverage extensions, exclusions, and a limit of insurance provision.

Auto Liability Exposure

The ____ is the possibility that the organization may have to defend itself against, and perhaps pay damages as a result of, suits alleging negligent ownership, maintenance, or use of autos.

Business Auto Coverage Form (BACF)

The ____, along with business auto declarations and any applicable endorsements, can be included in a commercial package policy or issued as a monoline policy.

Business Auto Coverage Form (BACF)

The ____, together with business auto declarations and any applicable endorsements, can be included in a commercial package policy or issued in a monoline policy.

B. Vehicles maintained for use solely on or next to premises you own or rent.

The definition of "auto" in the Business Auto Coverage Form specifies that it does not include mobile equipment. The definition of mobile equipment in the Business Auto Coverage Form includes A. A land motor vehicle, trailer, or semitrailer that is designed for travel on public roads. B. Vehicles maintained for use solely on or next to premises you own or rent. C. Land vehicles that are subject to a compulsory or financial responsibility law. D. Self-propelled vehicles with permanently attached equipment designed for snow removal.

Mobile Equipment

The definition of "auto" specifies that it does not include ____.

Respondeat Superior

This rule of placing liability on the employer, known as the doctrine of ____ ("let the employer answer"), is based on the fact that the employee was acting on behalf of the employer at the time of loss.

Vicarious Liability

This rule of placing liability on the employer, known as the doctrine of respondeat superior ("let the employer answer"), is based on the fact that the employee was acting on behalf of the employer at the time of loss. The employer's liability in this situation is also referred to as ____.

Loss of Use

To a limited extent, ____ of an auto is insurable under a rental reimbursement endorsement to auto physical damage insurance.

Section II—Covered Autos Liability Coverage

Under ____, the insurer is obligated to defend the insured in any claim or lawsuit alleging damages that would be covered under the policy, including personal injury, property damage, or covered pollution cost or expense. Such suits may include civil legal proceedings or, with the insurer's consent, arbitration proceedings, or other alternative dispute resolution proceedings. Defense costs are payable in addition to the limit of insurance.

C. The cost of repairing the vehicle or its actual cash value, whichever is less

Under auto physical damage insurance, the insurer ordinarily pays which one of the following if a covered auto is damaged or destroyed? A. The repair cost of the vehicle, regardless of its actual cash value B. The actual cash value of the vehicle, regardless of its actual repair cost C. The cost of repairing the vehicle or its actual cash value, whichever is less D. The cost of repairing the vehicle or its actual cash value, whichever is greater

Common Law (To illustrate, suppose that John's Garage allows a customer to borrow one of John's business vehicles as a loaner while the customer's car is being serviced. If the customer injures another person by negligently operating John's vehicle, John should not have any liability for resulting damages.)

Under the ____ (the law that is made and applied by court decisions), the owner of an auto is not liable for negligent operation of the vehicle by someone who is not acting on behalf of the owner.

Section II—Covered Autos Liability Coverage

Under the ____ insuring agreement, the insurer agrees to pay damages an insured is legally required to pay for bodily injury or property damage resulting from accidents arising from the ownership, maintenance, or use of a covered auto.

B. It contains detailed information necessary for rating the coverages and for determining the coverages applicable under the form.

Which one of the following best describes why an insurance professional must understand the declarations page of the business auto policy more so than the declarations pages for most other commercial coverage forms? A. It contains the dates the coverages for the policy are effective and when the coverages for the policy expire. B. It contains detailed information necessary for rating the coverages and for determining the coverages applicable under the form. C. It defines all the business auto policy definitions and the conditions under which the policy is interpreted. D. It provides the key definition for the policy to assist the insurance professional in explaining coverage to the insured.

C. It allows great flexibility to the insured to choose different combinations of coverages for various covered autos.

Which one of the following is a feature of the Business Auto Coverage Form? A. Its declarations are limited to one page of general information. B. It consists of three sections: Section 1—Covered Autos, Section II—Coverages, and Section III—Conditions. C. It allows great flexibility to the insured to choose different combinations of coverages for various covered autos. D. It uses symbols to designate specific exposures.

D. If symbol 7 is shown for a coverage, autos acquired during the policy term are covered from the time of acquisition if the insurer insures all autos owned by the named insured and the named insured asks the insurer to cover the newly acquired autos within 30 days of the acquisition.

Which one of the following statements regarding the Business Auto Coverage Form is true? A. Symbol 19—Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only is ordinarily used for liability coverage only. B. If the insured acquires a vehicle of the same type as insured under its current policy during the policy period, and currently is insured for Symbol 1 autos, the insured must notify the insurer of the acquisition to have the same coverage. C. Symbol 3 is ordinarily used for liability coverage only and provides the best protection for the insured. D. If symbol 7 is shown for a coverage, autos acquired during the policy term are covered from the time of acquisition if the insurer insures all autos owned by the named insured and the named insured asks the insurer to cover the newly acquired autos within 30 days of the acquisition.

Liability

____ can arise from owned autos, hired or borrowed autos, or employees' autos operated on behalf of the organization.

Section 1 - Covered Autos

____ defines the BACF's ten coverage symbols.

"Property Damage"

____ means damage to or loss of use of tangible property.

Nondealer auto service businesses

____, which are no longer eligible for coverage under the Garage Coverage Form, can insure their bailee loss exposures under a separate garagekeepers endorsement to the Business Auto Coverage Form.

True (This liability may be based either on user negligence or on a contractual duty to return the auto in the same condition as when hired, normal wear and tear excepted. These exposures are typically insured by purchasing auto physical damage insurance on hired autos.)

(T/F) An organization that hires or borrows autos can also become liable for damage to the hired or borrowed auto itself.

True (However, many states have enacted laws that make the owner of an auto liable for injuries arising out of the use of the auto by those that borrow it.)

(T/F) The common-law principle does not apply in all states.

Bailee

A ____ is legally liable for damage to customers' property only if the damage occurs as a result of the said person's negligence.

Lease

A rental period of six months or longer is usually referred to as a ____, and shorter rental periods are typically called rentals.

B. Garagekeepers coverage

A business that services or repairs autos can become liable for damages to its customers' autos temporarily left in its custody. Which one of the following coverages is meant to insure a business for losses to customers' autos left in its care, custody and control? A. Property damage liability B. Garagekeepers coverage C. Vicarious liability for non-owned autos coverage D. Hired or borrowed autos coverage

"Auto"

A land motor vehicle, trailer, or semitrailer that is designed for travel on public roads or Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance laws where it is licensed or principally garaged

Supplementary Payments

A separate Section II provision, ____, lists additional covered costs that are paid in addition to the policy limits. This include the cost of bail bonds (up to $2,000), bonds to release attachments in suits the insurer defends (up to the limits of insurance), reasonable expenses incurred by the insured at the insurer's request including loss of earnings (up to $250 per day) for time off work, court costs (except attorneys' fees), and interest that accrues on damages after a judgment has been entered.

Section II, Out-of-State Coverage Extensions

A separate provision in ____ addresses situations in which a covered auto is driven in more than one state. This provision allows for increased liability limits to meet higher financial responsibility requirements in another state.

Bailee Loss Exposures

Any business that services, repairs, or otherwise attends to customers' autos can become liable for damage to cars temporarily left in its custody. Such businesses are said to face ____.

C. Specifically Described "Autos" and applies to autos specifically described in the policy and for which a premium is shown in the policy.

Every auto covered under the Business Auto Coverage Form is designated with a coverage symbol that categorizes it for coverage purposes. Symbol 7 designates A. Any "Auto" and includes autos owned by the named insured or hired or borrowed from others and any other nonowned autos used in the insured's business. B. Hired "Autos" Only and applies to autos leased, hired, rented, or borrowed by the named insured, but not to autos leased, hired, rented, or borrowed from the named insured's employees or family members. C. Specifically Described "Autos" and applies to autos specifically described in the policy and for which a premium is shown in the policy. D. Nonowned "Autos" Only and applies to autos not owned, leased, hired, or borrowed by the named insured while they are used in connection with the named insured's business.

Hired and Borrowed Autos

In several situations, an organization can become liable for injury or damage to others that results from the use of autos it does not own. An organization may hire autos from others for terms ranging from a few hours to a number of years.

Yes. (Isabella's policy covers her liability in this accident. The pollution exclusion applies only to pollutants that are discharged from a covered auto or being transported by or on behalf of the insured. Because the oil that spilled was not being transported by Isabella or in an auto covered under her policy, she would have coverage. Similarly, coverage would apply for Isabella's pollution liability if she backed into a chemical storage tank in a customer's parking lot, rupturing the tank and causing the chemicals to spill. The chemicals spilled from the tank were not being transported in or moved to or from a covered auto.)

Isabella, while driving a delivery truck owned by her firm, Isabella's Floral Service, negligently collided with an oil tank truck owned by Oil Company. As a result of the collision, the oil carried by the tank truck leaked onto the ground and into a nearby stream. The cost to clean up the resulting pollution exceeded $200,000. Are the pollution cleanup costs covered by Isabella's business auto policy?

Owned Autos

Perhaps the most likely way a business can incur auto liability is when an employee of the business, while operating an auto owned by the business, negligently injures other persons or damages their property. As long as the employee operates the vehicle within the scope of his or her employment, the liability for resulting injuries and damage ordinarily falls on the employer as well as the employee.

Symbol 6—Owned "Autos" Subject to a Compulsory Uninsured Motorists Law

Required to have uninsured motorists coverage in state where licensed or garaged

A. Liability the insured would have in the absence of the contract

Section II—Liability Coverage of the Business Auto Coverage Form contains a contractual liability exclusion that precludes coverage for liability assumed by contract with two exceptions. Which one of the following is one of those exceptions? A. Liability the insured would have in the absence of the contract B. Bodily injury arising out of the insured's completed work C. Liability for damage to property in the care, custody, or control of the insured D. Liability for the discharge of pollutants being transported by a covered auto

Symbol 9—Nonowned "Autos" Only

Symbol ____: Applies to autos not owned, leased, hired, or borrowed by the named insured while they are used in connection with the named insured's business; includes autos owned by the named insured's employees or employees' household members but only while used in the named insured's business or personal affairs.

Symbol 1—Any "Auto"

Symbol ____: Includes autos owned by the named insured or hired or borrowed from others and any other nonowned autos used in the insured's business. Ordinarily used for liability coverage only, this symbol provides the best protection for the insured.

A. It needs to add a separate garagekeepers endorsement to its Business Auto Coverage Form.

The Big Sound Stereo Shop installs sound equipment in expensive autos. In order to maintain good customer relations, it makes goodwill payments to customers if their cars suffer damage while in Big Sound's possession, even if Big Sound is not legally liable. What, if anything, can Big Sound do to insure this exposure under its Business Auto Coverage Form? A. It needs to add a separate garagekeepers endorsement to its Business Auto Coverage Form. B. It needs to add employers nonownership liability coverage to its Business Auto Coverage Form. C. It needs to do nothing as this exposure is automatically covered under the Business Auto Coverage Form. D. It can do nothing as this exposure must be insured under a separate policy.

Business Auto Coverage Form (BACF)

The ____ is a flexible coverage form used for insuring a wide variety of loss exposures for all types of organizations other than auto dealers and motor carriers.

Single Limit

The ____ is the maximum amount the insurer will pay for all claims arising from a single accident, regardless of the number of vehicles, the number of drivers, or the number of claimants involved.

C. Vehicles maintained primarily to provide mobility to permanently mounted power cranes

The definition of "auto" in the Business Auto Coverage Form includes coverage for all of the following vehicles, EXCEPT: A. Land vehicles designed for travel on public roads B. Land vehicles subject to motor vehicle insurance laws C. Vehicles maintained primarily to provide mobility to permanently mounted power cranes D. Self-propelled vehicles with permanently attached equipment maintained primarily for snow removal

Section II—Covered Autos Liability Coverage

____ covers the named insured for any covered auto. A person other than the named insured is an insured while using, with the named insured's permission, a covered auto that the named insured owns, hires, or borrows, with some exceptions.

Section V - Definitions

____ defines other important words and phrases that are used throughout the policy, including "bodily injury," defined to include not just injury, but sickness or disease, as well as death resulting from any of those, and "property damage" to include damage to or loss of use of tangible property.

Section II—Covered Autos Liability Coverage

____ excludes almost all coverage for bodily injury or property damage resulting from the escape of pollutants being transported by a covered auto; however, if the pollutants that cause injury or damage are fluids needed for the normal functioning of the covered auto (such as gasoline or transmission fluid), resulting damages are covered.

"Accident"

____ includes continuous or repeated exposure to the same conditions resulting in "bodily injury" or "property damage".

Auto Physical Damage

____ insurance can cover damage to or destruction of an auto. Ordinarily, the insurer pays the cost of repairing the vehicle or its actual cash value, whichever is less.

Employers nonownership liability

____ is an employer's liability for its employees' operation of their autos in the employer's business. All three of the commercial auto forms provide insurance for this exposure.

Mobile Equipment

____ is automatically covered for liability while being carried or towed by an auto that has liability coverage.

Business Auto Liability Coverage

____ is subject to a combined single limit of insurance applicable to all bodily injury, property damage, and covered pollution cost or expense arising from a single accident. No annual aggregate limit applies.

"Insured"

____ means any person or organization qualifying as an insured in the Who Is An Insured provision of the applicable coverage. . . .

"Bodily Injury"

____ means bodily injury, sickness or disease sustained by a person including death resulting from any of these.

Section II—Covered Autos Liability Coverage

_____ of the Business Auto Coverage Form contains the provisions for covered autos liability insurance, including a coverage agreement, exclusions, and a limit of insurance provision.