Unit 16 Notes: Commercial Auto Insurance

Symbol 2 - Owned Autos Only

- Any auto the insured owns - Designates other coverages besides liability coverage

Trailer Interchange Coverage Truckers Coverage Form

- Covers damage to a specific trailer under the policy of the truck in whose possession the trailer is at the time of loss - For coverage to apply, the trucker must be liable under a written interchange agreement, and the damage must be caused by a covered peril - This coverage is b/c truckers frequently need to borrow or hire a trailer from another trucking business for use in their own business; under the BAC form, damage to such property is excluded

Loss of Use Physical Damage Coverage Liability Coverage Business Auto Coverage

- Covers expenses to rented autos for which the insured is legally responsible under a contract or agreement - Coverage is limited to $20/day to a maximum of $600

Collision Physical Damage Coverage Liability Coverage Business Auto Coverage

- Covers overturn of the covered auto and collision with another OBJECT - Written with a deductible

Business Auto Physical Damage Form

- Covers the insured's owned or hired business autos for physical damage only

Symbol 8 - Hired autos only

- Designates liability and/or physical damage coverage only - Only used for autos the insured has leased, hired, rented, or borrowed - Does not include autos rented or borrowed from employees or members of their households

Supplementary Payments Liability Coverage Business Auto Coverage

- Expenses the insurer incurs - Cost of bail bonds up to $2,000 for violations b/c of a covered accident - Cost of bonds to release attachments, but only within the limit of insurance - Expenses the insured incurs at the insurer's request, including the insured's lost earnings up to $250/day b/c of time off from work - Costs the insured is required to pay b/c of a suit - Interest that accrues after a judgment and before it is paid - Note: Losses covered under the supplementary payments section do NOT reduce the policy's limit of liability

Individual Named Insured Endorsement

- Extends personal auto coverage to immediate family members of the named insured - For ex: consider a sole proprietorship who operates a business and has BAC but no personal auto insurance; __ under the BAC, the sole proprietor would have coverage for any auto; __ the sole proprietor's family members would have coverage while using autos owned, hired, or borrowed by the named insured and while using non-owned autos in the insured's business __ However, the proprietor's family would have no coverage for their personal use of non-owned autos - Attaching the individual named insured endorsement to the BAC form would extend coverage for the use of any auto to family members, subject to certain exclusions - It provides very similar coverage to that provided by the PAP

Symbol 7 - Specifically Described Autos

- Most restrictive symbol - Applies only to autos specifically listed in the BAC form declarations

Specified Causes of Loss Physical Damage Coverage Liability Coverage Business Auto Coverage

A more limited type of comprehensive coverage and covers only: - fire - lightning - explosion - theft - windstorm - hail - earthquake - flood - V&MM ($25 deductible applies to this cause of loss) - sinking, burning, collision, or derailment of a conveyance transporting the covered auto (such as a ship) - No other losses have a deductible except for $25 to V&MM

Select all correct statements re: the BAC form conditions: A. An insured cannot take legal action against the insurance co. unless she has fully complied with all terms of the policy B. The BAC form provides excess coverage for covered autos owned by the insured C. When the BAC form and other insurance cover on the same basis, the BAC form pays only its proportionate share of the loss D. Physical damage claims are always settled on a replacement cost basis E. If more than one policy issued by the same insurer applies to a loss, the amount that the insured can be paid is limited to the highest single policy limit

A. True B. False; coverage is excess for non-owned covered autos and covered trailers while connected to non-own C. True D. False; insurer has 3 options for physical damage claims E. True

Motor Carrier (definition) Motor Carrier Coverage Form

Anyone who transports property by auto in a commercial enterprise, regardless of whether he was hired for that purpose

Endorsements

Endorsements for all 5 coverage forms: BAC, Business Auto Physical Damage (BAPD), Garage, Truckers, Motor Carrier

Diminution of Value Definitions Business Auto Coverage Form

Is an actual of perceived loss in resale or market value that results from a direct, accidental loss

Additional Insured--Lessor Endorsement

Leased vehicles can be considered owned vehicles for coverage purposes

Bodily Injury (BI) Definitions Business Auto Coverage Form

Means bodily injury, sickness, or disease, including death resulting from any of these

Property Damage (PD) Definitions Business Auto Coverage Form

Means damage to or loss of use of tangible property

Definitions

Section of the BAC form defines certain key terms used in the policy which will help clarify the intent of various coverages and conditions

Symbol 5 - Owned autos subject to no-fault laws

- Designates owned autos required to have no-fault benefits in a particular state

Out of State Coverage Extensions Liability Coverage Business Auto Coverage

- For situations where a business's autos are driven in more than one state - Modifies the policy's liability coverage to meet other states' financial responsibility requirements and other state laws concerning out of state drivers when the covered auto is being driven in that state

MCS-90 Endorsement

- If insurance is used to establish proof of financial responsibility, the MCS-90 endorsement must be attached to the policy - This endorsement provides public liability coverage for BI, PD, and environmental restoration

Covered Autos Garage Coverage Form

- Like the BAC form, the garage coverage form uses a numerical system to determine which autos are covered autos but with different numbers

Symbol 9 - Nonowned autos only

- Only used for autos in the insured's business that are not leased, hired, rented, or borrowed - Includes autos owned by employees but used in the insured's business or personal affairs - Designates liability coverage only

Two symbols that are unique to the garage coverage form:

- Symbol 30: Customers' autos left with the insured for service, repair, storage, or safekeeping (this is GARAGEKEEPERS coverage) - Symbol 31: Physical damage coverage only for the dealers' autos, including owned autos, autos for sale, and autos on consignment

Who is an Insured? Liability Coverage Business Auto Coverage

- The named insured - Those who become liable for the conduct of an insured

Medical Payments, Uninsured Motorists, and Underinsured Motorists Coverage Endorsements

May be added by endorsement; similar coverage to that provided by the PAP

Mobile Equipment

Same definition as the CGL coverage forms; this allows the 2 coverages to fit together precisely and removes any doubt about which coverage applies to autos and which applies to mobile equipment

Auto Definitions Business Auto Coverage Form

- A land motor vehicle, trailer, or semitrailer, including any attached machinery or equipment, that is: __ designed for travel on public roads; or __ subject to compulsory or financial responsibility laws or other motor vehicle laws - Does NOT include mobile equipment - An exception is made under the policy's liability coverage when mobile equipment is being towed or carried by a covered auto--this provision fills an insurance gap, b/c the CGL policy excludes coverage for mobile equipment while it is being transported by an auto that is owned or operated by an insured; other exposures arising out of mobile equipment are covered under CGL insurance

Limits of Liability - Motor Carrier Act of 1980 Motor Carrier Coverage Form

- Affect vehicles that have a gross vehicle weight of 10,000 pounds or MORE - The required limits are divided into 3 categories depending on the kind of hazardous cargo hauled: 1. $750,000 for interstate transportation of non-hazardous property 2. $5,000,000 for interstate or intrastate transportation of large quantities of certain hazardous materials such as compressed gas, radioactive materials, explosives, or oil 3. $1,000,000 for interstate or intrastate transportation of oil or other hazardous wastes - Vehicles that have a gross vehicle weight of less than 10,000 pounds must comply with the financial responsibility limit of $5,000,000 if the vehicle hauls explosives, any quantity of poison gas, or large quantities of radioactive materials

Motor Carrier Coverage Form

- An alternative to the truckers coverage form - B/c of the broad def. of "motor carrier" encompasses truckers, those who are eligible for coverage under the truckers coverage form could also be covered under the motor carrier coverage form; however, those who are eligible for motor carrier coverage can be covered under the truckers form ONLY if they transport goods for others by hire - With the exception of those who can be covered under the form, the motor carrier coverage form is practically identical to the truckers coverage form - It provides trailer interchange coverage - Unlike the truckers form, owned private passenger autos MAY be covered autos in the motor carrier coverage form

Symbol 3 - Owned Private-Passenger Autos Only

- Any private passenger auto the insured owns - Designates any coverage provided by the BAC form

Symbol 19 - Mobile equipment subject to motor vehicle laws only

- Autos that would be considered mobile equipment if they were not subject to compulsory or financial responsibility laws or other motor vehicle laws

Primary Coverage Conditions Business Auto Coverage

- BAC is PRIMARY coverage

Symbol 1 - Any Auto

- Broadest coverage (least restrictive symbol) - Any auto the insured will use during the policy period, including autos that are owned, leased, hired, rented, or borrowed - Used to designate liability coverage only

Commercial Auto Policy (CAP)

- Can be written as a monoline policy or included in the CPP - CAP coverage part must contain the following elements: 1. common policy declarations 2. common policy conditions 3. one of 5 separate coverage forms: business auto, business auto physical damage, garage, truckers, or motor carrier 4. appropriate declarations for coverage form selected

Exclusions (page 373) Liability Coverage Business Auto Coverage

- Contain many of the same exclusions as the personal auto liability coverage and some unique exclusions as well

Worldwide Liability Coverage Liability Coverage Business Auto Coverage

- Coverage territory for the BAC form includes the US, its territories and possessions, Puerto Rico, and Canada - Worldwide liability coverage for private passenger autos the insured hires, leases, rents, or borrows without a driver for 30 DAYS OR LESS - The insured's liability must be determined in a settlement agreed to by the insurer or in a suit filed in the US or its territories and possessions

Comprehensive Physical Damage Coverage Liability Coverage Business Auto Coverage

- Covers any loss that is not excluded by the policy, but does NOT cover collision or overturn - Written with a deductible - Losses due to glass breakage, hitting a bird or animal, and falling objects or missiles are treated as comprehensive losses (this usually works to the insured's advantage b/c comprehensive coverage is usually written with a lower deductible than collision coverage; however, the insured may also have glass breakage paid as a collision loss to remove a possible double deductible if glass breakage AND other damage result from a collision)

Liability Coverage Garage Coverage Form

- Covers both auto and business liability arising out of: 1. the ownership, maintenance or use of covered autos (garage operations--covered autos); and 2. garage operations (garage operations--other than covered autos) - Contains many of the same liability exclusions as the BAC form - Contains some general liability exclusions such as damage to property of others in the insured's care, custody, or control, property damage to the insured's own products or work, and product or work recalls

Symbol 6 - Owned autos subject to compulsory uninsured motorists law

- Designates owned autos required to have uninsured motorists coverage in a particular state

Garage Coverage Form

- Designed specifically for vehicle dealers, including dealers that have repair operations on the business premises - Form can be written to cover auto dealers, truck and truck-tractor dealers, motorcycle dealers, commercial trailer dealers, and recreational vehicle dealers - Includes liability, garagekeepers, and physical damage coverage - Uninsured motorists, underinsured motorists, and medical payments coverage may be added by endorsement

Drive Other Car Coverage Broadened Coverage for Named Individuals (DOC) Endorsement

- Extends the definition of covered auto to include autos the named insured does NOT own, hire, or borrow while being used by the person named in the endorsement - Coverage does NOT apply to autos owned by the person named in the endorsement or a family member - DOC coverage might be especially important if the named insured under a BAC form is furnishing an auto to an employee who has no personal auto insurance; although the employee would have coverage under the BAC form while using the furnished auto or any other auto owned, hired, or borrowed by the named insured, the employee would have NO coverage under the business auto form for an auto he borrowed or rented unless the DOC endorsement was attached to the BAC form

Garage Operations--Covered Autos Liability Coverage Garage Coverage Form

- Garage Operations--Covered autos are insured in essentially same way as BAC with one exception: __ Garage customers are NOT covered if they have their own liability coverage __ If customers do NOT have liability coverage of their own, the garage form protects them, but only up to the minimum limits of financial responsibility __ Insured has the option of adding coverage for customers up to the full limits of the policy

Covered Pollution Cost or Expense Liability Coverage Business Auto Coverage

- Insurer agree to pay all sums an insured legally must pay as a covered pollution cost or expense to which the policy applies - The pollution cost must be caused by an accident and result from the ownership, maintenance, or use of covered autos - The insurer will pay for covered pollution costs only if there is BI or PD caused by the same accident - Coverage for liability pollution clean-up costs is also included under specific circumstances

Settling Physical Damage Claims Conditions Business Auto Coverage

- Insurer has 3 options for settling physical damage claims: 1. Pay for, repair, or replace the damaged or stolen property 2. return stolen property to the insured at the company's expense and pay for any damages resulting from the theft 3. take the damaged or stolen property at an agreed or appraised value - In the event of a total loss, deprececiation and physical condition will be considered when determining ACV; if a repair or replacement results in better than like kind or quality, the amount of the betterment is not covered

Covered Pollution Cost or expense Definitions Business Auto Coverage Form

- Means costs arising out of any statutory or regulatory requirement or any order by a govt. authority demanding that the insured test for, monitor, clean up, remove, contain, treat, detoxify, or neutralize, or respond out of the escape of pollutants that are in property being transported to or towed by, handled into, onto, or from the covered auto, or otherwise in the course of transit by the insured, or being stored, disposed of, treated, or processed in or on the covered auto - Also excluded are pollutants, released before the property is moved to the place where they are accepted by the insured for movement into the covered auto, after the pollutants are delivered by the insured (this exclusion does not apply to fuels, lubricants, fluids, exhaust gases, or other pollutants necessary for or resulting from the normal operation of a covered auto or its parts

Main difference between Motor Carrier and Truckers Coverage Forms

- Motor Carriers: allows owned private passenger autos to be covered; allows anyone who transports property by auto in a commercial enterprise regardless of reason for hire - Truckers: only eligible for coverage if they transport goods for others by hire

Symbol 4 - Owned autos other than private passenger autos only

- Other types of vehicles the insured owns, such as trucks, trailers, buses, and motorcycles - Designates any coverage provided by the business auto coverage form

Coverage Extension Physical Damage Coverage Liability Coverage Business Auto Coverage

- Provides coverage for transportation expenses - Covers expenses incurred b/c of the theft of the insured's vehicle beginning 48 HOURS AFTER the theft and ending when the auto is returned or the insurer pays the loss - Covers is limited to a maximum of $20/day or a total of $600

Motor Carrier Act of 1980/MCS Endorsement

- Require trucking companies to certify that they are able to meet financial obligations if they become liable for injury or damage arising from their trucking operations - The most common method for satisfying these requirements is to obtain adequate truckers coverage to cover the automobile exposure as well as commercial inland marine motor truck cargo insurance to cover the liability for cargo being hauled

Covered Autos

- Selections are contained in the business auto declarations and are based on a numerical symbol system described in the policy - With the exception of specifically described autos, autos acquired during the policy period are automatically covered - For Specifically Described Autos: an auto acquired during the policy period is only a covered auto for a particular coverage if the insured already insures all autos for this coverage or if it replaces a covered auto and the insured notifies the insurer within 30 days of acquisition

Liability Coverage Business Auto Coverage

- Similar to that provided by the PAP - Policy agrees to pay all sums an insured legally must pay as damages b/c of BI or PD to which the insurance applies caused by an accident and resulting from the ownership, maintenance, or use of a covered auto - Coverage for defense costs and supplementary payments is also included

Conditions Business Auto Coverage

- Similar to those in other insurance contracts with a few unique ones

Liability and Physical Damage Coverage Truckers Coverage Form

- Similar to those provided in the business auto coverage form

Employees as Additional Insureds Endorsement

- States that any employee is an insured while using an auto the business does NOT own, hire, or borrow when the autos are used in the business or personal affairs of the named insured - Coverage insures employees for the business use of their own autos or autos owned by family members; - It does NOT protect other family members who may own a vehicle being used by an employee - If a business has broad coverage for all autos, it would be covered in any suit arising out of an accident involving owned, hired, or borrowed, or non-owned autos, including autos owned by employees while used FOR BUSINESS PURPOSES; although they might also have a PAP for liability, a suit from a business-related accident could easily exhaust that limit - Employees can be protected under the BAC form with the "EMPLOYEES AS ADDITIONAL INSUREDS" endorsement

Other Insurance Conditions Business Auto Coverage

- States that the BAC form provides "PRIMARY COVERAGE" for covered autos owned by the insured and for liability losses, covered trailers that are connected to covered autos owned by the insured - Coverage is "EXCESS" for losses involving non-owned covered autos and covered trailers while they are connected to non-owned motor vehicles - When the BAC form and the other insurance cover on the same basis, either primary or excess, the BAC form pays only its proportionate share of the loss

Two symbols to provide trailer interchange coverage Covered Autos Truckers Coverage Form

- Symbol 48: Trailers borrowed or leased by the named insured for which liability loss has been assumed under a written trailer interchange agreement; applies to comprehensive, specified causes of loss or collision coverages of trailer interchange coverage only - Symbol 49: Trailers owned or hired by the named insured while the trailers are in someone else's possession under a written trailer interchange agreement

Truckers Coverage Form

- The BAC form specifically excludes business that set themselves out for hire to haul the goods of others - Truckers must obtain coverage for their vehicles under the truckers coverage form which is a modified version of the BAC form that takes into consideration the special practices and regulations that apply to the trucking industry - Includes 3 coverages: 1. Liability 2. Trailer interchange 3. Physical Damage

Legal Action against the Insurer Conditions Business Auto Coverage

- The insured CANNOT take legal action against the insurance co. unless the insured has fully complied with all terms of the policy - If they lawsuit relates to the policy's liability coverage, the insurer must also agree in writing that the insured is obligated to pay or the amount of judgment must have been determined after a trial

Garagekeepers Insurance Garage Coverage Form

- The liability section of the garage coverage form excludes liability for the damage to property of others in the insured's care, custody, or control - For garages, this excludes a significant business exposure: the garage's liability for customers' autos in its care or custody - Coverage for this specific exposure is provided under the Garagekeepers insurance section of the garage coverage form - Covers the insured's liability for damage to customer's property that the insured has for servicing, repair, parking, or storage - Insured has the option of purchasing direct damage garagekeepers insurance which pays for physical damage to customers' property in the insured's custody, whether or not the insured is liable - Direct Damage Garagekeepers insurance can be provided on either a primary or excess basis; the causes of loss that can be covered include comprehensive or specified causes of loss and collision

Those who are NOT insureds include: Liability Coverage Business Auto Coverage

- The owner of an auto hired or borrowed from an employee or family member - A person who is working in an auto-type business - People besides employees or lessees while moving property to and from a covered auto - The owner of a hired or borrowed auto

Physical Damage Coverage Liability Coverage Business Auto Coverage

- This portion of the business auto coverage form contains three principal coverages: 1. Comprehensive 2. Specified causes of loss 3. Collision - The insured may select different physical damage coverage options for different vehicles (ex: some vehicles may be insured for comprehensive and collision losses while others are insured only for the specified causes of loss) - Coverage for Towing and labor costs incurred when a covered private passenger auto is disabled is available

Garage Operations--Other than covered autos Liability Coverage Garage Coverage Form

- Those considered insureds include the named insured, the insured's employees, and the business's directors and shareholders while acting within the scope of their duties

Physical Damage Coverage Garage Coverage Form

- Typically auto dealers purchase physical damage coverage on a blanket basis; a few specialized exclusions apply to this blanket coverage: __ expected profits; and __ collision damage to autos being driven or transported from the point of purchase or distribution to the point of destination if this distance is 50 miles or more

Business Auto Coverage Form

- Used to insure the private passenger and commercial auto exposures of all businesses other than garages, truckers, and motor carriers which have separate forms - Includes: __ Liability coverage __ physical damage coverage (comprehensive or specified causes of loss and collision) - Uninsured motorists, medical payments, and underinsured motorists coverage can be added by endorsement

Covered Autos Truckers Coverage Form

- Uses a numerical system to determine which autos are covered autos - The numbers are different and the "owned autos" option do not include private passenger autos - Contains two symbols to provide "Trailer Interchange Coverage"

If the insured has Liability Coverage under the policy, the following vehicles are also covered autos for liability coverage:

- temporary substitute autos - trailers with a load capacity of 2,000 pounds or less - mobile equipment while it is being towed or carried by a covered auto

Exclusions Physical Damage Coverage Liability Coverage Business Auto Coverage

- to sound reproducing and receiving equipment, tapes, and records - from wear and tear, freezing, mechanical or electrical breakdown, or road damage to tires - arising out of war - arising out of nuclear events - to covered autos while being used for, or while practicing or preparing for, organized or professional racing, demolition, or stunting activities - due to diminution in value

An endorsement may be used to add coverage for SPECIFIED HIRED AUTOS

As if they were covered autos owned by the named insured; when attached to a policy, the hired autos scheduled in the endorsement will be treated as if they were covered automobiles owned by the named insured

2 or More Policies Issued by the Same Insurer Conditions Business Auto Coverage

If more than one policy or coverage form issued by the same insurer applies to a loss, the amount the insured can be paid is limited to the highest single policy limit

Pollutants Definitions Business Auto Coverage Form

Means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste; waste includes materials to be recycled, reconditioned or reclaimed

Mobile Equipment Endorsement

Mobile equipment is considered a covered auto