Section 16: Commercial Automobile Coverage- The BAP Section II- Liability

The BAP Section III- Physical Damage Extensions Transportation expenses will pay up to

$20/day to a maximum of $600 because of total theft of private passenger type.

The BAP Section III- Physical Damage Extensions Under loss of use expenses, coverage is limited to

$20/day up to a $600

The BAP Section III- Physical Damage Extensions The physical damage exclusions does not apply to any of the following

1. Sound reproduction equipment and accessories permanently installed in the covered auto. 2. electronic equipment necessary for normal operations of vehicle 3. electric equipment permanently installed by manufacture for installation of a radio.

The BAP Section III- Physical Damage Extensions The physical damage section of the BAP excludes coverage for loss or damage:

1. tapes, records, discs, designed for use with audio visual or data electronic equipment. 2. Equipment used for radar or easier detection 3. electronic equipment and related accessories for audio visual or data signals that is not designed solely for reproduction of sound.

The BAP Section III- Physical Damage Extensions When a vehicle theft occurs, the insurer will pay for temporary expenses incurred during the period beginning

48 hours after the theft ending regardless of the policies expiration when the covered auto is refunded to use or when insurer pays for the loss.

Section II-Part B- Exclusion War

Bodily injury or property damage that is the result of any declared or undeclared war or any act or condition incidental to a war.

The BAP Section III- Physical Damage Coverage The physical damage coverage of the policy covers accidental direct damage to covered autos and their equipment, under three principle coverages. What are the three coverages?

Collision Comprehensive Specified causes of loss- specified perils

The BAP Section III- Physical Damage Coverage The deductibles under Section III of the BAP are written as:

Collision and comprehensive- chosen by insured Specified Causes of loss- $25 for vandalism and malicious mischief.

Section II-Part B- Exclusion Employee Indemnification and Employer's Liability

Employment related bodily injury to an insured employer and any resulting consequential injury to the employee's spouse or other immediate family member. This exclusion does not apply to bodily injury to a domestic employee who is not entitled to worker's compensation benefits.

Part II- Garage keepers Liability Examples of specified perils

Fire Explosion theft of the entire automobile Vandalism and malicious mischief

Part 1- Covered Autos Symbol 28

Hired autos only

Similarities & Differences Between the Business Auto, Truckers, and Motor Carrier Coverage Forms The Business Auto Policy includes a tractor - trailer combination under its definition of an "auto" that can be covered by the policy.

However, the BAP specifically excludes businesses for hire that haul the goods for others, leaving a commercial automobile exposure for these types of businesses. Therefore, the truckers coverage form was introduced to meet these needs.

Similarities & Differences Between the Business Auto, Truckers, and Motor Carrier Coverage Forms The Motor Carrier Act of 1980

Introduced a number of new regulations that were imposed on truckers and other commercial carriers.

Truckers Coverage Form Three coverages under the Truckers form

Liability trailer interchange physical damage

Section II-Part B- Exclusion Operations

Liability arising out of the operation of certain mobile equipment such as cherry pickers, air compressors, pumps or generations

Section II-Part B- Exclusion Contractual liability-

Liability assumed under any contract or agreement, except for liability assumed under an "insured contract". (the insured's assumption of the liability of another party under a hold harmless agreement.)

Section II-Part B- Exclusion Handling of property

Liability resulting from the handling of property, before it is moved from the place it is accepted by the insured for movement to a covered auto or after its removal from a covered auto, to the final delivery place, by the insured.

The BAP Section IV- General Conditions The BAP contains the same general conditions as most other policies, however, we will discuss two of the general conditions you need to remember for your state exam.

Other insurance & Two or More Policies Issued by the Same Insurer

Part 1- Covered Autos Symbol 30

Provides coverage for auto left with the insured business for service, repair storage or safe keeping. If this symbol is indicated on the Declarations page, we know that Garage keepers liability coverage has been added to the policy.

Part 1- Covered Autos Symbol 31

Provides coverage for physical damage to the auto dealers autos including owned autos, autos for sale, autos on consignment or trailer dealers. If symbol 31 is indicated in the Declarations page of the policy, we know that physical damage coverage has been added to the policy.

Part 1- Covered Autos Symbol 27

Specifically described autos

Section II- Part A Section II, Part A of the Business Auto Policy contains the insuring agreement which states that:

The insurance company will pay all sums an insured is legally liable to pay as damage for bodily injury or property damage covered by the policy and cause by an accident resulting from the ownership, maintenance, or use of a covered auto. The insurance company will pay for covered pollution cost expenses if there is either bodily injury or property damage that is caused by the same accident that caused the covered pollution or expense. The insurance company has a duty to defend the insured and this duty is more broad than simply the insurer's duty to pay any damages owed by the insured.

Section II Liability Coverages Section II of the Business Auto policy form contains three parts: Part A

The insuring agreement who is an insured coverage extensions and supplementary payments

Section II- Part A Who is NOT an insured?

The owner of, or anyone else, from whom the insured hired or borrowed a covered auto is not considered an insured under the policy, unless the covered auto is a trailer that is connected to a covered auto that the insured owns; An employee of the insured, if the covered auto is owned by that employee or a member of his/her household, even if the employee is using that auto to conduct business on behalf of the insured.

Part II- Liability Part II of the Garage Coverage applies liability coverage for

The ownership , maintenance or use of covered autos The day to day garage operations of the covered business.

Part II- Garage keepers Liability Losses excluded b y the Garage keepers coverage are:

Theft by an insider (named insured, employee, or shareholder) Contract liability Defective products or work performance losses Radar detectors are always excluded and sound reproducing or receiving equipment unless permanently installed by the manufacturer.

The BAP Section IV- General Conditions Other Insurance

This condition states the BAP provides primary coverage for covered autos owned by the insured. The policy provides excess coverage for losses involving non owned covered autos.

The Garage Policy Part III- Garage Keepers Liability

This coverage was designed to cover the insured's liability for damage to customer auto in the insureds care, custody or control.

The Garage Policy Part 1- covered auto

This section identifies the covered auto symbols listed on the declaration page.

The Garage Policy Part IV- Physical Damage

This section of the garage form includes coverage for collision, comprehensive (other than collision), or the specified causes of loss (if they don't carry comprehensive)

The Motor Carrier Act of 1980/MCS-90 Endorsement Financial responsibility requirements of the motor carrier act apply separately to four types of freight transport.

Type 1- for hire transportation of non-hazardous property in interstate or foreign commerce the minimum limit at least $700,000. Type 2- For hire or private transportation (interstate or intrastate) of hazardous substance (compressed gas, explosives, poison gas and radio active material) with a minimum of $5 million. Type 3- for hire and private transportation of oil, listed as hazardous substance or any hazardous waste or substances not included in the types with a minimum limit of 1 million. Type 4- for hire and private transportation of any quantity of class A or B explosives any quantity of poison gas, or a highway route- controlled quantity or radioactive materials with a minimum limit of $5 million.

The BAP Section III- Physical Damage Extensions Towing and labor costs goes into effect when

a covered private passenger vehicle is disabled

Truckers Coverage Form The trucker's coverage form is basically

a modified version of the business auto policy that takes into consideration the business model and regulations that apply to the trucking industry.

Part 1- Covered Autos Symbol 21

any auto

Section II-Part B- Exclusion Workers Compensation

any obligation for an employee's injuries that should be covered by work-man's compensation, disability benefits, or unemployment compensation law.

The Garage Policy The Garage Policy can be written as an individual policy, or attached to a Commercial Package Policy to cover

auto dealerships, automobile repair shops, or garages

The Garage Policy Auto dealerships can be covered with the Garage form (sometimes called the Auto Dealer's form) include those that sell:

autos trucks motorcycles recreational vehicles trailers

Section II-Part B- Exclusion Fellow employee

bodily injury of a fellow employee of an "insured" and consequential injury to a spouse or immediate family member of that fellow employee.

Part IV- Garage Physical Damage The "Garage Physical Damage" coverage part provides physical damage coverage for autos owned by the insured business. Coverage includes:

collision comprehensive/ other than collision with this coverage written with specified perils if the insured chooses.

Part II- Garage keepers Liability Garage keepers liability coverage can be written for...

collision and comprehensive/ other than collision basis. Those who select comprehensive coverage, may opt to have coverage provided for specified perils.

The BAP Section III- Physical Damage Extensions The insurer will pay for loss of use expenses if caused by

comprehensive coverage specified cause of loss collision coverage

Part II- Garage keepers Liability Part II of the Garage Coverage form provides Garage keeper liability coverage. This coverage is necessary to...

cover the physical damage losses to customer's auto while they are in the insured's care, custody, and control.

The Garage Coverage Form- Endorsements Personal Injury protection, also known as PIP coverage, is a component of auto insurance that...

covers medical expenses regardless of who is at fault in the accident. This coverage often includes lost wages also. Depending on state law, PIP may be optional or required. In either situation it is added to the policy by endorsement. When this endorsement is added auto dealers, symbol 25 is required to be shown on the endorsement. For non-dealers, symbol 25 can be used if all of the insured's owned autos are covered for Section II but if not, Symbols 23,24, or 27 can be used.

The Garage Policy The Garage form provides coverage for the

day to day operations of the type of businesses listed previously

The Garage Coverage Form- Endorsements The "Dealers Drive-Away Collision"

endorsement deletes the physical damage coverage exclusion for vehicles in inventory being driven or transported more than 50 miles from the point of purchase or distribution.

Section II-Part B- Exclusion Care, custody, or control

except for the liability assumed under a "sidetrack agreement", the Business Auto policy specifically excludes coverage for damage, including pollution cost of expense, to property owned, transported by , or in the care, custody or control of the insured. (A "sidetrack agreement" is an agreement between property owner and a railroad company that adds specific exclusions to the coverage provided by a liability insurance policy.)

Section II Liability Coverages Section II of the Business Auto policy form contains three parts: Part B

exclusions

The Garage Coverage Form- Endorsements The broadened coverage

garages endorsement allows insureds who carry a garage policy to add liablity coverages to the policy, but only for the garage operations of the insured (other than the ownership, maintenance or use of covered autos). The coverages that may be added by this endorsement are: -personal and advertising injury liability insurance - host liquor liability - damage to rented premises liability coverage - incidental medical malpractice - non-owned watercraft liability insurance liability - additional persons insured (the spouse of an insured partner) -limited world wide liability coverage -automatic liability coverage for newly acquired garage

Section II-Part B- Exclusion Completed operations

liability for bodily injury or property damage arising out of the insureds work after completed or abandoned.

Section II-Part B- Exclusion Pollution

liability for pollution or contamination , unless arising from the normal operating fluids of the vehicle that are necessary for the vehicle to operate and these fluids have spilled due to an accident.

Section II- Part A The supplementary payments of the Business Auto policy DO NOT

reduce the limits of insurance

Section II- Part A The insured's Business Auto policy will not cover anyone who is working in the business of...

selling, servicing, repairing, parking or steaming autos, UNLESS that business is owned by the named insured, then employees ARE covered.

Part II- Liability The Garage form requires that auto dealers carry liability coverage for any auto. This means

that any auto dealer covered for liability must show symbol 21 on the declarations page. For non dealer's coverage for liability, 29 must be indicated. Excludes coverage for the insured liability for damage to the property of others in the care, custody, and control of the insured business.

Part II- Garage keepers Liability Direct And Primary

that covers damage to a customer's auto without proving negligence of the insured.

The BAP Section III- Physical Damage Extensions Labor expenses coverage will not apply after

the disabled automobile is/had been transported to a repair shop.

Section II- Part A Section II- Part A of the Business Auto policy also defines "Who is an insured?" under the policy. The policy defines "an insured" as

the named insured is an insured for "any covered auto" described on the Declarations page. The auto must be listed on the Business Auto policy as a covered auto or the "named insured" will not be considered an insured under their own policy. "anyone who is liable for the conduct of an insured to the extent of that liability" "anyone else" who uses an auto that the named insured owns, has hired, or has borrowed, is considered to be an "insured" under the policy, as long as that person has been granted permission to use the auto by the named insured.

Section II- Part C- Limit of Insurance The limit of insurance shown in declaration for section II liability coverage, is the most that will be paid for all damages and covered pollution costs resulting from one accident, regardless of...

the number of covered autos, insureds premiums paid, claims made, or vehicle involved in the accident.

Trailer Interchange Agreements "tailer interchange coverage" uses two symbols under the truckers coverage form and the motor carrier coverage form are different, but...

they provide the same coverage. They are: -symbol 48 (trucker), symbol 69 (motor carrier)- trailers in the possession of the insured under a written trailer interchange agreement. -symbol 49 (trucker), symbol 70 (motor carrier)- trailers owned by the insured that are in the possession of anyone else under a written trailer interchange agreement.

The BAP Section IV- General Conditions Two or more policies issued by the same insurer

when the same accident is covered by two or more policies issued by the same insurer the highest policy limit on one of those policies is the total amount that will be paid. This condition does not apply when 2 or more policies issued by different insurance companies cover the same loss. It also does not apply when two policies are issued by the same insurer, but one is written to apply as excess.

Section II-Part B- Exclusion Racing

bodily injury or property damage resulting from the use of a covered auto in, or while practicing for, an organized race, or demolition or stunting activity.

Section II-Part B- Exclusions Expected or intended injury

bodily injury or property damage that was expected or intended by the insured

Part 1- Covered Autos Symbols 21 through 29 follows the

business auto policy form. However, the symbols that are unique to the Garage form are symbols 30 and 31

Section II Liability Coverages Section II of the Business Auto policy form contains three parts: Part C

limit of insurance

Part 1- Covered Autos Symbol 29

non owned autos listed in garage businesses

Part II- Garage keepers Liability Legal liability basis

requires the customer to prove the garage was negligent in the damage to his/her automobile before coverage applies

The Garage Policy Part II- Liability

This section provides coverage for auto liability such as liability incurred from driving in insured vehicle.

Part 1- Covered Autos Symbol 25

owned autos subject to compulsory uninsured

Part 1- Covered Autos Symbol 26

owned autos subject to compulsory uninsured

Part 1- Covered Autos Symbol 23

owned private passenger auto only

The Garage Policy Uninsured/Underinsured motorists coverage

personal injury protection (PIP) of required by state statute.

Truckers Coverage Form The liability and physical damage sections of the Truckers Coverage form mirror those...

sections of the Business Auto Policy

The Garage Coverage Form- Endorsements The Garage Locations and Operations Medical Payments endorsement provides coverage for...

the garage premises and operations. This endorsement pays medical reimbursement to customers and others who are injured at the garage premises or as a result of operations away from the premises and NOT involving automobiles.

The Garage Coverage Form- Endorsements If the insured opts to add medical payment coverage by endorsement then...

symbol 22 must be indicated on the endorsement because it provides coverage for owned autos only.

Part IV- Garage Physical Damage Typically, auto dealerships will purchase Garage Physical Damage coverage on a...

blanket basis so that all vehicles are covered under a single limit of insurance rather than making an attempt to insure each individual auto in their inventory. Additionally, if one of the vehicles in the inventory is driven or transported more than 50 miles from the point of purchase or distribution, collision coverage will be excluded.

The BAP Section IV- General Conditions The definition of "auto" is very broad and can cover:

motorcycles 3 wheelers motor homes cars trucks tractor trailer combination

Similarities & Differences Between the Business Auto, Truckers, and Motor Carrier Coverage Forms The Motor Carrier Coverage Form was introduced to cover these new exposures and the Truckers form was intended to become...

obsolete. However, the truckers form is still being utilized and the state exams cover them.

Part 1- Covered Autos Symbol 22

owned autos only

Section II- Part A The Business Auto policy extension for out of state coverage provides coverage for a covered auto while it is outside of the state in which it is licensed by:

- increasing the limits of the liability section of the policy to provide coverage that meets the limits specified by compulsory or financial responsibility laws of the state where the covered auto is being used. - providing the minimum limits of coverage and the types off coverage, including no fault, that is required of out of state vehicles by the state in which the covered auto is being used. This statement is inserted into the standardized policy to prevent the stacking of limits. (Using the liability limits from more than one car insured on the policy to pay a large claim). However, in states where stacking of limits is permitted, the statutory form would override this statement in the policy.

The BAP Section III- Physical Damage Extensions The physical damage section of the business auto policy excludes coverage for loss or damage

1. nuclear hazard, war or military action 2. organized racing, demolition contest or stunting activities 3. wear and tear, freezing, mechanical or electrical breakdown, blow outs, punctures or other road damage to tires.

The BAP Section III- Physical Damage Extensions What are the three options the insurer has to settle physical damage claims:

1. pay for repair or replace. 2. return stolen property to insured and pay for any damage resulting from theft. 3. take possession of the property (salvage) at an agreed or appraisal value.

The BAP Section IV- Loss Conditions Loss Payment- Physical Damage Coverage-

if the insurance company pays for the the physical damage loss, the payment will include applicable taxes for the damaged or stolen property.

The BAP Section IV- Loss Conditions There are 5 loss conditions of the Business Auto policy: Appraisal for physical damage loss

if the insurer and the insured disagree on the amount of the physical damage loss to the covered auto, either party may demand an appraisal. The acceptance of an appraisal does not act as a waiver on the part of the insurance company. The company may still deny the claim due to an extension or some other policy provision that indicates that coverage does not apply under the policy.

Section II- Part A The coverage territory for Section II of the Business Auto policy

includes the US, its territories, and possessions, Puerto Rico and Canada

The BAP Section IV- Definitions mobile equipment

land vehicles that are not subject to financial responsibility laws in the state they are principally garaged.

Section II- Part A Section II liability also provides world wide liability coverage for ...

private passenger autos the insured hires, leases, rents, or borrows without a driver, for 30 days or less. For coverage to apply the insured's liability must be determined in a suit filed in the US, or its territories and possessions.

The Garage Coverage Form- Endorsements The "False Pretense" endorsement

provides coverage for an auto dealer who voluntarily parts with a vehicle due to a trick or scheme. This endorsement also provides coverage when a dealer acquires an auto from someone who does not actually possess the legal title. In this situation, if the dealer trades an owned vehicle for the vehicle without a legal title the insurer will pay for the loss of the insured vehicle. If the insured unknowingly purchases a vehicle without a legal title, and the rightful owner demands the vehicle be returned, the insurer will cover the amount of the loss incurred when the insured purchased the vehicle.

Part IV- Garage Physical Damage Physical Damage coverage for auto dealers must include ...

symbol 31 to cover vehicles in stock for sale, however, symbols 22,23,24, or 27 must be used in conjunction with symbol 31, depending on the type of coverage provided.

The BAP Section IV- Loss Conditions Legal Action Against Us (the insurer)

the insured cannot bring a lawsuit against the insurance company until they have complied with all the required duties under the policy. The purpose of this condition is to keep the insured from attempting to force the insurance company to pay the claim before legal liability has been established or the amount of physical damage has been determined. Additionally, no third party has the right of bring the insurance company into a lawsuit simply to determine the insured legal liability. Some state laws invalidate this condition and allow third parties to see the insured and the insurance company in a single lawsuit.

Section II- Part A- Coverage Extensions Section II- Part A of the Business Auto policy includes coverage extension for "supplementary payments" and the "out of state coverage extension"

Under the business auto policy supplementary payments section, it states that the insurer will pay on behalf of an insured: -All expenses incurred by the insurance company in the investigation and defense of a claim or lawsuit. -Up to $2000 of the cost of bail bonds, including bonds for related traffic violations required because of covered accident. - The cost of bonds to release attachments in a suit against the insured that the insurance company defends, but only for bond amounts within the liability limits of the policy. -Reasonable expenses incurred by the insured at the request of the insurer, including loss of earnings up to $250/day because of time lost form work due to the suit. - All court costs, taxed against the insured in any suit the insurance company defends. However, these payments do not include attorney fees or expenses taxed against the insured. - Accrued interest in any judgment including post judgement interest until the judgment or settlement is paid within the limits of insurance.

Trailer Interchange Agreements Trailer interchange agreements are a common business practice amount truckers. "Trailer interchange insurance" covers...

damage to a trailer under the policy of the trucker in possession of the trailer at the time of the loss. For coverage to apply: -The trucker must be hold liable for the trailer damage by an written interchange agreement -The damage to the trailer must have been caused by a peril covered by the policy.

The Motor Carrier Act of 1980/MCS-90 Endorsement The Motor Carrier Act of 1980

deregulated the commercial trucking industry. As part of this legislation, trucking companies are required to met certain financial responsibility limits over and above those required for private passenger autos. To meet this requirement, trucking companies must be able to certify that they can meet the financial obligations if they become liable for bodily injury and property damage resulting from their operations. To satisfy these financial responsibility requirements for liability insurance, the MCS-90 endorsement must be attached to the carriers truckers or motor carriers coverage form. This endorsement provides public liability coverage for bodily injury, property damage and environmental restoration.

The Motor Carrier Act of 1980/MCS-90 Endorsement The limits of liability imposed by the Act and covered by the MCS-90 endorsement are imposed "for hire" and "private transporters of certain

hazardous cargoes in interstate on intrastate commerces whose vehicles have a gross weight vehicle rating of 10,000 lbs or more.

The BAP Section IV- Loss Conditions Transfer of Rights of Recovery Against Others to Us (The Insurer)

if the insurer makes a payment under the policy and the person to whom the payment was made, has the right to recover damages from another, the insurance company has the right to subrogate.

The Motor Carrier Act of 1980/MCS-90 Endorsement Unless cancelled with appropriate notice or replaced by a new policy, coverage under the MCS-90 endorsement remains

in effect. 35 days notice to the other party is required for cancellation of coverage under the MCS-90 endorsement on the part of either the insurer or insureds.

The BAP Section IV- Definitions Auto

land motor vehicle trailer semi trailer any other land vehicle that is subject to financial responsibility laws in the state where it is principally garaged.

Section II-Part B- Exclusion Movement of property by mechanical

liability from the movement of property by a mechanical device (other than a "hand truck") that is NOT attached to a covered auto. These may include conveyors, mobile carts, forklifts , or any other mechanical device that should be covered by the Commercial General Liability policy, not the Business auto form

The BAP Section III- Physical Damage Extensions What is the name of the provision that states, in the even of a total loss, depreciation and physical condition will be considered when determining actual cash value. If the repair or replacement results in better than like kind or quality, the amount of the betterment is not covered

limit of insurance $1000 is the maximum payable for electronic equipment.

Part 1- Covered Autos Symbol 24

owned auto other than private passenger only

The Garage Coverage Form- Endorsements Uninsured or Underinsured Motorists coverage may be added by endorsement, however,

symbols 22,23,24, or 27 must be indicated on the policy. Against, this is a coverage that is subject to state statues.

The BAP Section IV- Loss Conditions Duties in the event of an accident, claim suit or loss

the insurance company is under no obligation to provide coverage under the policy if the insured does not comply with the following duties: Make prompt notification to the insurer of the accident, claim, suit, or loss. This notification should include: -how when and where accident or loss occurred. - The insured's name and address - to the extent possible, the name and addresses of anyone injured in the accident and any witnesses. Assume no obligation, make no payment nor incur any expense without insurer permission. This means the insured should not try to settle a claim on their own, and then, inform the insurer what they have done. no cooperation in the investigation and settlement of the claim if there is a loss to a covered auto or its equipment (a physical damage loss), the insured has additional duties after the loss: -notify the police immediately if the covered auto or its equipment is stolen. -take reasonable steps to protect the auto from further damage. -allow the insurer to inspect the auto before its repair. The inspection allows the appropriate amount of the loss to be determined and prevents any possible fraud on the part of the insured in claiming the loss was more expensive than it was. -if the insurer requests it, the insurer must agree to an examination under oath (EUO) and provide a signed statement of the answers given.