Automobile Insurance (commercial) 15% Flashcards
When might you need commercial auto insurance?
● If your business requires higher limits of liability
● If you have to carry heavy loads of tools and equipment or tow a trailer for work
● If you hire or own cars for employee use
● If you sell, repair, or provide parking for customer’s cars
most personal auto policies won’t cover
business related risks.
(BAP)
Basic Business Auto Policy
Basic Business Auto Policy (BAP)
Designed for most commercial auto owners
5 Sections to the BAP
- Covered Autos
- Liability Coverage
- Physical damage coverage
- Conditions
- Definitions
Section 1 of the BAP uses _______ symbols to indicate what vehicles are covered under each sort of coverage in the policy
Numeric
Symbol #1 BAP
Any auto: usually only liability
Symbol#2 BAP
Any owned vehicle
Symbol #3 BAP
Owned private passenger vehicle
Symbol #4 BAP
Owned vehicles other than passenger: trucks, buses, specialty
Symbol #5 BAP
Owned autos subject to no-fault insurance
Symbol#6 BAP
Owned autos subject to compulsory uninsured motorist law
Symbol#7 BAP
Specifically described autos
Symbol#8 BAP
-Hired autos
Symbol#9- BAP
Non-owned vehicles (provides liability coverage)
Symbol#19- BAP
Mobile equipment subject to compulsory auto financial responsibility requirements
Section 1 BAP
Covered Autos
Section 2 BAP
Liability Coverage
Section 3 BAP
Physical damage coverage
Section 4 BAP
Conditions
Section 5 BAP
Definitions
BAP Section II: Legal Liability
● The insured’s liability, up to policy limits
● Supplementary payments
● Defense costs of the insured, not subject to policy limit
“Insured” means:
● Named insureds
● Those operating covered vehicle with permission
● Anyone who becomes liable for conduct of insured
Section II Extensions
Supplementary Payments:
● All of insured’s expenses
● Up to $2,000 for bail bonds
● The cost of bonds (within the policy limit) to release attachments
$250/day for loss of earnings
● Court costs
● Any reasonable expenses incurred at the insurer’s request, including up to
● Interest that has accrued on the final judgment
These payments do not reduce the policy limit.
BAP Section II: Liability Exclusions
Liability does NOT cover:
● Bodily injury or property damage that the insured expected or intended
● Contractual liability (i.e. failure to perform as contracted)
● Anything that would be covered under workers’ compensation or employers
liability insurance
● Bodily injury caused by a fellow employee
● Damagetoproperty that is owned or transported by the insured or in the
insured’s care
● Covered autos used in or being prepared for a race, demolition contest, or
stunt
Liability does NOT cover bodily injury or property damage caused by:
● Handling property before it is transported by the covered auto or after it is
delivered
● Moving property with a mechanical device (other than a hand truck) that isn’t
attached to a covered auto
● Operating mobile equipment
● Workthat the insured completed or abandoned
● Theactual, alleged, or threatened discharge, dispersal, seepage, migration,
release, or escape of pollutants
● War
Section III: Physical Damage
Types of coverage…
Collision
Comprehensive
Collision:
collision with another car or object, overturn
Comprehensive:
other events, including hail, fire, glass breakage, collision
with falling objects, contact with animals, etc.
Section III: Physical Damage Specified Causes of Loss:
○ fire, lightning, or explosion
○ theft
○ windstorm, hail, or earthquake
○ flood
○ mischief or vandalism
○ sinking, burning, collision, or derailment of any conveyance transporting the covered auto
Section III Other Coverages
Towing and Labor
Transportation Expenses
Loss of Use
Towing and Labor:
pays expenses for towing and labor performed at the
scene of damage
Transportation Expenses:
pays up to $20/day ($600 total) for temporary
transportation expenses after theft of an auto
Loss of Use:
pays up to $20/day ($600 total) for the insured’s liability for the loss of use of an auto hired or rented without a driver
Physical Damage, Settlement is for
Actual Cash Value (ACV)
Limit of Insurance provision: if, after a loss, the insured gets a better car than they had before the loss, the amount of this “betterment” is
not covered
Physical Damage Exclusions:
● War & nuclear activity
● Wear & tear
● Freezing
● Mechanical or electrical breakdown
● Blowouts, punctures, etc.
● After market electronics
Necessary, factory-installed electronics are covered
Section IV: Conditions
Loss Conditions
And
General Conditions
Section IV: Loss Conditions
● Appraisal
● Duties in the event of a loss
● Legal action against the insurer
● Loss payment options for physical damage
● Subrogation
Section IV: General Conditions
● Bankruptcy
● Concealment, misrepresentation, and fraud will void the policy
● Liberalization
● No benefit to bailee
● Other insurance
● Premium audit
● Policy period and coverage territory (where geographically the policy is in force)
● When two or more coverages issued by the insurer apply to a claim
Other Insurance:
Policy condition that clarifies who pays what if two insurance
policies apply to the same loss
When the accident involves the insured’s own car, his insurance is
primary
When it involves a covered auto that the insured doesn’t own, the other insurance is
primary
BAP provides primary coverage for hired autos—unless
the auto comes with a
driver
If a BAP covers the same loss on the same basis as another policy, the two policies
split the cost
BAP Section V: Definitions
- Auto
- Pollution
- Accident
Auto
passenger cars, trucks, buses and specialty vehicles
● Includes self-propelled vehicles that provide mobility to attached machinery or equipment
● Excludes mobile equipment: vehicles that are not designed for public roads and vehicles that provide mobility to permanently attached machinery or equipment, but are not self-propelled
Pollution:
clean-up of pollution from normal automotive fluids covered, spills of transported materials not covered
Accident:
includes continuous or repeated exposure to the same condition that results in bodily injury or property damage
BAP Endorsements Uninsured/Underinsured Motorist
Pays the insured when the person at fault for damages does not have the liability insurance to cover them
BAP Endorsements, Named individuals broadened PIP
Extends the policy’s PIP coverage to include specific people, such as an employee who doesn’t have his own car
BAP Endorsements, Medical Payments/PIP
● Adds coverage for medical injuries caused by accidents
● Includes the named insured and any relatives and household members
BAP Endorsements, Individual Named Insured
● For individuals or sole proprietors who add personal autos to a BAP
● Extends coverage to insured’s family members and deletes some exclusions
BAP Endorsements, Drive Other Car
Covers named people and their spouses for the use of cars that they do not own and are not covered under the BAP
BAP Endorsements, Mobile Equipment
Adds coverage for mobile equipment
Taylor’s Landscaping has a compact track loader and a skid-steer loader that they use for larger jobs. These machines wouldn’t be covered under an unendorsed BAP, but can be added with Mobile Equipment.
BAP Endorsements, Lessor- Additional Insured and Loss Payee
Covers designated leased autos and adds the leasing company as an insured for bodily injury and property damage
Garage Policy, Why is this coverage needed?
What if your valet parking service crashes a guest’s car while parking it?
● It wouldn’t be covered by a BAP since you don’t own or hire the car
● It won’t be covered by a CGL since the customer wasn’t injured and no product
was defective
● Your business will still be held responsible
Garage Policy
● Used mainly to cover auto dealers
● Combines the features of a Commercial General Liability policy and a Business
Auto policy
● Offers additional coverages, such as garage-keepers and physical damage
What is garage-keepers coverage?
● General Liability excludes “items in care, custody, and control” of insured
● Garages and mechanics need protection when customers’ cars get damaged
● Garage-keepers: bailee coverage for damage to customers’ cars while they are in the insured’s care
Bailee:
someone who holds another person’s property, usually for storage, repair, or transport
Bailment:
the relationship between two people when one person’s goods are in the other’s care, custody, and control
Bailee Coverage
prospects the bailee if he is held responsible for damage to the property he is holding
Covered persons
insured, insured’s employees, and anyone who uses a covered auto with permission
4 sections to the garage policy
- covered autos
- liability coverage
- garage keepers insurance
- physical damage
Section 1 Garage policy
Covered autos
section 2 garage policy
liability coverage
section 3 garage policy
garage keepers insurance
section 4
physical damage
Section 1: Coverage Symbols Garage policy Symbol 21
any auto
Section 1: Coverage Symbols Garage policy Symbol 22
Owned autos only
Section 1: Coverage Symbols Garage policy Symbol 23
owned private passenger autos only
Section 1: Coverage Symbols Garage policy Symbol 24
owned autos other than passenger autos only
Section 1: Coverage Symbols Garage policy Symbol 25
owned autos subject to no fault benefits
Section 1: Coverage Symbols Garage policy Symbol 26
owned autos subject to compulsory uninsured motorist laws
Section 1: Coverage Symbols Garage policy Symbol 27
specifically described autos
Section 1: Coverage Symbols Garage policy Symbol 28
hired autos only
Section 1: Coverage Symbols Garage policy Symbol 29
non owned autos used in garage business
Section 1: Coverage Symbols Garage keepers Symbol 30
autos left for service, repair, storage, and safekeeping (mandatory for grages)
Section 1: Coverage Symbols Garage keepers Symbol 31
dealers autos
Section II: Liability
Garage Operations- Other than Covered Autos
Garage Operations- Covered Autos
Garage Operations- Other than Covered Autos
bodily injury and property damage arising out of the ownership, maintenance, or use of the business premises, but not covered autos
Garage Operations- Covered Autos:
bodily injury, property damage, and covered pollution cost or expense arising out of the ownership, maintenance, or use of a covered auto
Garage Liability Policy Exclusions:
- Watercraft or aircraft, unless on premises
- Workers’ comp injuries
- Pollution damage
- Product or work recalls
- Loss of use of property caused by delays or failures of the insured
- Real or personal property in insured’s care, custody, and control
Section III: Garage-keepers Insurance
Garage-keepers insurance covers items (the customers’ autos) in the care, custody and control of the insured.
Garage-keepers Coverage options:
- legal liability
- direct coverage, excess and/or primary
Garage-keepers offers 3 forms of protection:
- comprehensive
- collision or overturn
- specific causes of loss, including:
○ fire
○ lightning and explosions
○ theft
○ malicious mischief
○ vandalism
Garage-keepers
Deductibles: per auto with a maximum per loss
Per Auto Deductible $300
Per Loss Deductible $1,500
Premier Autos’ Garage-Keepers coverage
For example…
Drunk driver speeds through the parking lot and crashes into 7 cars
● Damagetoeach car: $700
● Damagetotal: $4,900
● Premier Autos will pay: $1,500 (maximum deductible per loss)
● Insurer will pay $3,400
Exclusions to Garage-keepers coverage:
● Theft by insiders
● Contractual liability (may be covered in other section of policy)
● Defective parts or materials*
● Faulty work
● Aftermarket sound or radar equipment
● Acts of war, rebellion, etc.
Section IV: Physical Damage
Like the BAP, but includes blanket limit on entire inventory
Garage Policy: Endorsements
● Personal Injury Protection (PIP)
● Medical Payments
● Uninsured/Under-insured Motorist
● Drive Other Car Coverage
● False Pretense Coverage: covers the loss of cars when people steal them through a trick or scheme
In2013, the Auto Dealers coverage form replaced the
Garage coverage form
○ very similar to the garage policy
○ clarifies some policy provisions
● Options for servicing businesses (mechanics, valets, car washes, etc.) who can’t get a garage policy anymore:
○ get a BAP and a CGL
○ add a garage-keepers endorsement if needed
What about companies that deal with shipping and transportation?
Trucker’s Policy
A professional trucking company:
● Owns many large, expensive autos
● Probably needs higher limits
Truckers
Individuals or businesses who take possession of property for the purpose of transport
Note: the BAP normally excludes businesses that transport the goods of others!
So, these types of companies need a Trucker’s policy:
● Adds several provisions to BAP coverage
● Meets the extra insurance needs of trucking industry
The trucker’s policy will cover:
● A truck pulling an empty trailer
- A truck-tractor (a.k.a. a rig) with no trailer attached
(talking about semi trucks)
3 sections to the trucker’s policy
- covered autos
- liability coverage
- physical damage coverage
Section 1 of a truckers policy
Covered autos
Section 2 of a truckers policy
liability coverage
Section 3 of a truckers policy
Physical damage coverage
Coverage Symbols Truckers policy 41
any auto
Coverage Symbols Truckers policy 42
owned autos only
Coverage Symbols Truckers policy 43
owned commercial autos only
Coverage Symbols Truckers policy 44
owned autos subject to no fault benefits
Coverage Symbols Truckers policy 45
owned autos subject to compulsory uninsured motorist laws
Coverage Symbols Truckers policy 46
specifically described autos
Coverage Symbols Truckers policy 47
hired autos only
Coverage Symbols Truckers policy 48
non owned trailers under a trailer interchange agreement only
Coverage Symbols Truckers policy 49
owned trailers not in your possession under a trailer interchange agreement only
Coverage Symbols Truckers policy 50
non owned autos only
Coverage Symbols Truckers policy 59
mobile equipment subject to compulsory auto financial responsibility or other motor vehicle insurance only
Characteristics of the Trucker’s Policy Liability coverage:
includes people who hire out or lend their cars to the
insured for business purposes
Characteristics of the Trucker’s Policy Trailer Interchange coverage:
covers damage to other people’s trailers in the
care of the insured for transport purposes
Motor Carrier Policy
● Used as alternative to Trucker’s Policy
○ same as the Trucker’s Policy in most ways
○ uses Symbols: 61-71and79
● Unlike a trucker, a “Motor Carrier” may transport goods or passengers (taxis,
buses, limos, etc.)
● “Common Carrier”: offers transportation services on a regular basis
Motor Carrier Act Before the Act was passed:
It was almost impossible for new motor carriers to join the industry because the federal government controlled prices and stifled competition.
Solution: the Motor Carrier Act of 1980
● Deregulated the industry
● Lowered prices and improved the quality of service
● Established financial responsibility requirements
Financial Responsibility Requirements of the Motor Carrier Act
● At least $750,000 for non-hazardous property
● At least $1,000,000 for oil or other hazardous material
The Endorsement for Motor Carrier Policies of Insurance of Public Liability (MCS-90 endorsement) helps insured comply with these requirements.
