Chapter 3 Flashcards
Even though automobiles in Alberta and the Atlantic provinces are all insured using Standard Policy Forms; there are provincial variations in their coverages and exclusions.
True
The Ontario Motorist Protection Plan is a compulsory government automobile insurance plan.
False, it is a no-fault insurance system
When automobiles are rented on a short term basis and a lessee’s own automobile is insured by a S.P.F. No. 1 Owner’s Form in their own name, there is no need to purchase third party liability or Accident Benefits coverages from the lessor.
True
In provinces having government automobile insurance plans, private insurers are permitted to compete for excess coverages only.
True
Third party liability coverage is required by the law in each province to be purchased on all licensed motor vehicles.
True
Automobiles used in a car pool
are deemed to be used for
compensation and a special
endorsement to the S.P.F. No. 1
Owner’s Form, or its equivalent
in the other provinces, is
required.
False
What endorsement will be required to the S.P.F. No.1 Owner’s Form:
To pay charges incurred by the insured to rent a substitute automobile while the insured automobile is in the autobody shop for repair of collision damage?
SEF/OEF 20 Loss of Use Endorsement
What endorsement will be required to the S.P.F. No.1 Owner’s Form: To remove Third Party Liability and Accident Benefits coverage for losses arising out of equipment attached to the automobile?
SEF/OEF 30 Excluding Operation of Attached Machinery Endorsement
You have suggested to your client, M. T. Head, that he purchase additional insurance to cover his non-owned automobile liability exposure. He is opposed to this suggestion because, as he has never rented or leased automobiles in his business, it is his opinion there is no exposure. Identify the major source of Mr. Head’s exposure to a non owned automobile liability claim. What procedure is normally taken in insuring such risks?
S.P.F. No. 6 Standard Non-Owned Automobile Policy The major source of a non-owned automobile liability claim for employers is that arising out of automobiles owned by employees and used in the employer’s business. For some businesses, there may be a greater exposure from:
- hired or leased automobiles;
- automobiles operated under contract for the insured.
Procedure taken in insuring such risks:
Coverage can be provided (i) separately or, as is most common, (ii) by way of endorsement to the Commercial General Liability Policy.
Identify the two different systems used to insure automobiles in Canada
Private Insurers
Compulsory Government Insurance Plans
Identify the three types of SPF that are used to insure vehicles
SPF 1 Owners Form
SPF 4 Standard Garage Automobile Policy
SPF 6 Standard Non-Owned Automobile Policy
Identify three provinces where compulsory government insurance plans exist
BC, Manitoba, Saskatchewan
Identify three types of automobiles that can be insured on an SPF # 1
Private Passenger
Commercial vehicles (truck and delivery automobiles)
Public automobiles (buses and taxicabs)
Identify three ultimate limits that may be required by federal legislation depending on the use of the vehicle
- Vehicle use out of the province $1,000,000 TPL
- Carriers of danger goods $2,000,000 TPL
- Transported to the USA between $750,000 and $5,000,000 TPL
Identify the additional hazard faced by insurers of public vehicles
Increased number of passengers being carried and that such vehicles are used continuously over long periods of time
Identify the three sections of coverage available under the SPF # 1
- Third-party liability
- Accident benefits
- Physical damage
Identify five costs provided under section B - Accident Benefits
- Reimbursement of reasonable medical expenses
- Rehabilitation costs
- Funeral expenses
- Death benefit
- Loss of income
Identify the four options available under Section C - Physical Damage
- All perils
- Collision or upset
- Comprehensive
- Specified perils
The SEF # 44 provides coverage for:
Caused by:
Injury and death
An underinsured motorist
An uninsured motorist
Explain the operation of the SEF # 44
To increase the third-party liability limits available to victims of such accidents to the same limits as purchased under their own policy. When a claim is made payment will be limited to the difference between the liability insurance limits of the insurance policy and that carried by the motorist at fault
Identify the coverage limits and the maximum time provided for Loss of Use under Section C
$25-$30 per day
30 days
Identify the endorsement available for section C (physical damage) if Loss of use of theft is not adequate for the insured’s needs
SEF No. 20 loss of use endorsement
Identify two reasonable expenses covered under the SEF #20
- The rental of a substitute automobile
- Taxicabs or public means of transportation
Identify when coverage starts under SEF #20: Loss of Use Endorsement
- Coverage starts immediately when the damage is such that the automobile cannot be operated under its own power
- When the automobile is stolen coverage begins on the day following the report of the theft to the insurer or to the police
Identify how limits are set under SEF #20: Loss of Use Endorsement
Coverage limits are set at a certain amount per day with a maximum limit per occurrence
Identify four types of vehicles to which SEF #20 is not generally available
- Taxis
- Tractors
- U-drives
- Certain trailers
Identify one use of an automobile which is not deemed to be the renting or leasing of the automobile to another
The use by an employee of his automobile on the business of his employer and for which he is paid
When would a SEF 5c be used
When a rental firm leases a vehicle to an individual or business for 30 days or less
When would a SEF 5 (permission to rent or lease) be used
When a vehicle is leased by an individual or business for longer than 30 days
When would a SEF 5d be used
To indemnify the lessor if the lessee sold the vehicle and disappeared
When would a SEF 8 - Standard Lessor’s Contingent Automobile Policy be used
To indemnify the lessor when the lessee fails to maintain the required insurance as stated in the lease
If an individual lessee does not own their own vehicle and wishes to rent a vehicle for less than 30 days they can purchase insurance coverage from the lessor. However if the lessee does own their vehicle and wishes to rent a vehicle for less than 30 days identify two coverages which are automatically extended from the lessee’s own insurance to the rented vehicle
- Third-party liability
- Accident benefits
Identify the endorsement to be added to the individual lessee’s SPF #1 to provide legal liability for damage to non-owned automobiles
SEF No. 27 legal liability for damage to non-owned automobiles endorsement
Explain the purpose of the SEF No. 76: Additional Insured Endorsemnt
Additional insured endorsement (broad form) - removes the restriction that excludes coverage for pleasure use when automobile is provided for regular or frequent use to a person who is not an active partner or full-time employee of the business.
Explain the purpose of the SEF No. 71 Excluding Owned Automobiles
Excluding owned automobiles- used to delete all policy coverage on any automobile owned, hired or leased by or licensed in the name of the insured. It is often used when such automobiles are already insured under a SPF No. 1 owner form and related endorsement
Identify the endorsement available to address the concern with the legal liability requirement under E2 or the SEF No. 77
Waiver of legal liability endorsement
Identify the SEF endorsement available to broaden the coverage under subsection E2(Specified Perils, excluding open lot piliferage)
SEF No. 77 legal liability for comprehensive damage to customers automobiles endorsement
Coverage is provided against loss from any peril other than by collision and upset
This coverage includes open lot piliferage which is a attractive option for garage risks which store customers vehicles in the open.
Explain how the coinsurance feature is calculated under E2
When a loss occurs and there are more automobiles than indicated on the policy
Explain how a garage would determine the limits of insurance to be carried under subsection E2 (Specified Perils)
The garage would selected an amount of insurance which would respond to pay for loss to all vehicles in the insureds care, custody or control in a single occurrence. Based on the maximum or aggregate values of all customers vehicles on the lot at one time
Explain how a garage would determine the limits of insurance to be carried under subsection E1(Collision or Upset)
The garage would select an amount of insurance which it believes to be the maximum amount for which it could be legally liable
Identified three ways a garage might avoid legal liability for loss to customers automobiles under Section E - Legal Liability for Damage to a Customer’s Automobile while in the Care, Custody or Control of the Insured
- All doors and windows were closed and locked before the premises were closed for the night and
- That such doors were equipped with deadbolts and
- That keys to all vehicles were in a locked cabinet in a location kept out of sight of the public
Explain what is meant by legal liability
When the business fails to exercise the level of care normally expected of it and damage results, it will usually be legally liable for the loss
Identify the two subsections of coverage under Section E
- Collision or upset
- Specified perils (excluding open lot pilferage)
Explain the operation of the SEF No. 73 - Excluding Financed Vehicles Endorsements
The SEF No. 73 Excluding Financed Automobile Endorsement - removes the physical damage coverages provided by the policy from any automobiles insured elsewhere under dealers floorplan or other financing agreement
Explain the application of coinsurance, when the dealership elects to insure subsection C2, C3 or C4, on an 80% coinsurance basis and the loss is confined to one automobile only
Co-insurance waived
Identify three ways an insured may be penalized in the event of a loss if the dealership is not diligent in reporting inventory levels
- If the insured fails to file the required report, the insurer’s liability is limited to the amount indicated in the last report filed
- If the delinquent report is the first report required to be filed, the insurer is not liable for more than 75% of the applicable limit of liability
- The insurer’s liability at any one location is limited to the proportion that the values reported bear to values as actually existed on the date for which the report is made
Identify five conditions to endorsement SEF No. 27: legal liability for damage to non-owned automobile
- Coverage restricted to insured and spouse
- Coverage is for the same perils insured under the SPF No. 1 Owners Form
- No more than one automobile maybe rented or leased by insured or their spouse at any one time
- Coverage is normally restricted to certain types of automobile
- Coverage provided is subject to a maximum amount in any one occurrence
If the vehicle is rented on a short-term basis in the name of a business, identify the policy required to provide third-party liability
SPF No. 6
If the vehicle is rented on a short-term basis in the name of a business, identify the endorsement to provide legal liability for physical damage
SEF No. 94 Legal Liability for damage to Hired Automobiles
Identify the endorsement to be used when the vehicle is used to carry explosives
SEF No. 4a
Identify the endorsement to be used when the vehicle is used to carry radioactive material
SEF No. 4b
Outline the purpose of the SEF No. 30
This endorsement is used by the insurer to exclude liability under section A third-party liability and section B accident benefits for the operation of certain types of machinery
Although the policy excludes coverage when the vehicle is being used for carrying passengers for compensation or hire identify five uses that are not deemed to fall into compensation
- Used by the insured of his automobile for the carriage of another person in return for the formers carriage in the automobile of the latter (carpool)
- The occasional and infrequent use of the insured of his automobile for the carriage of a person who shares the cost of the trip
- The use by the insured of his automobile for the carriage of a temporary or permanent domestic servant of the insured or his spouse
- The use by the insured of his automobiles for the carriage of clients or customers or prospective clients or customers
- The occasional and infrequent use by a person of his automobile for the transportation of children to or from activities conducted as part of an educational program
When the SEF No. 30 is attached to an SPF No. 1, identify which coverages are deleted and which coverages are not
Deleted - third-party liability and accident benefits
Not deleted - Section C - loss or damage to insured automobile
Identify four examples of non-own property that can be insured under the SEF No. 31
- Tanks
- Pumps
- Meters
- Apparatus
Identify two ways to write insurance on commercial vehicles
- Scheduled
- Fleet
Identify two methods of issuing fleet policies
- Scheduled
- Blanket
Identify two endorsement that maybe used when vehicles are issued on a blanket basis
- SEF No. 21b blanket basis fleet endorsement
- SEF No. 21a monthly reporting basis fleet endorsement
Explain what is meant by retrospective rating
Prior to issuing the policy the insurer and insured agree that the final premium charged will fall within an established minimum and maximum range. As the insured’s loss ratio is a factor in the final premium to be charged, retrospective rating serves to encourage insureds to develop and maintain effective loss prevention programs
Which method identified above is the most common method used
By way of endorsement to the commercial general liability policy
Identify two ways coverage can be provided to businesses to insure their third-party liability exposure for non-owned vehicles operated on their behalf
- Separately
- By way of endorsement to the commercial general liability policy
Identify three groups of nonowned vehicles that may be use on the behalf of a business
- Owned by an employee
- A hired automobile
- Operated under contract for the insured
Why would an employer carry an SPF No. 6
When an automobile is rented in the name of the business physical damage coverage applies only when the business carriers and SPF No. 6 policy
Identify three instances or examples of when employees may use their vehicles for an incidental basis on behalf of their employers
- Pick up mail
- Make bank deposit
- Run errands
Identifying two types of vehicles that may be hired by an insured’s business
- Buses
- Vans
Identify an endorsement that is available to be attached to an SPF No. 6 for hired automobiles that provides similar coverage as an SEF No 27 provides on an SEF No. 1
SEF No. 94 legal liability for damage to hired automobiles endorsement
Identified two types of businesses that may have non-owned vehicles operated under contract
- Long-haul trucking
- Moving firms
Identify three persons other than the named insured who would be covered under an. SPF No. 6 who drives a non-owned automobile in the business of the insured
- Partner
- Officer
- Employee
Identify the endorsement that can be attached to the SPF No. 6 when an insured wishes to excluded a driver with an unacceptable driving history
SEF No. 98 Excluding Automobiles Personally Driven By Named Persons Endorsement
Identify five types of risks including garages who would be candidates for an SPF No. 4
- Automobile dealers
- Repair garages
- Service stations
- Storage garages
- Parking lots
Although the commercial liability policy can be used to insure the general liability exposures of garage risks,,identify two significant exposures common those risks that are left unprotected by that policy
- Policy coverages do not extend to insure bodily injury or property damage arising out of the ownership, use or operation by or on behalf of any insured of any automobile
- Coverage for personal property in the care custody or control of the insured is excluded
Identify the five sections of coverage available under the SPF No. 4
A. Third party liability
B. Accident benefits
C. Loss of or damage to owned automobile
D. Uninsured Motorist Coverage
E. Legal liability for damage to a customers automobile in the care custody or control of the insured
Identify three types or examples of owned automobiles used in the insured’s described business which would be covered under Section A of the policy
- Tow trucks
- Service loaners
- Automobiles being held for sale
Identified two types of non-owned automobiles for which coverage is provided under Section A
- Those belonging to customers
- Those belonging to others
Identify what is perhaps the greatest exposure to garages for liability arising out of a nonowned vehicle under Section A
Test driving customers automobiles when diagnosing suspected problems are when evaluating the adequacy of repairs or servicing
Identify the basis of premium rating for own vehicles under third-party liability
Rating is based on the insureds payroll or staff units depending on the insurer, total number of dealer plates
Identify two uses for which a surcharge is applied to the premium
- Service loaners
- Tow trucks
Identify the two rate tables used when determining the premium for third-party liability for customers automobiles
- Type of Vehicle
- Value of Vehicle
(Sometimes they want to know Payroll and Staff Units)
Is the SEF No. 44 Family protection endorsement available for an SPF No. 4
Yes
Explain how the limit of insurance is calculated and how the premium is calculated under the monthly average basis
The insured selects an amount which represents the maximum value owned automobiles expected at any one time. A provisional premium is charged to the insured and monthly reports of values are required to be provided to the insurer
Identified two bases by which owned vehicles can be insured under subsection C2, C3 and C4
- Monthly average basis
- Co-insurance basis
Explain the function of the endorsement SEF No. 79
Fire and theft deductible endorsement- reduces the premium required under each subsection 2, 3 and 4 by agreeing to pay a deductible on all fire and theft losses
Identify the four coverage options available under the SPF No. 4
Subsection 1 - collision or upset
Subsection 2 - comprehensive
Subsection 3 - specified perils
Subsection 4 - specified perils excluding theft
Physical damage to owned vehicles is optional but can physical damage to owned vehicles be restricted to certain vehicles? Must all owned vehicles either be insured or not insured?
Coverage is available on all owned automobiles or only those as specified by the insured. Coverage is provided to both licensed and unlicensed automobiles owned by the business
Monthly Average Basis
the insured selects an amount of insurance which represents the maximum value of owned automobiles expected at any one time. A provisional premium is charged the insured and monthly reports of values are required to be provided to the insurer.
Co-insurance basis
When insuring Subsection 2, 3 and 4 coverages on a Co-Insurance Basis, Optima, Inc. is required to purchase an amount not less than 80% of the actual cash value of all owned automobiles. In cases of under-insurance, a penalty shall be applied. However, the insurer agrees to waive application of any penalty when the loss or damage is confined to one automobile only.
S.E.F 5d Conversion Coverage Endorsement
Endorsement covers losses caused by the dishonest acts of the lesse which result in the loss of the automobile to the lessor.
Removes the exclusion contained in S.P.F. 1 Owner’s Form for loss “caused by the conversion, embezzlement, theft or secretion by any person in lawful possession of the automobile under a …lease or similar written agreement”
There is no coverage when insured automobiles are used for what 5 purposes
Taxicabs
Public omnibus
Livery
Jitney or sight seeing conveyance
Any other automobile used to carry passengers for compensation or hire
Five endorsements used to restrict the full blanket coverage of the S.P.F. No. 6
S.E.F. No. 90 - Limitation to Operation of Automobiles by Partners, Officers and Employees Endorsement
S.E.F. No. 91 - Limitation to Operation of Automobiles By Named Persons Endorsement
S.E.F. No. 92 - Limitation to Hired Automobiles and Automobiles Operated Under a Contract Endorsement
S.E.F. No. 93 - Limitation to Automobiles Owned By Named Persons Endorsement
S.E.F. No. 99 Excluding Long Term Leased Vehicle Endorsement
