COMMERCIAL AUTO COVERAGE

Question 1

Business Auto Coverage Form

Answer 1

The Business Auto Coverage Form is used to cover owned, leased, hired, rented, or borrowed private passenger autos, trucks, trailers, and semi-trailers that are owned or used by the insured.

It provides liability coverage for trailers being towed by a covered vehicle, but it does not provide automatic coverage for physical damage to trailers. It also Covers non-owned vehicles, including autos owned by employees while being used in the business. The only types of mobile equipment that may be insured are those required to be registered to drive on public roads.

Vehicles that are sold, stored, or repaired for others may NOT be insured on the business auto coverage form, as these vehicles are insured on the garage coverage form.

Question 2

Section I – Covered Autos

Answer 2

Symbol 1 – Any Auto, if it is used in the insured business, regardless of ownership
Symbol 2 – Owned Autos Only, whether or not specifically listed on the policy
Symbol 3 – Owned Private Passenger Autos Only; a business may wish to provide insurance differently for its cars than for its dump trucks or vehicles used for delivery
Symbol 4 – Owned Autos Other Than Private Passenger Autos Only
Symbol 5 – Owned Autos Subject to No Fault Laws
Symbol 6 – Owned Autos Subject to a Compulsory Uninsured Motorist Law
Symbol 7 – Specifically described vehicles listed on the declarations page
Symbol 8 – Hired Autos Only, which are those the insured leases, hires, rents or borrows, except any auto the insured leases, hires, rents, or borrows from an employee. These vehicles may not be owned by the insured.
Symbol 9 – Non-owned Autos Only, which are those the insured does not own, lease, hire, rent or borrow, and are used in connection with the insured’s business. This includes autos owned by an employee of the insured or a member of the employee’s household.
Symbol 19 – Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Vehicle Insurance Law, which triggers protection for autos that are otherwise described as “mobile equipment”, but are required to be licensed and registered to be operated on public roadways. This symbol is necessary since mobile equipment is excluded from the definition of “auto” under the business auto policy.

Question 3

Liability Coverage

Answer 3

Coverage
Coverage is provided for bodily injury or property damage caused by an accident for which the insured is legally responsible. The accident must occur within the policy territory, during the policy period, and result from the ownership, maintenance, or use of a covered auto.

Who is an Insured:
The named insured for any covered vehicle
Anyone else using a covered vehicle with permission of the named insured
Anyone liable for the conduct of an insured, but only to the extent of that liability

Coverage Extensions
Supplementary Payments – In addition to the limit of liability, supplementary payments include claims expenses incurred by the insurer, up to $2,000 for the cost of bail bonds required because of an accident, reasonable expenses incurred by the insured at insurer’s request, including up to $250 per day for an insured’s actual loss of earnings, costs taxed against an insured in a lawsuit defended by the insurer, and post-judgment interest.

Out-of-State Coverage Extensions – If the financial responsibility of other states and jurisdictions require an insured vehicle to possess certain coverages and limits of liability when driving within their boundaries, the liability coverages provided by the business auto coverage form automatically conforms to the types of coverages and limits of liability required by any jurisdiction within the policy’s coverage territory when being used in that jurisdiction.

Question 3

Liability Coverage

Answer 3

Coverage
Coverage is provided for bodily injury or property damage caused by an accident for which the insured is legally responsible. The accident must occur within the policy territory, during the policy period, and result from the ownership, maintenance, or use of a covered auto.

Who is an Insured:
The named insured for any covered vehicle
Anyone else using a covered vehicle with permission of the named insured
Anyone liable for the conduct of an insured, but only to the extent of that liability

Coverage Extensions
Supplementary Payments – In addition to the limit of liability, supplementary payments include claims expenses incurred by the insurer, up to $2,000 for the cost of bail bonds required because of an accident, reasonable expenses incurred by the insured at insurer’s request, including up to $250 per day for an insured’s actual loss of earnings, costs taxed against an insured in a lawsuit defended by the insurer, and post-judgment interest.

Out-of-State Coverage Extensions – If the financial responsibility of other states and jurisdictions require an insured vehicle to possess certain coverages and limits of liability when driving within their boundaries, the liability coverages provided by the business auto coverage form automatically conforms to the types of coverages and limits of liability required by any jurisdiction within the policy’s coverage territory when being used in that jurisdiction.

Question 4

Exclusions

Answer 4

Liability coverage does not apply to:
Expected or Intended Injury
Contractual – Liability assumed under any contract or agreement
Workers’ Compensation – Bodily injury sustained by an employee while on the job
Employee Indemnification and Employer’s Liability – A legal liability of the named insured due to work-related accidents other than injuries covered by workers’ compensation statute
Fellow Employee – Bodily injury to a fellow employee of the insured arising out of the course of the fellow employee’s employment or while performing duties related to the conduct of the insured’s business
Care, Custody, or Control – Damage to property owned or transported by the insured, or in the insured’s care, custody, or control
Handling of Property – Before it is moved from the place where it is accepted by the insured or after it is moved to the place of final delivery by the insured; this is covered by the CGL policy
Movement of Property by Mechanical Device – Bodily injury or property damage resulting from the movement of property by a mechanical device (unless the device is attached to a covered vehicle)
Operations – Bodily injury or property damage arising out of the operation of mobile equipment (such as Power Cranes)
Completed Operations – Bodily injury or property damage arising out of the insured’s work, after that work has been completed or abandoned
Pollution – The exclusion is designed to eliminate coverage for pollutants being transported by a covered auto
War
Racing

Question 5

Limit of Liability
The most the insurer will pay for the total of all damages and covered pollution cost or expense combined, resulting from any one accident, is the limit of liability shown in the Declarations. The limit of liability is paid regardless of the number of:
Covered autos
Insureds
Premiums paid
Claims made
Vehicles involved in an accident

Question 6

Section III – Physical Damage Coverage

Coverage
The insurer will pay for a loss to a covered auto or its equipment under:
Comprehensive – Coverage is provided for physical damage to a covered auto or its equipment on an open perils basis. The single peril excluded is collision, which is a vehicle’s impact with another object or its overturn.
Specified Causes of Loss – Coverage includes fire, lightning, or explosion; theft; windstorm, hail, or earthquake; flood; mischief or vandalism; and the sinking, burning, collision or derailment of a conveyance transporting the covered vehicle. If coverage for other perils is desired, Comprehensive should be purchased.
Collision – Coverage is provided for the covered auto’s impact with another object or its overturn.

Towing – The policy pays up to the limit in the Declarations for the costs of towing and labor incurred each time a covered private passenger type auto is disabled. Labor must be performed at the place of disablement.

Glass Breakage – Hitting a Bird or Animal – Falling Objects or Missiles – If the insured carries Comprehensive coverage, the insurer will pay for glass breakage, loss caused by hitting a bird or animal, and loss caused by falling objects or missiles. If glass breakage is caused by a collision, the insured may elect to have the loss considered a collision loss.

Question 7

Coverage Extensions
Transportation Expenses – The policy pays up to $20 per day and up to a maximum of $600, for temporary transportation expenses of the insured for the total theft of a private passenger auto. Transportation expenses begin 48 hours after the theft of the vehicle and end when the covered auto is returned to use or the insurer pays for its loss.

Loss of Use Expenses – If the insured hires a vehicle per a written rental contract or agreement, and without a driver, this coverage extension pays for loss of use expenses to the hired auto if loss is caused by a covered loss. The most paid for loss of use is $20 per day and up to a maximum $600.

Question 8

Exclusions
The insurer will not pay for loss caused by, or resulting from any of the following perils:
Nuclear hazard, war, or military action.
Professional or organized racing, demolition contest, or stunt activity.
Wear and tear, freezing, mechanical or electrical breakdown, or blowouts, punctures, or road damage to tires.
Loss to any tapes, records, discs, electronic equipment, radar, or laser detectors. This exclusion does not apply to equipment designed SOLELY for the reproduction of sound that is permanently installed in the covered vehicle.

Question 9

8 / 9
Limit of Insurance
The most the insurer will pay for a loss, in any one accident, is the lesser of the actual cash value of the damaged or stolen property, or the cost of repairing or replacing the damaged or stolen property with property of like kind and quality.

Deductible
The Declarations page of the commercial auto policy shows a deductible next to each of the physical damage coverages purchased by the insured. The standard deductible for collision, comprehensive, and specified causes of loss is $500; higher and lower deductibles are available.

The deductible shown on the Declarations page applies per covered auto, per loss. The Comprehensive deductible does not apply to fire or lightning losses.

Question 10

Section IV – Business Auto Conditions

The following conditions apply in addition to the Common Policy Conditions:
Loss Conditions – Appraisal, duties in the event of an accident, legal action against the insurer, loss payment, and transfer of rights of recovery.
General Conditions – Bankruptcy; concealment, misrepresentation, or fraud; liberalization; other insurance; premium audit; policy period, coverage territory; no benefit to bailee for physical damage.

Question 11

Section V – Definitions

Accident – Includes continuous or repeated exposure to the same conditions that results in “bodily injury” or “property damage.”

Auto – A land motor vehicle, trailer, or semi-trailer, designed for travel on public roads or any other vehicle subject to a compulsory or financial responsibility law or motor vehicle insurance law in the jurisdiction where the vehicle is licensed or principally garaged. Mobile equipment is not an “auto.”

Insured – Any person or organization qualifying as an insured in the Who is an Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who seeks coverage or against whom a claim or “suit” is brought.

Loss – Direct and accidental loss or damage.

Mobile Equipment – Any of the following types of land vehicles, including any attached machinery or equipment:
Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads
Vehicles maintained for use solely on or next to premises owned or rented by the named insured
Vehicles that travel on crawler treads
Vehicles, whether self-propelled or not, that are maintained primarily to provide mobility to permanently mounted power cranes, shovels, loaders, diggers, drills, and road construction or resurfacing equipment (i.e., graders, scrapers, or rollers)

Pollutants – 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.

Suit – A civil proceeding in which damages are alleged because of “bodily injury,” “property damage,” or “covered pollution cost or expense” and to which the policy applies. A “suit” includes an arbitration proceeding and any other alternative dispute resolution proceeding.

Trailer – A semi-trailer.

Question 12

Garage Coverage Form

The Garage Coverage Form is designed to provide automobile liability and physical damage coverage, as well as general liability insurance for businesses that are engaged in the sale, service, parking, or storage of automobiles. Eligible businesses include automobile vehicle dealerships, sales agencies, repair shops, service stations, storage garages, and public parking places.

It eliminates the coverage gaps and overlaps found when other commercial lines policies are written by writing the following coverages on the same form:
Premises liability
Products liability
Auto liability
Auto physical damage coverage
Garagekeepers coverage

Question 13

Section I – Covered Autos
The garage coverage form provides a schedule of covered auto designation symbols in a similar fashion to the business auto coverage form. In addition to the nine types of vehicles insured by the business auto coverage form, the garage coverage form also includes symbols for vehicles that are unique to the auto business. Symbols 1-9 on the Business Auto Policy are the same as symbols 21-29 in the Garage Coverage Form. There are two unique symbols under the Garage Coverage Form:
Symbol 30 – “Autos” left with the insured for service, repair, storage, or safekeeping.
Symbol 31 – Dealers “autos” physical damage coverages.

Coverage is typically written using a blanket limit of insurance. Because an auto business is a bailee, and legally responsible for the vehicles left in its care, custody, or control, special insurance coverage is required.

The limit of liability for customers’ vehicles is usually expressed as a blanket limit, such as $100,000 for the total of all customer vehicles in the insured’s care, custody, or control.

Question 14

Section II – Liability Coverage
The garage coverage form provides two types of liability coverage. Liability coverage is provided for:
Garage Operations – Other than Autos is similar to commercial general liability insurance.
Garage Operations – Covered Autos is similar to business auto insurance.

It provides bodily injury and property damage liability coverage for losses resulting from garage operations. In addition, the form includes coverage for Premises and Operations Liability, Products Liability, and Completed Operations Liability. It does not cover property in the care and custody of the insured, injuries covered by Workers’ Compensation, and liability arising from pollution or product recall.

A $100 deductible applies to all losses resulting from property damage to an auto as a result of work performed on that auto by the insured.

Section III – Garagekeepers Coverage
The garage coverage form also provides garagekeepers coverage, which is insurance for amounts the insured is legally obligated to pay for loss or damage to a customer’s vehicle and/or equipment while it’s in the insured’s care for servicing, repair, parking, or storing. The insured may select the following coverage options that apply to customer’s vehicles:
Comprehensive Coverage
Specified Causes of Loss – This coverage covers fire, lightning, explosion, theft, mischief, or vandalism.
Collision Coverage

Section IV – Physical Damage Coverage
The garage coverage form provides physical damage coverage for covered autos the named insured owns, hires, rents, leases, or borrows in the same fashion the business auto coverage form provides coverage. The coverage is for the insured’s own vehicles and is the same as Physical Damage Coverage under the Business Auto Coverage Form.

Question 15

Business Auto Physical Damage Coverage Form

The Business Auto Physical Damage Coverage Form contains virtually the same language as Section III of the Business Auto Coverage Form and only provides physical damage coverage. The symbol designations are limited to 5, instead of 9, and include:
Owned autos only
Owned private passenger autos only
Owned autos other than private passenger autos only
Specifically described autos
Hired autos only
This form can be included as part of a commercial package policy.

Question 16

Truckers and Motor Carrier Coverage Forms

The Truckers Coverage Form and the Motor Carrier Coverage Form were designed to provide insurance for the unique exposures of common carriers and contract carriers.

Common Carrier
A common carrier is a business individual or organization that carries persons or property for a fee, from one place to another. The persons or property being transported are, or belong to, the general public. A trucker is a common carrier and may transport goods belonging to several customers at the same time. Common carriers, or truckers, may use either of the coverage forms.

Contract Carrier
A contract carrier is a business individual or organization that carries persons or property for a fee, from one place to another. The persons or property being transported are only those of certain customers and NOT the general public. Unlike a common carrier, a contract carrier may refuse to carry persons or property for a fee. Contract carriers, or motor carriers, may only use the Motor Carrier Coverage Form.

Question 17

The Truckers Coverage Form
The Truckers Coverage Form covers business exposures of motor carriers for hire who transport the goods of others.

The Motor Carrier Coverage Form
The Motor Carrier Coverage Form provides coverage for business exposures due to the transportation of goods owned by others for hire AND transporting their own property.

The motor carrier coverage form was designed to replace the truckers coverage form after the motor transportation industry was deregulated. It allows for greater flexibility in arranging insurance for the shipping of goods because the coverage provided, and the definition of insured, is based on the written agreements between the carrier/shipper and its customers rather than on government regulation.

Because truckers and motor carriers often hire independent owner/operators, these coverage forms contain two special coverage conditions.
The first condition is contained in the Other Insurance Clause. The insurance of the insured trucker or motor carrier is primary, and the hired vehicle’s coverage is excess. However, the insured’s coverage will be excess if the insured leases a vehicle to another motor carrier.
The second condition is called Trailer Interchange Coverage. Trailer interchange coverage is physical damage coverage (comprehensive, specified causes of loss, and/or collision coverage) for non-owned trailers and their equipment if they sustain a loss and the insured is legally responsible for the damage.

Question 18

Commercial Carrier Regulations

The Motor Carrier Act of 1980
The Motor Carrier Regulatory Reform and Modernization Act, known as the Motor Carrier Act of 1980, deregulated the trucking industry. This deregulation affected price and entry controls in U.S. transportation, no longer allowing rate bureaus to interfere with a motor carrier’s right to charge its own rates.

As a result of the Motor Carrier Act of 1980, the number of motor carriers doing business increased and the consumer costs associated with trucking decreased, as did wages to truckers.

The Act requires certain vehicles to carry specific minimum limits of liability insurance for the protection of the public and the environment. Those minimum limits range from $750,000 to $5 million per accident, depending upon the type of merchandise being transported (e.g., non-hazardous merchandise vs. specific types of hazardous substances).

Question 19

The Endorsement for Motor Carrier Policies of Insurance for Public Liability (Form MCS–90)
This endorsement provides evidence of financial responsibility, on behalf of the motor carrier, to the Interstate Commerce Commission (ICC). The endorsement must be included on all policies, and a policy must meet the financial responsibility requirements of the Department of Transportation. The form must be carried in the cabin of the vehicle and must show:
The names of the motor carrier and the insurance company
The policy number and policy dates
Whether the insurance providing coverage is primary or excess
The limits of liability provided by the policy

Question 20

Selected Commercial Auto Endorsements

Auto Medical Payments Coverage
This endorsement allows the insured to purchase Medical Payments Coverage. The commercial auto forms do not automatically include this coverage. Coverage is written with a limit per person, per accident, and pays up to the limit for necessary medical and funeral expenses resulting from bodily injury incurred within 3 years of an accident.

Uninsured Motorists Coverage
This endorsement allows the insured to purchase Uninsured Motorists Coverage (the commercial auto forms do not automatically include this coverage). The coverage provides payment for bodily injury to the insured and vehicle occupants when struck by an uninsured driver who is legally responsible for the accident.

Individual Named Insured
This endorsement is used to add family members to the definition of “insured” under any of the auto coverage forms. It also eliminates the fellow employee exclusion for bodily injury to the employees of the named insured or any family member.

If the named insured owns at least one private passenger auto and insures it on the business auto policy for physical damage coverage, personal auto coverage will extend to non-owned autos as covered autos. When purchased, the endorsement applies to all family members who are residents.

Mobile Equipment
This is an endorsement that allows mobile equipment such as bulldozers, forklifts, and road construction equipment to be considered covered autos. This type of equipment is not normally covered, except for liability arising while being carried or towed by a covered auto.

Question 21

Drive Other Car – Broadened Coverage for Named Individuals
This endorsement may be added to any of the auto coverage forms and is designed for individuals who do not personally own and insure an auto. It provides coverage for liability, auto medical payments, comprehensive, collision, uninsured motorists, and underinsured motorists—if a limit of liability and premium is shown on the endorsement’s schedule. Coverage applies to vehicles owned by the named insured and non-owned autos that aren’t owned by the individual named in the endorsement or any family member of that individual.

Coverage is provided for the individual named on the endorsement and is extended to the named individual’s resident spouse.

Rental Reimbursement Coverage
The Rental Reimbursement Coverage endorsement may be added to all 5 of the business auto coverage forms and pays for rental reimbursement expenses incurred as the result of a covered loss to a vehicle named in the endorsement’s schedule.

Because the business auto coverage forms only provide temporary transportation expenses coverage for the total theft of private passenger type vehicles, this is a valuable endorsement for businesses that own other types of vehicles and/or who want rental reimbursement coverage in the event of losses other than total thefts.

Optional Limits – Loss of Use Expenses
The Optional Limits – Loss of Use Expenses endorsement may be added to all five of the business auto coverage forms to increase the daily and maximum limits of liability paid for loss of use expenses under Hired Physical Damage coverage.

Auto Loan/Lease Gap Coverage
The Auto Loan/Lease Gap Coverage endorsement may be added to all five of the business auto coverage forms. It pays any unpaid amount due on a lease or loan for a covered auto less other expenses, including the amount paid under physical damage coverage, overdue loan or lease payments, financial penalties, etc. This is beneficial to an insured if the actual cash value of an insured vehicle is less than its outstanding loan.

Lessor – Additional Insured and Loss Payee
This endorsement is used when the insured leases a vehicle and the owner/lessor requires that it be designated on the auto policy as additional insured and loss payee.

Designated Insured
This endorsement may be added to any of the auto coverage forms. It contains a schedule that lists a person or organization that is considered an insured under the liability coverage provided by the policy, but does NOT change any of the provisions of the policy.