Recap of Chapter Eleven

Commercial Auto insurance provides liability and physical damage coverage options for autos used in business operations. Additional coverages, such as auto medical payments and uninsured motorists coverage, are generally added by endorsement. For coverage purposes, an auto includes a land motor vehicle, trailer, or semitrailer designed for travel on public roads, as well as any other vehicle subject to compulsory insurance or financial responsibility laws. The definition also includes certain self-propelled vehicles with permanently attached equipment, such as snow removal equipment, cherry pickers, air compressors, and generators.

Mobile equipment is generally not covered under Commercial Auto insurance. However, coverage may apply when the equipment is subject to compulsory insurance or financial responsibility laws, is being carried or towed by a covered auto, or is specifically insured through the Mobile Equipment Endorsement. Mobile equipment includes vehicles designed primarily for use away from public roads, such as farm machinery, as well as vehicles that travel on crawler treads. The term also includes vehicles used mainly to provide mobility for permanently attached equipment, including cranes, backhoes, and road construction machinery.

The Business Auto Coverage Form is the primary commercial auto policy used to insure vehicles operated in a business. The autos covered by the policy are identified by numerical symbols shown on the Business Auto Declarations page and explained in Section I – Covered Autos. Symbol 1 designates any auto used in the insured’s business, regardless of ownership. Symbol 2 applies only to autos owned by the insured. Symbol 8 applies to hired autos, which are autos the insured leases, hires, rents, or borrows. Symbol 9 applies to non-owned autos, which are autos the insured does not own, lease, hire, rent, or borrow but that are used in the business, such as an employee’s personal auto used for business purposes.

Section II – Liability Coverage provides coverage for bodily injury or property damage for which an insured becomes legally responsible because of an accident involving a covered auto. The insurer also has a duty to defend the insured against covered claims or lawsuits. This section includes supplementary payments in addition to the applicable liability limit. These payments may include up to $2,000 for the cost of bail bonds and up to $250 per day for loss of earnings when the insured is required to assist in the investigation or defense of a claim or lawsuit. Insureds under Section II include the named insured for any covered auto, anyone using a covered auto owned, hired, or borrowed by the named insured with permission, and any person or organization held liable for the conduct of another insured. However, when an auto is owned by an employee or a member of the employee’s household, the employee is generally not considered an insured while using that auto for business purposes. Coverage for the employee may be added through the Employees as Insureds Endorsement.

Section II – Liability Coverage excludes several types of liability that require other coverage or arise from particularly hazardous activities. Coverage does not apply to bodily injury or property damage that the insured expected or intended, liability arising from organized racing activities, workplace injuries covered by Workers’ Compensation, bodily injury to a fellow employee, or damage to property in the insured’s care, custody, or control. Liability arising from the release or escape of pollutants is also generally excluded. However, limited coverage may apply when the pollutants are substances necessary for the normal functioning of an auto, such as gasoline, motor oil, or other operating fluids.

Section III – Physical Damage Coverage provides three coverage options for covered autos: collision, comprehensive, and specified causes of loss. Collision coverage applies to loss caused by a covered auto striking another vehicle or object, or by the auto overturning. Comprehensive coverage applies to covered physical damage losses caused by perils other than collision. Specified causes of loss coverage provides protection only for the named perils listed in the policy, including fire, lightning, explosion, theft, windstorm or hail, earthquake, flood, mischief or vandalism, and the burning, sinking, collision, or derailment of a conveyance transporting the covered auto. A separate deductible may apply to each selected physical damage coverage.

Section III – Physical Damage Coverage also includes coverage for towing and labor costs incurred at the place of disablement each time a covered private passenger auto becomes disabled. Physical damage coverage may also include extensions for transportation expenses and loss of use expenses. Transportation expense coverage for a stolen private passenger auto begins 48 hours after the theft occurs.

Section III – Physical Damage Coverage excludes losses caused by war, organized racing activities, freezing, wear and tear, mechanical or electrical breakdown, and road damage to tires. Coverage also does not apply to loss involving electronic equipment that is not permanently installed in the covered auto. Coverage under Section III is also available as a separate policy, known as the Business Auto Physical Damage Coverage Form.

Section IV – Conditions contains several conditions that commonly apply to Commercial Auto policies. After a loss, the insured must provide prompt notice to the insurer, immediately forward any claim or suit papers, and permit the insurer to inspect the covered auto before repairs are made. Coverage may be voided if the insured intentionally conceals or misrepresents a material fact or engages in fraud related to the policy or a claim. Under the Other Insurance condition, Business Auto Policy coverage is generally primary for autos owned by the insured and excess for autos the insured does not own.

The Garage Coverage Form is designed for businesses that take customers’ autos into their care, custody, or control. It helps eliminate coverage gaps that may exist under standard Commercial Auto and Commercial General Liability policies. Eligible businesses may include repair shops, service stations, parking lots, and other businesses involved in servicing, storing, or handling customers’ vehicles.

Section II – Liability Coverage provides two categories of liability protection for garage businesses. Garage Operations – Other Than Covered Autos applies to liability arising from the business premises, ongoing operations, and products. Garage Operations – Covered Autos provides liability coverage for bodily injury or property damage arising from the ownership, maintenance, or use of covered autos.

Section III – Garagekeepers Coverage provides physical damage coverage for customers’ autos and related equipment while they are in the insured’s care, custody, or control for servicing, repair, parking, or storage. The available coverage options include collision, comprehensive, and specified causes of loss. Specified causes of loss coverage applies only to the perils named in the policy, including fire, lightning, explosion, theft, mischief, and vandalism.

Section IV – Physical Damage Coverage provides coverage for physical damage to the named insured’s covered autos. The coverage options and provisions are generally the same as those provided under the Business Auto Coverage Form.

The Auto Dealers Coverage Form provides specialized insurance protection for businesses that sell and service customers’ autos. Section I – Covered Autos Coverages includes the auto liability, Garagekeepers, and physical damage coverages provided under the Garage Coverage Form. Section II – General Liability Coverages provides protection similar to a Commercial General Liability policy, including bodily injury and property damage liability, personal and advertising injury liability, and medical payments coverage. Section III – Acts, Errors, or Omissions Liability Coverages addresses liability for other types of injury, such as financial harm resulting from a covered act, error, or omission committed during auto dealer operations.

Specialized Commercial Auto policies are available for certain types of transportation businesses. Common carriers transport people or property for a fee and offer their services to the general public. Examples include taxi services and truckers, which transport property for hire. Contract carriers also transport people or property for a fee, but they operate under agreements with specific customers rather than offering services to the general public. This category may include motor carriers that transport passengers or property for hire under contractual arrangements.

The Truckers Coverage Form provides commercial auto coverage for businesses that transport property for hire. Covered autos are identified by numerical symbols, including a symbol for owned commercial autos, such as trucks, tractors, and trailers. Section III – Trailer Interchange Coverage applies when the insured becomes legally responsible for damage to a trailer the insured does not own but possesses under a written trailer interchange agreement. Coverage provided under this section is primary insurance. However, when another business hires or borrows an owned commercial auto from the insured, the Truckers Coverage Form generally provides excess insurance.

The Motor Carrier Coverage Form is designed for motor carriers and other businesses that transport passengers or property for hire. Its coverage is generally similar to the coverage provided by the Truckers Coverage Form. However, motor carriers that transport passengers may be subject to additional laws and regulations because they owe passengers a higher standard of care. These requirements may affect the coverage, limits, and conditions that apply to the motor carrier’s operations.

The Motor Carrier Act of 1980 deregulated interstate trucking and authorized the Department of Transportation to enforce financial responsibility requirements for motor carriers. Motor carriers demonstrate compliance with these requirements through the Endorsement for Motor Carrier Policies of Insurance for Public Liability, commonly known as Form MCS-90. The required minimum liability limit depends on the type of property being transported. The minimum limit for transporting nonhazardous property is generally $750,000 per accident. The highest required minimum is $5 million per accident for motor carriers transporting large quantities of certain hazardous substances.