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10/21/2016
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Agribusiness and Farm Insurance Specialist (AFIS™)
Part 3
Farm Auto
The Agribusiness Auto Exposure• Who is an insured?
• What is a covered auto?
• When is “mobile equipment” considered “auto”
• Where is it covered?
• The Family Auto policy is designed for “Private Passenger Autos”. No coverage for non owned or hired trucks that do not meet the definition.
• Our focus is the BAP which can accommodate both personal and commercial vehicles
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Auto ExposuresOwned / Leased / Rented / Borrowed
• Third party liability
Injury
Damage to property
• Injury to driver and passenger
Medical bills
Injury caused by uninsured or underinsured drivers
• Damage to or theft of and loss of use of vehicle3
Auto ExposuresEmployees
• Use of company vehicle
• Use of personal vehicle on company business
• Use of rental vehicle
Rented by company
Rented by employee
• Loading or unloading property
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Business Auto Policy Eligibility• All Agribusinesses except: Garage risks
o Body shop
o Repair
o Parking
o Dealer
Motor carrier
o Hauls for others
• Sole proprietor eligible but has personal auto option (not necessarily a good option)
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Business Auto Policy Eligibility• All businesses except: Garage risks
o Body shop
o Repair
o Parking
o Dealer
Motor carrier
o Hauls for others
• Sole proprietor eligible but has personal auto option (not necessarily a good option)
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Types of Agribusiness Activities• “Farming”
• “Harvesting”
• Servicing
• Transportation of
Equipment
Materials and supplies
Products
People7
Types of Legal Entities• “Family” – Individual
• Other Partnership
Corporation
LLC
• Living on “Farm”
• Fixed Location
• Many Locations
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Liability• Auto vs. Farm/General Liability
“Auto” or “mobile equipment”
Loading and unloading
Having others provide transportation of
o Products
o Equipment
o People
o Materials and supplies
Personal Auto vs. Business Auto
Our focus is on the Business Auto Policy.
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Coverage Structure
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}1. Common Policy
Declarations2. Common Policy
Conditions3. Business Auto
Declarations4. Business Auto
Coverage5. Endorsements
The Business
Auto Policy
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Important Concepts
Covered Persons
Covered Types of Vehicles
Vehicle Usage
Locations of garaging
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Eligible Types of Vehicles
Any land vehicle designed for use on
public roads
• Motorcycle
• Private passenger vehicle
• Truck
• Tractor/trailer units
Motorized equipment
• Typically off road
• Subject to financial responsibility or other insurance laws
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Classifying VehiclesMost insurance companies use the ISO Commercial Lines Manual
• Industry standard
• Establishes rating factors to charge proper premium
Type and size of vehicle
Vehicle Use
Value of vehicle
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Property Coverage
• Auto Physical Damage
• Auto or Mobile Equipment
• Power Unit or Attached Equipment
• Cause of Loss
• Payment of Damages
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The Insured
• “Family Farm”
• Owned Individually
• Auto
PPA’s or Pick‐ups?
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Coverage for the Family Farm• Personal Auto Coverage Form Protect autos listed
Protect family members
Extends medical coverage
o PIP
Extends selected coverage
o UM ‐ IUM
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Personal Auto Coverage Forms – PP0001• Only units less than 10,000 GVW
No Hauling
One location operation
Units used personally
Business transportation of family member
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An Auto Accident Happens• If It Was Your Insured, What Would They Expect?
Coverage!!!
• Factors to Ensure Coverage
Liability
o The insuredo Covered autoso Limits
Other coverage
o Physical damageo UM/MP
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Personal Auto vs. Business Auto
• Insured Other Than Individual
• Larger Units (10,000 plus)
• Hauls Other Than
Owned, small equipment, limited supplies
• Hauls for Others
• Coverage
BACF only or both?
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Important Terms and Concepts
Agribusiness can have many different types of vehicles used for different purposes
• The policy can be designed to cover owned, rented, hired, leased or borrowed vehicles
BAP is designed to cover a wide spectrum of exposures and customer needs
• Third party liability
• Injury to vehicle occupants
• Physical damage to covered autos 20
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BAP Coverages
Liability Coverage
Medical Payments
• Pays defense and damages if the insured is sued because of a car accident
• Pays medical bills and funeral expenses for occupants of the insured vehicle or in limited cases when outside the vehicle
• Added by endorsement
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BAP Coverages
Uninsured / Underinsured Motorists
Physical Damage
• Pays damages for injury to the insured or physical damage to the insured vehicle if the other party is at fault (or partially at fault) and does not have liability insurance or has low limits of liability coverage
• Added by endorsement
• Pays for damage to an insured vehicle
• Comprehensive coverage / Specific Causes of Loss
• Collision coverage
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Who is The “Insured”?
• The “Insured” Is Properly Addressed by Name and Legal Type
Item One of the Dec
• And Selection of Symbols to Define What Will be “Covered Autos” and What Coverages Will Apply to These “Covered Autos”
Item Two of the Dec
• If These Two Steps Are Not Taken, Then the Policy Will Not Respond
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Item One• NAMED INSURED
“You” in Policy – Is any entity listed as named insured on the Named Insured line on Dec – Any and all
Type
o Corporation (Inc.) – Best – Business only
o Limited Liability Company (LLC) – Same as corporation
o Partnership – A legal entity (do not name the individual partners)
o Individual
• Proprietor; DBA
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Item One
If a named insured is an individual, the policy must consider activities of the person as well as the business – This applies any time an individual is a named insured
No need to name the owners of the business, corporation, LLC, partnership for their liability arising out of the ownership of the legal entities on the named insured line – You give them no more coverage than they already have – Of course, if the named insured is an individual, you have to name them – The DBA – Trade name is not a legal entity ‐ The individual and all of the individual’s activities must be considered
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Insured Persons
Named Insured(s)
Employees of the Named Insured(s)
Permissive Drivers
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Uncovered Parties
Owner of hired or borrowed vehicle
Employee driving personal vehicle
A ‘garage’ employee driving an insured vehicle
A non‐employee loading or unloading an insured vehicle
A partner (named insured is partnership) driving personally owned vehicle
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Item Two What is a Covered “Auto”?
• Schedule of Coverage and Covered Autos
Package
Liability and Property
To Effect Coverage a Number Must be Listed by Each Coverage Desired
Estimate Total Premium
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Purpose of Symbols
• Indicates which autos are covered autos
• To show which autos are provided what coverages
• First is the request on the application to the underwriter
• Policy is issued with symbols – verify as requested on the application
• A critical step in establishing the proper coverage
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Covered Autos
• Symbol 1
Any auto
Used for liability coverage only
Always request this symbol as it provides the broadest coverage
Underwriter might not always provide
Next best – use Symbols 2, 8 and 9 (you can ask for more than one or different ones in each coverage area)
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Covered Autos• Symbol 2
Any owned auto Used for liability, medical payments, uninsured / underinsured motorists and physical damage
• Symbol 3
Any owned private passenger auto Not a common symbol to use
• Symbol 4
Any owned auto other than private passenger Not a common symbol to use
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Other Covered Autos Symbols
• Symbol 5
Compulsory No‐fault Applies only to “No Fault” States
• Symbol 6
Compulsory Uninsured Motorists
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Covered Autos
• Symbol 7
Any specified auto Used for liability, medical payments, uninsured / underinsured motorists and physical damage This is a more restrictive symbol (more in a minute)
• Symbol 8
Any auto the named insured hires, rents or borrows.
Must use to protect the “insured” if symbol 1 not available.
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Covered Autos• Symbol 9
Autos the named insured does not own, lease, hire, rent or borrow.
Must be used in connection with named insured’s business.
Includes employee owned vehicles while being used in named insured’s business or personal affairs.
Des not cover the employee.
Must use to protect the “insured” if symbol 1 not available.
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Covered Autos
• Symbol 19
Used for liability coverage
Covers any vehicle for liability when subject to motor vehicle insurance or financial responsibility laws
Example is a skip loader, back hoe, fork lift
• No need if using Symbol 1 for liability
• Always add if using Symbols other than 1
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Newly Acquired “Autos”
Symbols 1, 2, 3, 4, 5, 6Automatic Coverage for
the policy periodRecommend adding as
soon as insured advisesMust be added at
renewalAny auto
Symbol 7Very Limited Coverage
ONLY IF:Replaces a vehicle with
that coverage OR All Owned Are Covered
ANDNotified Within 30 Days
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Newly Acquired Units• Coverage for “autos” that are acquired after inception of policy that insurance company has not been notified about – This provision allows the auto to be considered a covered auto – Either units added to fleet (increased number of units) or unit replacing an insured auto (trade‐in)
Newly acquired units
o When using symbols that have triggering of “any” or “owned”, all “autos” that meet these descriptions will be covered for those coverages automatically without notice to company until policy expiration subject to audit
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Newly Acquired Unitso But if (7) is used to trigger coverage, to be a covered “auto”, the “auto” must be specified in Item Three, because it is newly added, it is not specified yet. To have coverage for those “autos” newly acquired, the insured must meet these conditions
• Additional units – (Units added to fleet – Increased numbers)
• To have coverage, all “autos” owned by “you” must be insured by the company and for all coverages desired
• Replacement units
• Same coverages that the replaced unit had
• If conditions above are met for coverages, then must notify insurer within 30 days of acquiring the new “autos” or coverage expires – This is a limitation for Symbol 7 only
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Coverage—Extensions Certain trailers, mobile equipment and temporary substitute “autos”
o Liability coverage only• Service trailer – Covered without being listed on policy if using (7) – No premium charged if using (1), (2), (4) for liability
• “Mobile equipment” being carried or towed is treated like any other cargo –Damage done by ME falling off or coming loose to public is auto loss – No coverage for damaged equipment
• “Mini hired car” – If (1) or (8) not used, then limited protection for temporary substitute – An auto not owned replaces an insured covered auto that is owned while the covered auto is out of service
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Coverage—Extensions
• Premium Considerations
Trailer less than 2,000 lb. load capacity will have no liability premium charge
Hired auto used to replace insured auto that is out of service will not be subject to liability hired auto premium if you have for physical damage coverage, then there will be a premium charge
These premiums only apply to liability
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An example for symbol 10
• Make Up Your Own Symbol
• Use CA9954 – Covered Auto Designation Symbol
If proprietorship: We want to provide no coverage for PPA not used in business
o “Any auto except PPA not used in insured’s business that is covered on insured’s personal auto policy”
o “Any auto except PPA”
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Symbols You only want to meet federal insurance requirements
o “Any “ auto 10,000 lb. GVW or larger”
Special
o “Any auto except the one driven by the drunk brother‐in‐law my wife wants me to hire”
Most clients with fleets do not want physical damage coverage on all owned autos but do not want the limitation of Symbol 7
o “Any owned auto 20_____ or newer including newly acquired”
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Symbols - Review• To provide protection for Liability for all exposures must use Symbol “1” – Any auto – Best for insured
How about the company?
o Know the insured
o Have adequate rate and audit to get premium part of risk excluded
Individual (DBA’s) – Try “4” or “10”
Possible problem with “1”
o For company – Personal autos
o For insured – Premium audit43
Coverage - Review• All owned – “2”
Liability – Must own at time of accident – No coverage for non‐owned
Physical Damage – Use if insured wants all owned autos covered – If not, try “10”
“2”, “8” and “9” do not equal “1” for liability
• All owned PPA’s – “3” Use for Medical Payments and possibly Uninsured Motorists
• All insureds have exposure from non‐owned – Must use “8” and “9” for liability if not “1”
• Physical Damage “8” for comprehensive and collision add to any other used
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Coverage—Review
• Specified – “7” – Must be found in policy at time of loss or no coverage unless it is:
Newly acquired – Must meet these conditions to have coverage
o All autos insured for coverage or
o Replacements – Had coverage
o 30‐day notice required to continue
• Considerations
At time of loss to have coverage triggered by Symbol 7 auto must be specified in policy or must meet above conditions
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Item Three
• Schedule of Covered Autos You Own
• If Symbol “7” then must be described here to have coverage
• Other than listing – Rating
Radius
Use
Size
Coverage
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Hired Car and Nonowned Coverage• Only included in Symbol (“1”, “8” or “9”) – CA9954 with any auto coverage will have premium for coverage when only “1” is used – No need to add “8” and “9”
• Premium considerations
Primary – Operated by insured – Hired – “Used by insured”
Contingency – Operated by others for insured – Owner of non‐owned auto used by insured has insurance and has properly protected the insured –“Having someone else do hauling for insured”
• Also need hired car to provide physical damage for autos of others
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Insuring Agreement Liability (Coverage)
• Paragraph One – Direct Damages – Policy will pay what insured legally must pay for BI and PD where insurance applies, and if a covered auto caused accident (named insured and symbols must be done correctly or no coverage)
• Paragraph Two – Coverage for “pollution cost or expense”
• Paragraph Three – Duty to defend. Very important, we now have an attorney on retainer.
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Insuring Agreement Liability (Coverage)• Defined terms – Section V
“Insured” – The you on the Dec plus anyone who qualifies as “who is an insured” – Policy applies separately to each qualifying
“Suits” – Any means of settlement of dispute
“Bodily injury” – Includes sickness or disease and even death
“Accident” – Same as occurrence
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Insuring Agreement Liability (Coverage)
“Property Damage” – Pays to others where insured is liable:
Direct – Fix what was damaged
Loss of use – Payment because property cannot be used
“Autos” – Only requirement is to be designed for travel on road –No number of wheels required – But not “mobile equipment”
“Trailer” – All types
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However, "mobile equipment" does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered "autos".
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Added to GL/FL definition 2004
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Mobile Equipment or Auto?
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“Auto” vs. “Mobile Equipment”
• Key Consideration
Auto ‐ Any land vehicle subject to financial responsibility laws or required to be licensed
Mobile equipment – Listed items except for above
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Underwriting
• Review mobile equipment – If licensed or should be then must be addressed for Auto Liability and could be for Physical Damage in the Auto Form
• Concern if not licensed but should have been
• States differ on what must be licensed or subject to financial responsibility requirements
• Concern if General Liability Form is not the 12/04 or 12/07 edition
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What do you think?
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This should be no problem
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This could be!
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What covered auto symbol could help?
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Pollution
• Pollution Damage Coverage
Bodily injury and property damage – Pollution damage coverage found in the first insuring agreement when not excluded – Direct damage and loss of use
Clean‐up of pollutants – Coverage in a second insuring agreement to assure clean‐up will be paid if loss meets definition of “covered pollution cost or expense”
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Pollution
• Three areas property causing pollution damage can come from
Property that is cargo – In insured’s CCC – Property being carried does damage
Property used for service of vehicle – Fluids that make covered auto go – Escapes from designed containers and does damage
Property that is someone else’s property – Third party’s property that an insured causes to escape does damage
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Covered Pollution Cost excerpt
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We will also pay all sums an "insured" legally must pay as a "covered pollution cost or expense" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance or use of covered "autos". However, we will only pay for the "covered pollution cost or expense" if there is either "bodily injury" or "property damage" to which this insurance applies that is caused by the same "accident
Pollution• “Covered Pollution Cost and Expense” – Defined Term
Exclusion 11 – Pollution
o Same for both defined items and exclusions
o Buy back CA9948. A critical endorsement for the Agribusiness account.
If loss is caused by something the insured is carrying (cargo) – No coverage
o Except for
• Fluids for servicing of auto or
• Someone’s property not in insured’s CCC
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Covered fluids
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apply to fuels, lubricants, fluids, exhaust gases or other similar "pollutants" that are needed for or result from the normal electrical, hydraulic or mechanical functioning of the covered "auto" or its parts,
Pollution Coverage
• Auto Form Pollution Coverage – Add Endorsement CA9948 to extend to cargo.
Always included in coverages and quoted premium by some insurer
Added if requested for a premium charge by some carries
• Some states mandate coverage for units domiciled and tagged in that state
New York, Vermont, Virginia – Amendatory Endorsement
New Jersey, Massachusetts, Kentucky, Kansas – To state financial limits
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Accident spills more than fuel
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Lets think about a solution and discuss.
Some cargo deserves to be salvaged!
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Some is just plain fishy!
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• A truck carrying about 40,000 pounds of French fries went off the freeway and caught fire on the Grapevine early Sunday morning.
• Two lanes of traffic were blocked for most of the morning. CHP officials said the truck had to be unloaded before it could be turned upright and towed.
• The CA 99 48 endorsement would surelyhelp here.
• In related news further to the north…..
Truck carrying french fries through Grapevine crashes, catches fire
(L.A.Times 12/2013)
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Do you want fries with that?
Sticky situation: A truck carrying thousands of bottles of ketchup has crashed in Reno, Nevada, covering the freeway with the Heinz sauce
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Cleanup covered?
Clear away: State transportation crews used snowplows to help clear the highway connecting Reno to Lake Tahoe
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Pollution Coverage
• You need to see what is required for pollution coverage in your state
• You need to ask every insurer you do business with how they approach pollution coverage
• You must offer the coverage – Even if the cost is higher – Offer both –Quote
• It is available, it is a question of cost – That should be the insured’s option – Not yours.
• Reviewed further in AFIS 5
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• Required for both exempt and non‐exempt for‐hire motor insurers operating in interstate commerce and certain intrastate insurers of hazardous materials
• 91X FILING WITH FMCSA PLEDGES COMPLIANCE WITH MCA80
Insurer agrees to pay to protect the public even if no coverage in policy (even when insured is using an auto that is not a covered auto under the policy)
Reimbursement by insured for any payment beyond coverage
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MCS90 – Endorsement to Policy to Meet MCSA80 Requirements
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MCS90 Issues
• Suretyship vs. Coverage – No coverage
• Applicability to the driver – No just MC and no other MC
• Applicability to punitive damages – No
• Duty to defend – None in MCS90
• Claims for Reimbursement – insurer discretion
• Cancellation – 36 days
• Stacking – Not with new court rulings
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MCS 90 Excerpt
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However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.
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State Oversight
• Unified Carrier Registration (UCR) – States cannot put additional requirements in place on a federal registered motor carrier
• No longer have to send any FR to state if motor carrier has met the requirements of a federal registered motor carrier with few exceptions
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Auto Forms – “Who Is An Insured” Provision
• The policy will “pay all sums an ‘insured’ legally must pay”
“Insured” defined term – “Means any person or organization qualifying as an insured in the who is an insured provision . . .”
• So, anyone qualifying will be an insured
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Auto Forms – “Who Is An Insured” Provision• The following are “insureds”
You – The entity on the dec sheet (Item One) for any covered auto (defined by use of symbol)
Anyone Else – Employee, driver, officer – (No matter who they are, they are insured) – While using with your (the entity on dec sheet) permission if covered auto (again symbol) – Owned, hired, or borrowed by the insured
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Auto Forms – “Who Is An Insured” Provision
• TWO CONCERNS
Who is using the covered auto
o Driver selection important to underwriting
What permission do they have – Employee can take home at night and park in driver’s yard – Now that employee got it home, can they take it to the store, bar, or let others use it?
Need to have insured’s state rules in writing as to what the scope of permission the user of the covered auto has
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Auto Forms – “Who Is An Insured” Provision
• The you and permissive user are an insured for a covered auto you own, hire or borrow
Except
• The owners of non‐owned covered autos will not be an insured. The insured (you and permissive user) will be protected but not the owner of the non‐owned covered auto
Any owner of non‐owned covered auto
Employee for employee’s personally owned auto
Partner, partnership and members of LLC’s for autos owned individually
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Auto Forms – “Who Is An Insured” Provision• The except takes away coverage for certain others
Persons in the garage business even when they have permission from the “you” to test drive the vehicle
o Where do they get coverage?
Someone loading and unloading a covered ‘auto” – Other than employee of insured or permissive user – This is needed because of the loading and unloading definition – Coverage under GL of business loading and unloading the covered “autos”
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Auto Forms – “Who Is An Insured” Provision
• The Business Auto Coverage Form includes wording in part c. of the who is an insured provision
c. “Anyone liable for the conduct of an ‘insured’ described above but only to the extend of that liability”
• Who does this provision extend coverage to?
81© Insurance Services Office, Inc., 2009
Additional Insured Considerations• Your insured wants to or is required to add others as insureds on their auto policy and send proof of this because of doing business with them
No need to add endorsement – They already are an insured because of the vicarious liability wording – No additional coverage is provided by endorsements – Just send a certificate showing these customers as additional insureds because of provision c. in the Who Is An Insured Provision
But, if they must see their nameo CA2048 Designated Insured
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Additional Insured Considerations• BLANKET ADDITIONAL INSURED – ALREADY IN POLICIES
Vicarious Liability – Anyone liable for the conduct of an insured in an “auto” policy will also be an insured under that policy and will be protected by the policy covering the auto causing the accident
Protection for insureds who use non‐owned autos will be provided by the Vicarious Liability Provision of the Auto policy covering non‐owned autos being used on their behalf (still they need non‐owned auto coverage to protect them in excess of others’ provided protection if other does not respond and have to be made to)
o How about non‐owned auto coverage for customers?o Which one of the customers’ policies covers them in excess of the insured?
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Additional Insured Considerations
• Want to be on the Named Insured line of Item One as insured because of their ownership of the legal entity – Why would the owner be named in a suit? – Because they were being held vicariously liable for the activities of the business they own which is an insured –Therefore they already have all the coverage they need for owning the legal entity – You give them no additional coverage by adding them to Item One of the Dec – You do complicate the covered auto issue if you do add them
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Additional Insured Considerations• But if they own the auto personally and titled in business name or they lease or rent the auto and want or are required to provide coverage endorsements to protect them from possibly being held legally liable because of their ownership of the non‐owned covered auto can add: CA9947 – Employee as Lessor CA2001 – Lessor – Additional Insured and Loss Payee CA9916 – Hired Auto Specified as Covered Autos You Own CA9937 – Employees as Insureds (Excess)
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Who Is An Insured Review
• The You on the Dec
• Only While Operating a Covered Auto
Covered auto? – Symbols done correctly
• The You and Permissive User While Using a Covered Auto
No matter on insured business or personal use – Covered autos always covered and insured and permissive user will be protected – How far does permission go?
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Who Is An Insured Review
• But Not Owner of Hired, Borrowed, Rented or leased Auto
Insured will be protected for non‐owned auto if a covered “auto” – owner of
the non‐owned auto – Will not be protected even if covered auto, even if
listed on policy
• But Not Employee for Employee Owned Autos
Insured will be protected for non‐owned only if a covered “auto” – Employee
(Owner) of auto will not be protected – Even if a covered auto, even if listed
on policy
• Anyone Else Held Vicariously Liable for the Insured
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Coverage Extensions
• Supplementary payments – Payment in addition to limits of policy. Note! Defense costs for insured are outside the limits!
All expenses we incur (includes legal fees)
Up to $2,000 for bail bonds
Bonds to release attachments
Insured’s expense ($250 a day earnings)
Costs taxed against the insured
Interest on judgment
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Coverage Extensions
• Out‐of‐state coverage extensions
Increase the limit to meet the other states’ requirements if carrying minimum
o Not Motor Carrier Acts
Minimum amounts and types of coverages
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Exclusions—No Coverage
• No coverage for expected or intended injury – Knowledge of insured
• No coverage for liability assumed contractual – Except if assumed under an “insured contract”, therefore, coverage for “insured contract”
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Definition of Insured Contract from Section V—Definitions
1.‐4. Four incidental contracts
5. Other contracts – “Broad Form”
6. Rental contract – hold harmless agreement signed when renting auto
Definition does not include the following
• Contracts involving railroad construction, insured must have Railroad Protective Coverage
• Contracts involved in trucking
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Tell The Insured To Buy A Workers Compensation Policy
(3) Workers Compensation and other laws
No coverage under BA for employees’ work‐related injuries
Work Comp Policy Needed
(4) Employee Indemnification and Employers Liability –Coverage under Section B Workers Compensation Policy
No coverage under BA for suits from employees’ work‐related injuries
Work Comp policy Needed
Buy Back CA2325 – Coverage for Injury to “Leased Workers”92
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Tell The Insured To Buy A Workers Compensation Policy
(5) Fellow‐Employee – The employee’s (insured) Workers Compensation pays for injury to employee (work‐related injuries) where injury is auto related
If employees want to sue each other for job‐related injuries, the employees’ own (personal auto) policies will provide them coverage
Work Comp Policy Protects the Insured (Employer)
Endorsements – CA2055 and CA2056 will modify this exclusion93
Care, Custody or Control
• No coverage for damage to property that is being carried or in possession of insured – Damage to either their own or property of others will not be protected by BA
• Cargo Policy – Covering owned or non‐owned property needed
• Symbol 8 for Physical Damage – Covering non‐owned auto in possession of insured
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Definition of Coverages between CGL and BA• INSURED MUST ALSO HAVE A CGL – THESE EXCLUSIONS DEFINE WHERE ONE POLICY COVERAGE STARTS AND THE OTHER POLICY STOPS
• Exclusion 7 – Handling of Property
Defines coverage for damage to public (not damage to the cargo) – Protection for BI and PD done during the loading and unloading of cargo from a covered auto
Conforms with GL coverage
Damage done during the complete loading and unloading operation only –Excluded before and after the move so during the movement not excluded, therefore, BI and PD done covered under Auto Form during movement of property to and from a covered auto from first handling of property to be moved until property is at final place of unloading
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Definition of Coverages between CGL and BA• Exclusion 8 – Limitations of Above
No coverage for damage done during the movement of property by mechanical device
Exclusion does not apply if device is attached to a covered auto (BI and PD done covered by BA)
Exclusion does not apply if movement is by hand truck (BI and PD done covered by BA)
Exclusion applies only if the movement is by a device not attached to a covered auto (crane, forklift, front‐end loaders) – Coverage for this BI and PD found under the CGL policy of the owner of the device being used
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Definition of Coverages between CGL and BA• Exclusion 9 – BI and PD Done During Operations of the Equipment of a Defined “Auto” with the Following Equipment Type
Items defined as auto in 6 b and c while equipment is being operated (only items 6 b and c)
CGL coverage operation – BA coverage road exposure
• Exclusion 10 – Completed Operations
Conforms with CGL coverage – Movement complete – No more coverage under BA – Coverage now CGL – The BA Form has no completed operations coverage
97
Pollution
• Exclusion 11 – Pollution (Previously discussed)
No coverage if pollution BI and PD is caused by insured’s cargo –There is coverage if pollution BI and PD is caused from fluids for service of a covered auto or from others’ property
Buy back pollution damage caused by Cargo (CA9948)
98
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Other Exclusions
• Exclusion 12 – War
No coverage if insured contracted for war
• Exclusion 13 – Racing
No coverage for a covered auto if used in racing activities – First found in 12/93 Form – Same as in Garage Form
99
How Much Will Be Paid?C. Limits
Each accident has full limits (no aggregate) but multi‐insured or multi‐covered vehicle does not increase limit (no stacking)
100
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Section III
• Physical Damage Coverage – Property Coverage
Protects auto and its equipment by cause of loss selected
101
Physical Damage
• The company will pay the damage to a covered “auto” or equipment – Cab, chassis and equipment if damage is done by a selected cause of loss
• Cause of loss
Comprehensive coverage – All risks – Except (c)
Specified cause of loss – Named causes of loss that must be what happens to the covered auto or its equipment
Collision coverage – Added to above causes of loss for complete coverage under comprehensive or the seventh cause of loss under specified
102
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Physical Damage
• Other
Towing coverage applies only to PPA
A collision with bird/animal/falling item can be claimed under comprehensive if insured wants – Less deductible
If theft of PP auto, payment after 48 hours ‐ $20 a day/$600 max payable
No recovery for diminution in value of the auto – Repair to same condition but because of accident not worth as much – The “worth less because of the accident” is not recoverable by insured
103
Physical Damage
• Cause of loss exclusions
Following loss not coveredo Nuclear – Damaged by nuclear explosiono War – Damaged during war
No coverage for a covered auto for wear and tearo Comprehensive and collision coverage are as close to “all risk” as can be provided in property coverage in any form. Only cause of loss exclusions are war, nuclear or wear and tear
Activities exclusionso Used in professional or organized racing
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Physical Damage Exclusions• Types of property exclusions
Tapes – CD’s – Records or other devices
Radar detectors
Electronic devices not for sound reproduction
Electronic accessories not covered if not permanently installed or for operation of auto – Buy Back CA9960
Telephone, fax, scanners – Everything not part of the radio
• Property not excluded Permanently installed electrical equipment used for operation of auto is covered
• New wording on 03/10 Coverage Form105
Physical Damage—Limits of Insurance
• What amount of dollars will be available to pay damages?
Evaluation at time of loss is ACV – What one just like it is worth
o Cost new shown in dec is not a consideration for recovery
o Cost new is premium base only
Payment for damaged property will be what covered auto and its equipment is worth at time of loss – Same condition and type
Cost of repairing or replace
o With like kind and quality
106
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Physical Damage—Limits of Insurance
• Considerations – “I want a certain amount of coverage”
Bank, lease company or insured ask – Can we provide coverage where premium base is on limit of insurance? Percent of value of unit and a limit is listed on dec, premium charged is based on
o Stated Amount (CA9928) Seller Beware!
o This coverage only caps recovery – Does not guarantee recovery – Does not benefit insured at time of loss, therefore, the request from bank or finance company are not met
o Rented or lease agreements – May require a certain amount of coverage but there is no means to meet these requirements in standard Auto Form
107
Physical Damage—Limits of Insurance
• GAP coverage has been available in specialty markets or with leasing company, now Endorsement CA2071 – Auto Loan/Lease Gap Coverage
• No guarantee of recovery amount from Auto Physical Damage
• Deductible – Comp deductible not applied to fire or lightning
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Physical Damage Review
• Auto and Equipment – Covered
• Cause of Loss – Comp and Collision Almost Equals All Risk
• Cost New Base of Premium
• Base of Settlement – ACV – Worth at Time of Loss
109
Duties and Conditions
• Company has the choice of how to pay for damage
• Cannot waive subrogation rights after a loss
• Concealment of material fact can void coverage
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General Conditions• Concealment, Misrepresentation or Fraud – Declaim coverage – Coverage can be void by insured if there is Material Misrepresentation or Concealment.
• Other Insurance Provision – When auto is involved in an accident – How will policy apply? If the auto is an owned auto, the coverage is primary If the auto is a non‐owned auto, the coverage is excess Trailers track the power units the trailer is attached to Hired Auto Physical Damage, coverage is primary
• Premium Audit – Get dollars for protection Type (rating information from Item Three) Numbers of exposure units
111
Covered Territory
USA Puerto Rico Canada
Worldwide 30 days*
Suit brought in US, PR, or Canada
Covered during transit
112
*PPV hired without a driver
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*Tip! Limited World Wide Coverage
• Recommend Foreign hired auto coverage. Responds to foreign locus.
• BAP requires lawsuit to be brought back here. Not likely to happen!
113
Additional Coverages:Medical Payments
UM / UIMAdded by Endorsement – but very common coverage
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Medical Payments CoveragePays reasonable expenses for medical and funeral services
Incurred within 3 years
Caused by “accident” to an “insured”
115
Uninsured Motorists/Underinsured Motorists
• Differences Between Personal Auto and Business Auto
• Always Provide Maximum (Limits) in Personal Auto Coverage
• Business Auto Could Be Different
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Uninsured Motorists/Underinsured Motorists
• How to meet employer’s obligation to employee in business
For work‐related injury, loss of income
• Buy a work comp policy
117
Uninsured Motorists/Underinsured Motorists
• Does employee have any other legal recourse to employer beyond work comp?
• What does UM pay?
UM – A pool of dollars for users of covered auto to pay for their damages by others
Meet legal obligation/provide a benefit
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Uninsured Motorists/Underinsured Motorists
• More people in auto, more exposure
• Have insured acknowledge what is being provided
119
Endorsements
• Some endorsements may me useful to expand or clarify "who is an insured”.
120
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Additional Insured
121
• Issue A business partner of the insured wants to be added as Additional Insured to your insured’s auto policy
• Solution Provide the Designated Insured endorsement
Leased Auto
122
• Issue Insured leases vehicles and the lessor wants the insured to provide primary coverage and to be named on the insured’s BAP
• Solution Use the Lessor – Additional Insured and Loss Payee endorsement to provide coverage
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Employees Lease To Your Insured
123
• Issue Your insured’s employees use their vehicle on your insured’s business and the insured company has agreed to provide auto insurance for the vehicles and has arranged a lease back contract with the employee.
• Solution Add the Employee as Lessor endorsement.
This endorsement provides coverage for the vehicle(s) on a primary basis and covers the employee for all coverages provided on the vehicle, i.e., liability, medical payments, uninsured motorists, physical damage, etc.
Hired Autos
124
• Issue Insured hires vehicle and renting party requires that the insured provide primary insurance and name them on the insured’s auto policy.
• Solution Add Hired Autos Specified As Covered Autos You Own
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Employees Rent Cars
125
• Issue Your insured has employees that rent vehicles for business use.
• Solution Add Employee Hired Auto to cover the Physical Damage and clarify Liability coverage
For Liability coverage, Symbol 1 will cover the hired auto or Symbol 8
More Than One Employee In Vehicle
• Issue
The insured has vehicles that may be occupied by two or more employees.
• Solution
Add the Fellow Employee endorsement to provide coverage for an employee causing injury to fellow employee.
126
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No Personal Auto Insurance• Issue Your insured is a sole proprietorship and the owner(s) of the firm are provided a vehicle insured under the BAP and do not have any personal auto insurance.
• Solution Add Individual Named Insured
Provide coverage similar to personal auto insurance
Name the individual and legal spouse
Can extend all coverage areas: Liability, Medical Payments, Uninsured Motorists, Physical Damage
127
No Personal Auto Insurance• Issue
Your insured is a Partnership, LLP, LLC or Corporation and some of the key employees of the firm are provided a vehicle insured under the BAP and do not have any personal auto insurance.
• Solution
Add Drive Other Car coverage
Covers the named person when driving a rented, hired or borrowed vehicle
Name the employee, legal spouse and resident children
Can extend all coverage areas: Liability, Medical Payments, Uninsured Motorists, Physical Damage
128
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Employee Needs Liability Coverage
• Issue
Your insured wants to provide coverage for an employee when operating a vehicle not owned, hired or borrowed by the insured.
• Solution
Add the Employee as Insured endorsement
This endorsement is only providing Liability coverage
129
Personal Use Vehicles
• Issue
Your insured has personal use vehicles on the BAP that are covered for physical damage.
• Solution
Add the Rental Reimbursement endorsement to provide coverage for a rental car for the insured to use if their covered auto is not usable due to a covered loss under physical damage.
130
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Comments on Regulation
• The following is an overview of DOT regulations.
• The Motor Carrier Reform Act of 1980 changed the rules to apply to what is being hauled on Interstate Highways and eliminated the distinction between Carriers for Hire.
• The Agribusiness account may be subject to these requirements if hauling “hazardous material”.
131
What Type Of Business Does The Federal Government Consider A Motor Carrier?
• Anyone using a vehicle for commercial purposes in interstate that has a GVW of 10,001 pounds or larger
• Does this include private?
Yes
What is interstate?
o When items being transported cross state lines
• Either the unit is providing transportation or the unit is used to provide local movement of an interstate shipment
o If the definition is met, must have a DOT# and meet responsibilities under UCR
o Could have to meet financial responsibility requirements132
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The Federal Government Requires A Motor Carrier To Register
• DOT Registration (DOT Number) – 700,000 Plus
This is for overseeing motor carrier safety and operation compliance – It affects all interstate motor carriers – To obtain a DOT number at present, no financial responsibility requirements have to be filed – Some might have to meet the MCS90 requirements
If DOT#, then required to be part of the Unified Carrier Registration (UCR) –Subject to safety rules and information in Safer – Pay a fee based on the number of interstate trucks operated – Fees are from $76 (0‐2 units) to $73,346 (100+ units)
133
Regulations
Only DOT number is required to be displayed on truck
The basis of the Uniform Registration System is the DOT number
No difference between regulated or exempt for‐hire carriers – No difference between common or contract motor carriers –Everyone with a DOT# will pay a fee to operate
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Drivers and Safety• Safety oversight
Driver selection
o If unit is 26,001 GVW or larger, driver must have a CDL
Operating standards/safety monitoring and rating
• The use of non‐owned autos as a part of the business of a for‐hire motor carrier
Insureds using their autos for someone else
Insureds using someone else’s autos as a part of their business
o “Permanent and exclusive”
o One load at a time135
Brief (Very Brief) Overview
• Both IFTA and IRP requirements occur for trucks over 26,001 GVW or larger that cross state lines, however, the UCR fees are based on units 10,001 GVW or larger that cross state lines for commerce purposes
136
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Current Regulation For Financial Responsibility
• When a motor carrier approaches someone to provide insurance for them, the first and most important service provided to them is to get them “legal” – Meet all the government requirements!
• Motor carriers must gain FMCSA’s permission to haul for others, processed goods in intestate commerce – today about 170,000 (MC number)
These are interstate motor carriers who haul regulated goods and have met their financial responsibility requirements by having a 91X sent to the federal government and MCS90 attached to policy
This financial responsibility requirement affects vehicles 10,000 GVW or larger
The promise to protect the public is for all operations with “authority” to haul even if unit is not known by carrier and promise is continuous
137
SAFERSYS.ORG
• Access by:
MC/DOT/Name
o Snapshot
• Overview of motor carrier
• Who, what and insurance
138
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• Safety Measurement System (SMS)
Roadside inspection
• Basic – Unsafe driving, fatigued driving, driver fitness, drug and alcohol, vehicle maintenance, cargo loading/securement (including most violations related to hazardous materials) and crash history
• Peer Group – 65%/80% = “Alert” Interventions
• Driver controls PEP
• Electronic equipment139
Compliance, Safety, Accountability (CSA)
