commercial casualty iimagma.magma.scic.com › elearning › 2ic_pdf › 2ic_lesson_1.pdf · it is...

Commercial Casualty II – Business Auto, Workers Compensation & Excess 1

Commercial Casualty II

Course Introduction p1

Welcome

Insurance and risk professionals today need learning choices from many sources. As time and economic pressures bear down on everyone, The National Alliance continues to push forward with excellent online programs, carefully designed to fulfill your professional development needs. In the pages that follow, be sure to read and understand the requirements for completing your course. If you have any questions, you may contact us via the link on the bottom navigation bar. I hope you enjoy your journey into online learning. Thank you for choosing a National Alliance online course!

William T. Hold, Ph.D., CIC, CPCU, CLU President



Certified Insurance Service Representatives (CISR) Most students who select this course have already made the decision to achieve the Certified Insurance Service Representatives (CISR) Designation - the best recognized credential for insurance service representatives and other insurance professionals in the industry today. The National Alliance for Insurance Education & Research gave recognition to the first CISR designee in 1987. Today, over 28,000 insurance professionals proudly wear the CISR pin. You can learn more about it by using the link provided below – maybe it’s right for you!

https://www.scic.com/courses/CISR

Course Introduction Page 4

Course Home Page Use the home symbol on the bottom left navigation bar to access this page during your course. Links to instructions and other helpful information are provided on this page. Help Desk Hours: 8:30 am to 5:00 pm Central Time Phone Contact: 800-633-2165

Copyright. The Society of Certified Insurance Service Representatives, Incorporated. All rights reserved. This material includes copyrighted material of ISO Properties, Inc. with its permission. This course or any part thereof may not be reproduced, copied, republished, uploaded, posted, transmitted, or distributed in any form or by any means or stored in any information retrieval system without the express written consent of the National Alliance for Insurance Education and Research and the Society of CISR. All trademarks and services marks are proprietary to The Society of CISR, or its affiliates or licensees.



REQUIRED READING FOR FLORIDA RESIDENTS ONLY:

An entity that is required to be licensed or registered with the Florida Office of Insurance Regulation but is operating without the proper authorization is identified as an unauthorized insurer. All persons have the responsibility of conducting reasonable research to ensure they are not writing policies or placing business with an unauthorized insurer. Any person who, directly or indirectly, aid or represent an unauthorized insurer can lose their licenses or face other disciplinary sanctions. Please see section 626.901, Florida Statutes, to read the laws. Lack of careful screening can result in significant financial loss to Florida consumers due to unpaid claims and/or theft of premiums. Under Florida law, a person can be charged with a third-degree felony and also held liable for any unpaid claims and refund of premiums when representing an unauthorized insurer. It is the person’s responsibility to give fair and accurate information regarding the companies they represent.

Curriculum Intro p1 (2IC)

Welcome!

CISR Commercial Casualty II – Business Auto, Workers Compensation & Excess Liability Thank you for selecting the Certified Insurance Service Representatives (CISR) Commercial Casualty II course. This course will provide an overview of Business Auto, Workers Compensation and Excess Liability/Commercial Umbrella. More than ever, insurance professionals need to increase their technical knowledge of commercial casualty coverage. This course will provide a solid foundation and is ideal if your career involves any of the following:

• describing coverages to a client • placing coverage with an insurance company • reviewing policies • handling claims • analyzing the broad range of products being offered by insurance companies • exchanging information between producers, company underwriters, adjusters • pursuing sales leads or cross selling


Course Study and Exam Preparation

Have you ever thought about how you learn? The study aids listed below will help you determine your progress and test your understanding of concepts and examples presented in the course.


Learning Objectives:

Learning Objectives are designed for managing your own learning. The learning objectives for the course are listed at the beginning of each topic. The learning objectives are indicated throughout the course pages as well.

At the end of the course, you will have the opportunity to read the learning objectives again, and see how confident you feel about each one.

Self Quizzes

Self quizzes are another learning management tool. You are required to pass each self-quiz with a score of 70 or above before moving forward in the course, and you can launch a self-quiz as many times as needed.

To print the score page of your self- quiz, click on Assessment Results, then right click on the page. The Assessment Results page makes an excellent study aid.

Glossary

Glossary terms and definitions are critical to insurance professionals, and a key study aid for your online course. To define a term, click on the Glossary link above. Definitions of newly introduced terms will also be included on the course pages.

Knowledge Checks

Knowledge Checks are application level questions.

By attempting to apply the concepts of the course, you will better prepare yourself for the final exam. Make sure you attempt each knowledge check in the course.

Course Mentor

And don't forget to email the Course Mentor with your questions about the curriculum.

Our faculty members are distinguished producers and risk managers who currently work in the insurance industry. The mentors are happy to explain and clarify the concepts in the course.

They will return your email on or before the next business day.

Be sure to use the Frequently Asked Questions (FAQ) Page to review guides for commonly asked questions.

ISO Forms v. Company or State Specific Forms

Insurance companies often use policy forms other than the ISO Commercial Casualty Exposure forms. These policies may incorporate language similar to the ISO Forms in their contract and endorsement language. You must also be aware that state specific forms often contain different provisions than the ISO Standard Forms.

Be sure to look for differences between the ISO Forms which we study in this course, and the company


specific or state specific forms that you use in your job.

Forms used in this course are located by clicking on the Forms Library link. We also present a link to the forms used at the beginning of each lesson.


This course consists of three lessons:

1. Business Auto Coverage 2. Workers Compensation & Employers Liability Insurance Policy 3. Commercial Umbrella / Excess Liability Exposures

Each lesson is further broken down into topics. In each topic, you will have content to read, graphical material to view, and self-quizzes to test your comprehension of important points. You may link to the final exam after completing all of self quizzes in the course with a score of 70 or above.


Lesson 1 – Business Auto Policy

Lesson 1 BAP Intro p1 (2IC)

The Business Auto Policy (BAP) provides coverage for most business exposures. It is designed to provide protection for a variety of business risks that are eligible to be written on this type of policy, including auto service and auto repair shops. The BAP is not designed for auto and trailer dealers and similarly related dealerships as these should be written on a Garage Policy. It is also not designed for businesses that regularly transport materials, commodities and goods for themselves as well as for others. Those business risks are best written on a Motor Carrier Policy. The Garage and Motor Carrier Coverage Forms will not be discussed in this course. The structure chart displays the makeup of the Business Auto Policy. This course will focus on the Business Auto Coverage Form and some commonly used endorsements.

These five parts make up the Business auto Policy Common Policy Declarations

Common Policy Conditions

Business Auto Declarations

Business Auto Coverage Form

Endorsements


Lesson 1 - Business Auto Coverage Form

The Business Auto Coverage Form (BAC) is a combination of several coverages. It includes a liability section, which provides protection from claims for bodily injury and property damage for which an insured is legally responsible. It also includes a physical damage section, which provides coverage for damage to or loss of an insured's covered auto. This presentation will focus on these two coverages.

Medical Payments and/or Personal Injury Protection and coverage for Uninsured and/or Underinsured Motorist bodily injury and/or property damage losses can be added by endorsement. These coverages vary from state to state and will not be addressed in this presentation. You should obtain and keep for reference a copy of the forms for these coverages that apply in your state.

Exposures Covered by the Business Auto Coverage Form Liability Coverage Physical Damage Coverage

Owned Comprehensive Non-Owned Specified Causes of Loss

Hired or Borrowed Collision Towing (Private Passenger Autos Only)


This lesson will consist of the following topics:

1. Business Auto Exposures 2. Definitions


3. Symbols 4. Newly Acquired Autos and Liability Coverage Extensions 5. Who is an Insured 6. Insuring Agreement 7. Liability Exclusions 8. Physical Damage Coverage and Exclusions 9. Conditions


Lesson 1 – Learning Objectives:

1. Identify the liability and physical damage exposures covered by the Business Auto Coverage (BAC) Form.

2. Explain specific Business Auto Coverage Form definitions. 3. Identify a covered "auto" when presented with the appropriate symbol. 4. Determine whether a newly acquired auto is covered in specific situations. 5. Identify what types of vehicles are granted coverage through the Liability Extension. 6. Determine who is and who is not an insured under the BAC Form. 7. Identify and explain the most commonly used endorsements to modify who is an insured. 8. Recognize the paragraphs of the Insuring Agreement in the BAC Form. 9. Explain the two Coverage Extensions in the BAC Form. 10. Apply the Liability Coverage Exclusions of the BAC Form to specific situations. 11. Explain the application of the BAC Form's Physical Damage Coverage. 12. Apply the Physical Damage Coverage exclusions of the BAC to specific situations. 13. Recognize Conditions provisions under the BAC Form.


Forms that you need to print for this lesson:

• CA 00 01 Business Auto Policy • CA DS 03 Business Auto Policy Declarations

Forms you have printed and will need for this lesson

• None


Lesson 1 Topic A – Business Auto Exposures

Lesson 1 Topic A Business Auto Exposures p1 (2IC)

Learning Objective: Identify the liability and physical damage exposures covered by the Business Auto Coverage (BAC) Form.

Refer to page 2 of the Business Auto Coverage Form.

In this topic, we will discuss two primary exposures covered by the BAC Form. They are:

1. Liability for the ownership, maintenance or use of covered autos. 2. Physical damage for loss of or damage to a covered auto.

Lesson 1 Topic A Business Auto Exposures p2 (2IC)

Learning Objective: Identify the liability and physical damage exposures covered by the Business Auto Coverage (BAC) Form.

Liability Coverage Legal liability results when "bodily injury" to others or "property damage" to the property of others arises out of the ownership, operation, maintenance or use of an auto. Business auto exposures can arise from an insured's maintenance or use of several types of autos.

• Autos the Named Insured owns.

• Autos the Named Insured does not own, but are used in, or on behalf of, the Named Insured's business.

• Autos the Named Insured hires or borrows.

The last two auto types are specifically defined in the BAC Form and will be discussed later.

Physical Damage Coverage

A business owner can suffer loss if one of the business's vehicles is damaged or destroyed. Some of the more common claims include collision, windshield breakage, theft, fire, and vandalism. The BAP can be written to include coverage for many of the perils that can damage a vehicle. Potentially covered physical damage losses can happen to both owned autos and to hired or borrowed autos. We will study how the BAP covers, or does not cover, these exposures.


Lesson 1 Topic B – Definitions

Lesson 1 Topic B BAC Form Definitions p1 (2IC)

Learning Objective: Explain specific Business Auto Coverage Form definitions.


Throughout the BAC Form, specially defined words or terms are set apart by quotation marks. Before beginning a discussion of the BAC Form conditions, provisions, and coverages, please read the following from the Business Auto Coverage Form: Click here to read Business Auto Coverage Form Section V. Definitions. The definitions begin on page 10 of the Business Auto Coverage Form. You should refer to this section of the Coverage Form when the meaning of a defined word is unclear. There are sixteen terms defined in this policy section. Please focus on understanding the following defined words or terms:

• Accident • Auto • Employee • Insured Contract • Mobile Equipment • Property Damage • Trailer

Below is a copy of the definitions section of the Business Auto Coverage Form.

SECTION V . DEFINITIONS

A. "Accident" includes continuous or repeated exposure to the same conditions resulting in "bodily injury" or "property damage".

B. "Auto" means:

1. A land motor vehicle, "trailer" or semitrailer designed for travel on public roads; or

http://onlinedev.scic.com/dev/NewLinx/RunThruCluster.php?UserID=1163974&SessionKey=936878292&CourseID=test%5e4051&CourseVersion=1&ExternalSCO=&ClusterID=test%5e4051&ClusterVersion=1&ClusterNumber=1&DocNumber=1&OriginalCourseID=&EndOfCourseTU=&PDA=&Preview=Y&OriginalCourseID=&OriginalClusterID=


2. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

However, "auto" does not include "mobile equipment". C. "Bodily injury" means bodily injury, sickness or disease

sustained by a person including death resulting from any of these.

D. "Covered pollution cost or expense" means any cost or expense arising out of:

1. Any request, demand, order or statutory or regulatory requirement that any "insured" or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants" or

2. Any claim or "suit" by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of "pollutants".

"Covered pollution cost or expense" does not include any cost or expense arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

a. That are, or that are contained in any property that is: (1) Being transported or towed by, handled, or handled

for movement into, onto or from the covered "auto";

(2) Otherwise in the course of transit by or on behalf of the "insured";

(3) Being stored, disposed of, treated or processed in or upon the covered "auto";

b. Before the "pollutants" or any property in which the "pollutants" are contained are moved from the place where they are accepted by the "insured" for movement into or onto the covered "auto"; or

c. After the "pollutants" or any property in which the "pollutants" are contained are moved from the covered "auto" to the place where they are finally delivered, disposed of or abandoned by the "insured".

Paragraph a. above does not 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, if:

(1) The "pollutants" escape, seep, migrate, or are discharged, dispersed or released directly from an "auto" part designed by its manufacturer to hold, store, receive or dispose of such "pollutants"; and

(2) The "bodily injury", "property damage" or "covered pollution cost or expense" does not arise out of the operation of any equipment listed in Paragraph 6.b. or 6.c. of the definition of "mobile equipment".

Paragraphs b. and c. above do not apply to "accidents" that occur away from premises owned by or rented to an "insured" with respect to "pollutants" not in or upon a covered "auto" if:

(1) The "pollutants" or any property in which the "pollutants" are contained are upset, overturned or damaged as a result of the maintenance or use of a covered "auto"; and

(2) The discharge, dispersal, seepage, migration, release or escape of the "pollutants" is caused directly by such upset, overturn or damage.

E. "Diminution in value" means the actual or perceived loss in market value or resale value which results from a direct and accidental "loss".

F. "Employee" includes a "leased worker". "Employee" does not include a "temporary worker".

G. "Insured" means 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 is seeking coverage or against whom a claim or "suit" is brought.

H. "Insured contract" means: 1. A lease of premises; 2. A sidetrack agreement; 3. Any easement or license agreement, except in

connection with construction or demolition operations on or within 50 feet of a railroad;


4. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;

5. That part of any other contract or agreement pertaining to your business (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another to pay for "bodily injury" or "property damage" to a third party or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement;

6. That part of any contract or agreement entered into, as part of your business, pertaining to the rental or lease, by you or any of your "employees", of any "auto". However, such contract or agreement shall not be considered an "insured contract" to the extent that it obligates you or any of your "employees" to pay for "property damage" to any "auto" rented or leased by you or any of your "employees".

An "insured contract" does not include that part of any contract or agreement:

a. That indemnifies a railroad for "bodily injury" or "property damage" arising out of construction or demolition operations, within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, roadbeds, tunnel, underpass or crossing; or

b. That pertains to the loan, lease or rental of an "auto" to you or any of your "employees", if the "auto" is loaned, leased or rented with a driver; or

c. That holds a person or organization engaged in the business of transporting property by "auto" for hire harmless for your use of a covered "auto" over a route or territory that person or organization is authorized to serve by public authority.

I. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker".

J. "Loss" means direct and accidental loss or damage. K. "Mobile equipment" means any of the following types of

land vehicles, including any attached machinery or equipment: 1. Bulldozers, farm machinery, forklifts and other vehicles

designed for use principally off public roads; 2. Vehicles maintained for use solely on or next to premises

you own or rent;

3. Vehicles that travel on crawler treads; 4. Vehicles, whether self-propelled or not, maintained

primarily to provide mobility to permanently mounted:

a. Power cranes, shovels, loaders, diggers or drills; or b. Road construction or resurfacing equipment such as

graders, scrapers or rollers. 5. Vehicles not described in Paragraph 1., 2., 3., or 4.

above that are not self-propelled and are maintained primarily to provide mobility to permanently attached equipment of the following types: a. Air compressors, pumps and generators, including

spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment; or

b. Cherry pickers and similar devices used to raise or lower workers.

6. Vehicles not described in Paragraph 1., 2., 3. Or 4. above maintained primarily for purposes other than the transportation of persons or cargo. However, self-propelled vehicles with the following types of permanently attached equipment are not "mobile equipment" but will be considered "autos": a. Equipment designed primarily for:

(1) Snow removal; (2) Road maintenance, but not construction or

resurfacing; or (3) Street cleaning;

b. Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and

c. Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting or well servicing equipment.

However, "mobile equipment" does not include land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law 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". L. "Pollutants" means 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.

M. "Property damage" means damage to or loss of use of tangible property.


N. "Suit" means a civil proceeding in which:

1. Damages because of "bodily injury" or "property damage"; or

2. A "covered pollution cost or expense", to which this insurance applies, are alleged. "Suit" includes:

a. An arbitration proceeding in which such damages or "covered pollution costs or expenses" are claimed and to which the "insured" must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages or "covered pollution costs or expenses" are claimed and to which the insured submits with our consent.

O. "Temporary worker" means a person who is furnished to you to substitute for a permanent "employee" on leave or to meet seasonal or short-term workload conditions.

P. "Trailer" includes semitrailer.



BAC Form Definitions continued


We will not discuss all of the definitions in this topic. Some will be discussed at the point of their application to the BAP. An example is “pollution” which will be discussed in Topic G – Liability Coverage Exclusions. However, several defined words or terms are used in more than one section of the Policy, and we will discuss those now.




Accident

As used in the BAC Form, an "accident" does not have to be sudden. A continuous or repeated exposure to the same conditions that result in "bodily injury" or "property damage" is considered an "accident".

Example:

A truck, exceeding the weight limit restriction for a bridge, crosses the bridge daily. Over a period of time, the bridge is weakened and suffers structural damage. This is considered an "accident".





Auto

An "auto" is a land motor vehicle, "trailer", or semi-trailer designed for travel on public roads. "Auto" also includes any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law where it is licensed or principally garaged.

"Auto" is not "mobile equipment". "Mobile equipment" has the same definition in this Policy as is found in the Commercial General Liability (CGL) Policy.




Employee

The BAC Form does not actually define employee. The definition only tells us that an employee does include a leased worker (one leased by a labor-leasing firm), but does not include a temporary worker (a substitute for a permanent employee furnished to the named insured).




Insured Contracts The first five types of "insured contracts" in this Policy are the same found in the CGL Policy. Those deal with lease of premises, sidetrack agreement, easement or license agreement, an obligation as required by ordinance to indemnify a municipality, and assumed tort liability arising from the insured's business. There is no elevator maintenance liability in the BAC Form definition of "insured contract".

The BAC Form includes one additional type of "insured contract" that addresses the exposure of auto rental or lease agreements. These agreements are considered "insured contracts", if the rental or lease is entered


into as part of the named insured's business and the agreements are made by the named insured of any of its employees. The rental/lease "insured contract" does not cover property damage to the auto rented or leased by the named insured or one of the employees. We will discuss "property damage" to a rented or leased auto in Topic H Physical Damage Coverage and Exclusions.




Refer to pages 11-12 of the Business Coverage Form.

Mobile Equipment

The definition of "mobile equipment" in the BAC Form is the same definition as the "mobile equipment" definition in the CGL Coverage Form, found in the Commercial Casualty I Course.

There are six types of land vehicles that are considered "mobile equipment". Any machinery or equipment attached to any of these vehicles is also considered "mobile equipment".

The six categories have been summarized on the next page. Please refer to the definition K. of mobile equipment found on page 11-12 of the BAC Form as you study this material.

Take note of the descriptive phrases that will be key to understanding "mobile equipment". "designed for use off public roads" "used primarily to service premises you own or rent" "moves on crawler treads" "self propelled or not self propelled" "provides mobility to permanently mounted specific equipment" "not otherwise described ... maintained for purposes other than transport of persons or cargo"





Refer to K. "mobile equipment" on page 11-12 of the BAC Form.

We will look at each individually, but first consider all six categories of "mobile equipment" identified by the BAC Form.

1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads. 2. Vehicles maintained for use solely on or next to premises you own or rent. (The key words are

"maintained for use solely on premises you own or rent".) 3. Vehicles that travel on crawler treads. 4. Vehicles, whether self-propelled or not, maintained to provide mobility to permanently mounted

specific equipment. (This wording includes trailers.) 5. Other vehicles that are not self-propelled and are maintained primarily to provide mobility to

specific permanently attached equipment. 6. Vehicles not otherwise described maintained primarily for purposes other than the transportation

of persons or cargo.




BAC Form definition of Mobile Equipment lists six types of land vehicles which meet the definition of "mobile equipment":

1. Bulldozers, farm machinery, forklifts and other vehicles designed for use principally off public roads

Example:

Think of the forklifts you see in a large lumberyard or the bulldozers you see on a construction site. If these are occasionally on a public road, they still may be considered “mobile equipment”.

2. Vehicles maintained for use solely on or next to premises you own or rent

Example:

A golf cart is used by apartment managers to drive around a large apartment complex. The key words are “maintained for use solely on premises you own or rent”.





We continue our discussion of the six types of land vehicles which meet the BAC Form definition of "mobile equipment":

3. Vehicles that travel on crawler treads

Example:

Construction equipment and other commonly seen types of contractor's equipment

4. Vehicles, whether self-propelled or not, maintained primarily to provide mobility to permanently mounted specified equipment

Examples Vehicles with attached power cranes, shovels, loaders, diggers or drills OR road construction or resurfacing equipment




There are two final types of land vehicles which meet the definition of "mobile equipment" under the BAC Form:

5. Other vehicles that are not self-propelled and are maintained primarily to provide mobility to specific types of permanently attached equipment:

• air compressors • pumps and generators • spraying, welding, building cleaning, geophysical explorations, lighting and

well servicing equipment

The key words here are “not self-propelled, primarily provide mobility to the specified types of equipment”. Generally, these vehicles will be a trailer-type of vehicle with the specified equipment attached.


6. Vehicles not otherwise described maintained primarily for purposes other than the transportation of persons or cargo.

Paragraph 6. of the definition of mobile equipment includes vehicles not described in 1. through 4. which are maintained primarily for purposes other than transporting people or cargo.




Refer to paragraph 6. on page 12 of the BAC Form.

"Autos" Not "Mobile Equipment" The Coverage Form then goes on to define specific self-propelled vehicles as "autos" and not "mobile equipment". The Coverage Form language says:

However, self-propelled vehicles with the following types of permanently attached equipment are not "mobile equipment" but will be considered "autos".

There are three categories of vehicles that are considered "autos" and not "mobile equipment". We will list them all here, then look at all three individually.

a. Equipment designed primarily for snow removal, road maintenance, (but not construction or resurfacing) or street cleaning;

b. Cherry pickers and similar devices mounted on an automobile or truck chassis and used to raise or lower workers; and

c. Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment.




Refer to paragraph 6. on page 12 of the BAC Form.


Self-Propelled:

Self-Propelled vehicles designed for:

• Snow Removal • Road Maintenance (not road building or repaving) • Street cleaning

Examples: snowplow, paint striping, street sweeper

Mounted Devices:

Devices Mounted on an auto or truck chassis and used to raise and lower workers

Example: cherry pickers

Self-Propelled with permanently attached equipment:

Self-propelled vehicles with the following types of permanently attached equipment:

• Air Compressors • Pumps and generators • Spraying, welding, building, cleaning, geophysical explorations, lighting and well servicing

equipment

Example: well drilling truck

Tip: Caution: Even though the BAC Coverage Form defines item b. and c. above as "autos", the Coverage Form excludes coverage to these while the attached equipment is being operated. We will discuss this later under Exclusions.




Refer to the last paragraph of k. "mobile equipment" on page 12 of the BAC Form.

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”.


Please refer to Lesson 1 Topic B BAC Form Definitions p15 (2IC) to complete the Knowledge Check at this time.




"Property damage" means damage to or loss of use of tangible property.

"Trailer" simply states trailer includes semi-trailer

Please refer to the end of Lesson 1 Topic B to complete Self Quiz 1.


Lesson 1 Topic C – Symbols

Lesson 1 Topic C Symbols p1 (2IC)

Learning Objective: Identify a covered "auto" when presented with the appropriate symbol.

Refer to page 1 of the Business Auto Coverage Form

In this topic, we provide an overview of the use of symbols in the Business Auto Policy (BAP). Additional symbols are also suggested which may customize coverage.

On the BAP Declarations, the coverage applicable to autos is determined by the use of numerical symbols. This is the part of the BAP that tells us which autos are covered by the Policy. The symbols are entered next to a coverage in the Declarations to show what coverage applies. When a symbol is entered in the Covered Auto column next to the desired coverage, then those autos designated by that symbol have that coverage. More than one symbol may be used to designate coverage.

Tip: A symbol must be on the Declarations to trigger coverage. If there is no symbol next to a coverage item, no auto has that coverage.



The key to symbols and to analyzing coverage is to remember that the symbol belongs only to the Named Insured, not necessarily to the driver of the vehicle.

Click on the image to print a study aid which summarizes the symbols. We will go through each one listed in the next few pages.

The symbols are also fully described on page 1 of the BAC Form.

Summary of Covered Auto Symbols

Symbol Description Applicable Coverages 1 Any Auto Liability Only 2 Owned Autos Only Liability, Physical Damage, Medical Payments, Personal Injury Protection,

Uninsured Motorists 3 Owned Private Passenger Autos Liability, Physical Damage, Medical Payments, Personal Injury Protection,

Uninsured Motorists, Towing 4 Owned Autos Other Than

Private Passenger Autos Liability, Physical Damage, Medical Payments, Personal Injury Protection, Uninsured Motorists

5 Owned Autos Subject to a no- Personal Injury Protection for autos required to have No-fault benefits in


fault law the state where they are licensed or principally garaged. 6 Owned Autos Subject to a

compulsory Uninsured Motorists law

Uninsured Motorists Coverage when the law in the state where the autos are licensed or principally garaged are required to have and cannot reject Uninsured Motorists Coverage.

7 Specifically Described Autos Only

Liability, Physical Damage, medical Payments, Personal Injury Protection, Uninsured Motorists

8 Hired Autos Only – meaning autos the Named Insured leases, hires, rents or borrows – excluding those from employees, partners of a partnership, members of a limited liability company, or members of their households

Liability, Physical Damage

9 Non-owned Autos Only – autoes the Named Insured does not own, lease, hire rent or borrow. Includes autos of employees, partners, members, and their respective households

Liability Only

19 Mobile Equipment Subject To Compulsory Or Financial Responsibility Or Other Motor Vehicle Insurance Law Only

Liability only on those “autos” that are land vehicles and that would qualify under the definition of “mobile equipment” under this policy if they were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where they are licensed or principally garaged.



Symbol 1


Symbol 1 can be used to provide Liability Coverage:

• Triggers Liability Coverage for any auto. • Provides the broadest Liability Coverage possible. • May be used when there are no owned autos and an umbrella calls for underlying auto coverage.

Symbol Description Applicable Coverages 1 Any Auto Liability Only




Symbols 2 – 4


Symbols 2 - 4 are used for owned autos:

• All three symbols trigger coverage for autos owned by the named insured at the inception of the Policy as well as automatic coverage for autos (of the same type) acquired during the policy period.

• All three symbols can provide Physical Damage Coverage (towing and labor on Symbol 3).

Symbol Description Applicable Coverages 2 Owned Autos Only Liability, Physical Damage, Medical Payments, Personal Injury

Protection, Uninsured Motorists 3 Owned Private

Passenger Autos Liability, Physical Damage, Medical Payments, Personal Injury Protection, Uninsured Motorists, Towing

4 Owned Autos Other Than Private Passenger Autos

Liability, Physical Damage, Medical Payments, Personal Injury Protection, Uninsured Motorists



Symbols 5 & 6


Symbol 5 is used for owned autos:

• that are required to have no-fault benefits according to state law where the autos are licensed or principally garaged.

• Symbol 5 includes newly acquired autos if no-fault benefits are required.

Symbol 6 is also used for owned autos:

• that are required to have Uninsured Motorist Coverage according to state law where the autos are licensed or garaged.


• Symbol 6 includes newly acquired autos if the state does not permit rejection of mandatory coverage.

Symbol Description Applicable Coverages 5 Owned Autos Subject to a

no-fault law Personal Injury Protection for autos required to have No-fault benefits in the state where they are licensed or principally garaged.

6 Owned Autos Subject to a No-fault Law

Personal Injury Protection for autos required to have No-fault benefits in the state where they are licensed or principally garaged.



Symbol 7


Symbol 7 is used for specifically described autos:

• Triggers coverage for autos scheduled in the Declarations.

• Liability for trailers the named insured does not own while attached to a scheduled auto.

Symbol Description Applicable Coverages 7 Specifically Described

Autos Only Liability, Physical Damage, medical Payments, Personal Injury Protection, Uninsured Motorists



Symbol 8


Symbol 8 is used for hired autos:

• Triggers coverage for autos the named insured leases, hires, rents, or borrows • Does not include autos the named insured leases, hires, rents, or borrows from any of the named

insured's employees, partners (of partnership named insured) or members (of LLC named insured) or members of their households


Symbol Description Applicable Coverages 8 Hired Autos Only – meaning autos the Named Insured

leases, hires, rents or borrows – excluding those from employees, partners of a partnership, members of a limited liability company, or members of their households

Liability, Physical Damage



Symbol 9


Symbol 9 is for non-owned autos:

• Triggers coverage for autos the named insured does not own, lease, hire, rent, or borrow and are used in connection with the name insured's business.

• Autos owned by the named insured's employees, partners (of partnership named insured), members (of LLC named insured) or members of their household while used in the named insured's business or named insured's personal affairs.

Symbol Description Applicable Coverages

9 Non-owned Autos Only – autoes the Named Insured does not own, lease, hire rent or borrow. Includes autos of employees, partners, members, and their respective households

Liability Only



Symbol 19


Symbol 19 is used for mobile equipment subject to motor vehicle insurance law:

• Triggers Liability Coverage.


Symbol Description Applicable Coverages

19 Mobile Equipment Subject To Compulsory Or Financial Responsibility Or Other Motor Vehicle Insurance Law Only

Liability only on those “autos” that are land vehicles and that would qualify under the definition of “mobile equipment” under this policy if they were not subject to a compulsory or financial responsibility law or other motor vehicle insurance law where they are licensed or principally garaged.



Additional Symbols

There is a way you can customize coverage for a client by using additional symbols. You attach the endorsement CA 99 54 - Covered Auto Designation Symbol to describe the vehicles you wish to cover.

Example:

Your insured may want to have collision coverage only on those vehicles that are fairly new. You could use Symbol 10 and define it as follows:

Only those "autos" you own with a model year of 2010 and newer. This includes those "autos" you acquire ownership of after the policy begins.



Example

Take a look at sample entries on a Business Auto Declaration Page showing coverage symbols.

Refer to the image on Lesson 1 Topic C Symbols p11 (2IC) at this time.

Refer to Lesson 1 Topic C Symbols p12 (2IC) to complete the Knowledge Check at this time.

http://onlinedev.scic.com/dev/NewLinx/RunThruCluster.php




Automatic Coverage Symbols vs. Scheduled Coverage Symbols

When you use Symbols 2 - 6, the Policy states, "This includes those "autos" you acquire ownership of after the policy begins". This means that the named insured has automatic coverage for the type of auto shown next to the coverage without having to notify the insurer. Since Symbol 1 is "Any Auto", it automatically triggers liability coverage for any newly acquired autos. When a named insured has Symbol 7 next to a coverage, only those vehicles specifically scheduled in Item 3 of the BAP Declarations have that coverage. In our next topic, we will study the very limited coverage a named insured has for newly acquired autos when Symbol 7 is used.

Please refer to the end of Lesson 1 Topic C to complete Self Quiz 2 at this time.


Lesson 1 Topic D - Newly Acquired Autos and Liability Coverage Extensions

Lesson 1 Topic D Newly Acquired Autos & Cvg. Extensions p1 (2IC)

Learning Objective: Determine whether a newly acquired auto is covered in specific situations.

Refer to page 2 of your Business Auto Coverage Form, section titled Owned Autos You Acquire After The Policy Begins.

In this topic, you will learn about newly acquired autos and liability coverage extensions. Before proceeding further click here and read paragraph C. and paragraph D. of the BAC Form. The coverage for newly acquired "autos" is tied to the symbol used for each coverage. Whether or not the named insured has a specific coverage for a newly acquired "auto" will depend on which symbol is shown in the Declarations. We study this concept in three parts:

• Automatic Coverage Symbols 1 - 6 or 19 • Specified Autos-Symbol 7-Limited Coverage • Liability Coverage Extensions

SECTION I - COVERED AUTOS

B. Owned Autos You Acquire After The Policy Begins

1. If Symbols 1, 2, 3, 4, 5, 6 or 19 are entered next to a coverage in Item Two of the Declarations, then you have coverage for "autos" that you acquire of the type described for the remainder of the policy period.

2. But, if Symbol 7 is entered next to a coverage in Item Two of the Declarations, an "auto" you acquire will be a covered "auto" for that coverage only if: a. We already cover all "autos" that you own for that coverage or it replaces an "auto" you

previously owned that had that coverage; and b. You tell us within 30 days after you acquire it that you want us to cover it for that coverage.

C. Certain Trailers, Mobile Equipment And Temporary Substitute Autos

If Liability Coverage is provided by this Coverage Form, the following types of vehicles are also covered "autos" for Liability Coverage:

1. "Trailers" with a load capacity of 2,000 pounds or less designed primarily for travel on public roads. 2. "Mobile equipment" while being carried or towed by a covered "auto". 3. Any "auto" you do not own while used with the permission of its owner as a temporary substitute

for a covered "auto" you own that is out of service because of its: a. Breakdown; b. Repair;




c. Servicing; d. "Loss"; or e. Destruction.



Automatic Coverage: Symbols 1- 6 or 19


If any of these symbols are used to trigger a coverage in Item 2 of the Declarations, then the named insured has that coverage for newly acquired "autos" of the type described by the symbol for the remainder of the policy period. Example 1

• Assume that a named insured has a BAP in which Symbol 2 (Owned Autos Only) is used to trigger liability, comprehensive, and collision coverage. If this named insured acquires an additional auto, that auto has liability, comprehensive, and collision coverage under the Policy for the remainder of the policy period. The insured does not have to report the newly acquired auto. Premium will be picked up on audit.

Example 2

• Assume that a different named insured has a BAP in which Symbol 3 (Owned Private Passenger "Autos" only) is used to trigger liability, comprehensive, and collision coverage. If the named insured acquires a panel truck, there is no automatic coverage because the panel truck does not qualify as a private passenger auto.

It is a good practice for the named insured to inform the agent immediately of any change in auto ownership to avoid any gaps that could exist.



Specified Autos Symbol 7 - Limited Coverage



When Item 2 of the Declarations shows Symbol 7 next to a coverage, the BAC Form states that a newly acquired auto will have that coverage only if both of the following conditions are met:

1. All "autos" the named insured owns must be insured by the insurance company for that coverage; or it replaces an "auto" the named insured previously owned that has coverage and

2. This named insured must tell the insurance company within 30 days after acquiring the "auto" that the named insured wants that coverage.

If both conditions are met and the newly acquired auto is an additional unit, it will automatically have the coverage that all owned autos have. If the unit is a replacement vehicle, it will automatically have only the coverage the replaced vehicle had.



Specifically Described Autos Symbol 7 - Limited Coverage continued

Example 1 A named insured owns nine autos insured on a BAP with Symbol 7 triggering coverage. All nine autos have Liability, eight have Comprehensive, one has Specified Causes of Loss, and six have Collision. If the named insured acquires a 10th auto, that additional unit only has automatic liability coverage, because that is the only coverage all nine autos have and only for a maximum of 30 days.

Example 2 A named insured owns two autos, both of which are insured on a BAP with Symbol 7 triggering coverage. Vehicle 1 has only liability coverage, and Vehicle 2 has liability and collision coverages. If the named insured acquires a replacement auto for Vehicle 1, the new auto only has liability coverage and only for a maximum of 30 days. (The named insured must tell the insurer that Liability Coverage is wanted within 30 days after acquisition.) Physical Damage Coverage does not apply until the named insured notifies the insurance company that Physical Damage Coverage is wanted.




Specifically Described Autos Symbol 7 - Limited Coverage

Whether the newly acquired auto is an added auto or a replacement auto, there is no coverage and no coverage ever applied, if the named insured fails to give the notice within the 30-day period. Coverage will begin on the day the named insured notifies the company.

Example 3 A named insured owns one auto with Symbol 7 shown for liability, comprehensive, and collision coverages on her BAP. She acquires another auto on March 1, but does not notify the company until August 15. There was never any coverage for this newly acquired auto. The coverages she requests begin on August 15.

Note: Be careful when symbol 7 is used to trigger coverage!

Please refer to Lesson 1 Topic D Newly Acquired Autos & Cvg. Extensions p6 (2IC) to complete the Knowledge Check at this time.


Learning Objective: Identify what types of vehicles are granted coverage through the Liability Extension.

Liability Coverage Extensions

If the Business Auto Policy includes liability coverage, the following three types of vehicles automatically have liability coverage. There is no need to describe these "autos" on the Policy, and there is no premium charge either.

Trailers

Liability Coverage is automatically provided for any "trailers" that have a load capacity of 2,000 pounds or less designed primarily for travel on public road.


Mobile Equipment

Liability Coverage is automatically extended to cover liability arising out of "mobile equipment" while being towed or carried by a covered "auto".

The CGL Policy specifically excludes the transportation of mobile equipment by an "auto" owned by, operated by, rented to, or loaned to any insured. The BAP picks up that coverage here.

Temporary Substitute

Liability Coverage is automatically extended to any auto the named insured does not own that is being used, with the permission of the owner, as a temporary substitute for a covered "auto" the named insured owns that cannot be used for one of the following reasons:

• Breakdown; • Repair; • Service; • "Loss"; or • Destruction

Please refer to Lesson 1 Topic D Newly Acquired Autos & Cvg. Extensions p8 (2IC) to complete the Knowledge Check at this time.

Please refer to the end of Lesson 1 Topic D to complete Self Quiz 3 at this time.


Lesson 1 Topic E – Who Is An Insured?

Lesson 1 Topic E Who Is An Insured BAC Form p1 (2IC)

Learning Objectives: Determine who is and who is not an insured under the BAC Form.


In Topics C and D, we studied what vehicles the Business Auto Policy covers. In this topic you will learn who has coverage under the Policy. There are three classifications of insureds afforded coverage in the BAC Form.

1. "You" 2. Permissive Users of Covered "Autos" 3. Others Who Have Vicarious Liability

To get a better understanding, click here to read the Who Is An Insured provision of the Business Auto Coverage Form.

SECTION II - LIABILITY COVERAGE

1. Who Is An Insured

The following are "insureds":

a. You for any covered "auto". b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:

1) The owner or anyone else from whom you hire or borrow a covered "auto". This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.

2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.

3) Someone using a covered "auto" while he or she is working in a business of selling, servicing, repairing, parking or storing "autos" unless that business is yours.

4) Anyone other than your "employees", partners (if you are a partnership), members (if you are a limited liability company), or a lessee or borrower or any of their "employees", while moving property to or from a covered "auto".

5) A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered "auto" owned by him or her or a member of his or her household.

c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.






Who Is An Insured


“You”

"You" refers to the named insured shown in the Declarations. If the named insured is an individual, there is no automatic coverage for any spouse or for any other relative, but the named insured is an insured for any covered "auto".

A few states do have mandatory provisions that make persons other than the named individual (resident spouse, estate executor) a "you".

The named insured receives the broadest coverage.

Permissive Users of Covered "Autos"

Permissive users are individuals who are using a covered "auto" with the named insured's permission. The covered "auto" must be owned by, borrowed by, or rented to the named insured. There are five exceptions to this part of Who Is An Insured that will be covered in detail later.

(Reminder: A covered auto is one defined by the symbols shown on the first page of the BAP Declarations.)

Example:

Your named insured has an unendorsed Business Auto Policy (BAP). The employee drives the company car on a business trip.

As previously stated, there are five exceptions which we will discuss in the next few pages.

Others Who Have Vicarious Liability

The third classification of insured is anyone who is legally responsible for the conduct of any insured identified as a named insured or a person who qualifies as a permissive user. These insureds do not have to be specifically named by endorsement. If they are liable for the conduct of any insured covered by the BAP, then they automatically are an insured.

Example:

A named insured donates time to the Boy Scouts of America. If a permissive driver causes an accident with the named insured's covered "auto" while doing the volunteer work, the named insured's BAP will provide coverage for the Boy Scouts of America as well as the named insured and the permissive driver.




Who Is An Insured continued


Five types of permissive users that do not get coverage under this provision of the BAC Form:

Owner of rented or borrowed covered “auto”:

If the named insured rents or borrows a covered "auto", the owner of that "auto" is not covered under the named insured's BAP. The owner of the vehicle must look to his/her own policy for coverage. This exception does not apply if the rented or borrowed covered "auto" is a "trailer", and the "trailer" is connected to a covered "auto" owned by the named insured.

Employee using his owned “auto”:

An "employee" of the named insured using a covered "auto" that is owned by that "employee" or a member of that "employee's" household is not an insured.

Any individual working on the auto business:

Any individual working in the auto business (repairing, selling, servicing, parking or storing) is not an insured under the BAP, unless that is the named insured's business.

Example:

An auto mechanic, who is not a named insured's employee, drives the named insured's auto for a test drive. There is coverage for the named insured if the mechanic has an accident, but there is no coverage for the mechanic under the named insured's BAP.

Loading and unloading a covered “auto” by a non-employee:

The liability section of the BAP provides coverage for certain loading and unloading operations. This coverage will be discussed in Topic G - Liability Exclusions. However, there is no coverage for non- employees who load and/or unload a covered auto.

Example:

Lynn's Lumber Co. delivers lumber to a job site. Conway's employees unload the truck. Lynn's BAP does not cover Conway's employees while unloading.

Partner (of partnership) or a member (of LLC) using his owned “auto”:


Partners of partnerships or members of limited liability companies are not covered when using their own personal autos or autos owned by members of their household. It makes no difference if the use is for business or not. The BAP will not give coverage to the individuals, but it will cover the named insured partnership or the named insured limited liability company.

Please refer to Lesson 1 Topic E Who Is An Insured BAC Form p4-5 (2IC) to complete the Knowledge Checks at this time.


Learning Objective: Identify and explain the most commonly used endorsements to modify who is an insured.

Additional Insureds and the Business Auto Coverage Form

While additional insured discussions most frequently revolve around the Commercial General Liability Policy, the Business Auto Policy should not be ignored.

There are situations when named insureds will want or need to expand Who is an Insured on their Business Auto Coverage Form to provide coverage to specific individuals or organizations.



Additional Insureds and the Business Auto Coverage Form continued

There are numerous additional insured endorsements designed to meet the specific needs of the various types of additional insured under the Business Auto Coverage Form. The following endorsements modify the Who Is An Insured provision. Commonly used endorsements that change the Who Is An Insured provision:

• Drive Other Car Coverage - Broadened Coverage For Named Individuals - CA 99 10 • Individual Named Insured - CA 99 17 • Employees As Insureds - CA 99 33 • Employee As Lessor - CA 99 47 • Designated Insured - CA 20 48 • Lessor - Additional Insured And Loss Payee - CA 20 01




Example

Situation #1 Hartley's Fine Furnishings, Inc. is the named insured on a Business Auto Policy. Lloyd is the president of Hartley’s Fine Furnishings, Inc. Lloyd does not own any autos titled to him personally, and he does not have a Personal Auto Policy. The auto he drives is owned by Hartley’s Fine Furnishings, Inc., and the only auto insurance he has is from Hartley’s Business Auto Policy. Problem #1 Lloyd rents a car while he is on vacation. He has an at-fault accident. See if you can answer this question.

Will Hartley's Business Auto Policy provide Lloyd liability coverage for his accident?

Answer: No



Example

Situation #1

Hartley's Fine Furnishings, Inc. is the named insured on a Business Auto Policy.

Tom is Hartley’s top sales person. He drives a company car and has permission for 24/7 use. He does not personally own an auto, so he sees no need for a Personal Auto Policy.

Problem #2


Tom has an at-fault accident while driving a friend’s car. Tom finds out after the accident that his friend does not have insurance.

See if you can answer this question:

Will Hartley's Business Auto Policy provide Tom liability coverage for his accident?

Answer: No



Drive Other Car Coverage - Broadened Coverage for Named Individuals (CA 99 10)

Problem:

1. Lloyd rents a car while he is on vacation. He has an at-fault accident. 2. Tom has an at-fault accident while driving a friend's car. Tom finds out after the accident that his

friend does not have insurance.

The Business Auto Policy will not provide liability coverage for either Lloyd or Tom. Lloyd and Tom are not insureds under the Business Auto Policy because neither was driving a covered auto.

A covered auto does not include the use of a non-owned auto (including a rental auto) for non-business use.

Solution: Drive Other Car Coverage - Broadened Coverage for Named Individuals (CA 99 10)

POLICY NUMBER: COMMERCIAL AUTO CA 99 10 03 10

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.

DRIVE OTHER CAR COVERAGE – BROADENED COVERAGE FOR NAMED INDIVIDUALS

This endorsement modifies insurance provided under the following:

BUSINESS AUTO COVERAGE FORM BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM


TRUCKERS COVERAGE FORM

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement.

This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below.

Named Insured:

Endorsement Effective Date:

Schedule

Name of Individual: Liability Limit: $ Premium: $ Auto Medical Payments Limit: $ Premium: $ Comprehensive: Deductible: $ Premium: $ Collision Deductible: $ Premium: $ Uninsured Motorists Limit: $ Premium: $ Underinsured Motorists Limit: $ Premium: $ Information required to complete this Schedule, if not shown above, will be shown in the Declarations

Note – When Uninsured Motorists Coverage is provided at limits higher than the basic limits required by a financial responsibility law, Underinsured Motorists Coverage is included, unless otherwise noted. If Underinsured Motorists Coverage is provided as a separate coverage, make appropriate entry in the Schedule above.

A. This endorsement changes only those coverages where a premium is shown in the Schedule. B. Changes In Liability Coverage

1. Any "auto" you don't own, hire or borrow is a covered "auto" for Liability Coverage while being used by any individual named in the Schedule or by his or her spouse while a resident of the same household except:

a. Any "auto" owned by that individual or by any member of his or her household. b. Any "auto" used by that individual or his or her spouse while working in a business

of selling, servicing, repairing or parking "autos". 2. The following is added to Who Is An Insured:

Any individual named in the Schedule and his or her spouse, while a resident of the same household, are "insureds" while using any covered "auto" described in Paragraph B.1. of this endorsement.

C. Changes In Auto Medical Payments And Uninsured And Underinsured Motorists Coverages The following is added to Who Is An Insured: Any individual named in the Schedule and his or her "family members" are "insureds" while "occupying" or while a pedestrian when being struck by any "auto" you don’t own except: Any "auto" owned by that individual or by any "family member".

D. Changes In Physical Damage Coverage


Any private passenger type "auto" you don't own, hire or borrow is a covered "auto" while in the care, custody or control of any individual named in the Schedule or his or her spouse while a resident of the same household except:

1. Any "auto" owned by that individual or by any member of his or her household. 2. Any "auto" used by that individual or his or her spouse while working in a business of

selling, servicing, repairing or parking "autos". E. Additional Definition

As used in this endorsement: "Family member" means a person related to the individual named in the Schedule by blood, marriage or adoption who is a resident of the individual's household, including a ward or foster child.



Drive Other Car Coverage - Broadened Coverage for Named Individuals (CA 99 10)

Typically used to provide non-owned coverage similar but not identical to that provided by a Personal Auto Policy for an individual. This individual is typically a corporate officer or key employee who is provided a company car but does not own a personal auto and does not have a Personal Auto Policy.

• Individual has to be named on the endorsement schedule for non-owned auto coverage to apply to him/her.

• Non-owned auto coverage options include liability, auto medical payments and/or no-fault benefits, uninsured and underinsured motorist coverage, and physical damage coverage.

• Endorsement automatically extends coverages selected to resident spouse. • Endorsement does NOT automatically extend the coverage selected to resident family members.

Exception: If auto medical payments and uninsured/underinsured coverage is a selected option, then family members of the individual named are considered insureds for auto medical payments and uninsured/underinsured motorists coverage while they occupy a non-owned auto or while a pedestrian they are struck by a non-owned auto. Note: If broader coverage is desired resident family members must also be named on the endorsement schedule.)

• There is a premium charge for each named individual. • All BAC Form's exclusions apply; none are removed.


Errors & Omissions Alert


There is also a personal lines solutions: PP 03 22 Named Non-owner Coverage, which provides broader liability coverage than the coverage afforded by CA 99 10. However, this endorsement does not provide physical damage coverages. Refer to the Forms Library link on the top menu bar for a copy of PP 03 22.



Example

Situation #2 Danny Clarke dba Lacey Landscaping is the named insured on a Business Auto Policy. Danny owns a small landscaping business. Since all of the vehicles personally owned by Danny are insured on the Business Auto Policy, Danny does not have a Personal Auto Policy. Problem #1 Chris, Danny's wife, is driving her mother’s car to take her mother to the grocery store when she has an at-fault accident. Her mom carried minimum limits that are insufficient to pay all of the damages. Chris has been sued. See if you can answer this question:

Will the Business Auto Policy provide liability coverage for Chris?

Answer: No



Example

Situation #2 Danny Clarke dba Lacey Landscaping is the named insured on a Business Auto Policy. Danny owns a small landscaping business. Since all of the vehicles personally owned by Danny are insured on the Business Auto Policy, Danny does not have a Personal Auto Policy.


Problem #2 Danny's 19-year old daughter Lisa (who lives with him) is driving a friend’s car home from a football game. While speeding, Lisa loses control of the car and hits a guardrail. The friend, who was in the car with Lisa, is seriously injured and sues Lisa for her injuries. See if you can answer this question:

Will the Business Auto Policy provide liability coverage for Lisa?

Answer: No



Individual Named Insured (CA 99 17)

Problem:

1. Chris is driving her mother’s car to take her mother to the grocery store when she has an at-fault accident. Her mom carried minimum limits that are insufficient to pay all of the damages. Chris has been sued.

2. Danny's 19-year old daughter, Lisa, (who lives with him) is driving a friend’s car home from a football game. While speeding, Lisa loses control of the car and hits a guardrail. The friend, who was in the car with Lisa, is seriously injured and sues Lisa for her injuries.

The Business Auto Policy will not provide liability coverage for either Chris or Lisa. Chris and Lisa are not insureds under the Business Auto Policy since neither was driving a covered "auto". A covered "auto" does not include the use of a non-owned auto for non-business use.

Solution: Individual Named Insured (CA 99 17)

COMMERCIAL AUTO CA 99 17 03 06


INDIVIDUAL NAMED INSURED



BUSINESS AUTO COVERAGE FORM BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM


If you are an individual, the policy is changed as follows:

A. Changes In Liability Coverage 1. The Fellow Employee Exclusion does not apply to "bodily injury" to your or any "family member’s"

fellow "employees". 2. Personal Auto Coverage

If any "auto" you own of the "private passenger type" is a covered "auto" under Liability Coverage: a. The following is added to Who Is An Insured:

"Family members" are "insureds" for any covered "auto" you own of the "private passenger type" and any other "auto" described in Paragraph 2.b. of this endorsement.

b. while being used by you or by any "family member" except: 1) Any "auto" owned by any "family members". 2) Any "auto" furnished or available for your or any "family member’s" regular use. 3) Any "auto" used by you or by any of your "family members" while working in a business of

selling, servicing, repairing or parking "autos". 4) Any "auto" other than an "auto" of the "private passenger type" used by you or any of your

"family members" while working in any other business or occupation. c. The Pollution Exclusion and, if forming a part of the policy, the Nuclear Energy Liability Exclusion

(Broad Form), does not apply to any covered "auto" of the "private passenger type". d. The following exclusion is added and applies only to "private passenger type" covered "autos":

This insurance does not apply to: "Bodily injury" or "property damage" for which an "insured" under the policy is also an "insured" under a nuclear energy liability policy or would be an "insured" but for its termination upon its exhaustion of its limit of liability. A nuclear energy liability policy is a policy issued by Nuclear Energy Liability Insurance Association, Mutual Atomic Energy Liability Underwriters or any of their successors. This exclusion does not apply to "autos" registered or principally garaged in New York.

B. Changes In Physical Damage PERSONAL AUTO COVERAGE If any "auto" you own of the "private passenger type" is a covered "auto" under Physical Damage Coverage, a "non-owned auto" will also be considered a covered "auto". However, the most we will pay for "loss" to a "non-owned auto" which is a "trailer" is $500.

C. Additional Definitions As used in this endorsement: 1. "Family member" means a person related to you by blood, marriage or adoption who is a

resident of your household, including a ward or foster child. 2. The words "you" and "your" include your spouse if a resident of the same household except for


notice of cancellation. 3. When the phrase "private passenger type" appears in quotation marks it includes any covered

"auto" you own of the pick-up or van type not used for business purposes, other than farming or ranching.

4. "Non-owned auto" means any "private passenger type" "auto", pick-up, van or "trailer" not owned by or furnished or available for the regular use of you or any "family member", while it is in the custody of or being operated by you or any "family member".



Individual Named Insured (CA 99 17) continued

This endorsement is added to a Business Auto Policy when the named insured is an individual; and at least one of the covered autos is a private passenger type auto.

• Who Is An Insured for liability is changed to include the resident spouse of the named insured and "family members" (as defined) for any covered auto of the private passenger type and non-owned autos.

• This endorsement, in essence, turns the Business Auto Policy into a Personal Auto Policy • The Fellow Employee Exclusion does not apply to fellow employees of the named insured or family

members. • There is not typically a premium charge for this endorsement. • Unlike the Drive Other Car Coverage endorsement, family members are automatically included

without being listed. • Unlike the Drive Other Car Coverage endorsement, coverages do not need to be individually

selected. This endorsement automatically extends the coverages provided under the Business Auto Policy.



Example


Situation #3 Rhodes Insurance, Inc. is the named insured on a Business Auto Policy. The three cars insured on the Policy are used by the corporate officers. Rhodes does not provide company cars to any of their other employees, but Rhodes' BAP does provide coverage for nonowned autos.

Their bookkeeper, Becky, uses her personal vehicle to drive to and from the bank for agency business.

Problem #1

Becky has an at-fault accident while on the way to the bank.

Will Rhodes' Business Auto Policy provide Becky liability coverage for her accident?

Answer: No



Example

Situation #3

Rhodes Insurance, Inc., is the named insured on a Business Auto Policy. The three cars insured on the Policy are used by the corporate officers. Rhodes does not provide company cars to any of their other employees, but Rhodes' BAP does provide coverage for nonowned autos.

Travis, the owner’s son, is employed at the agency as a producer. He uses his personal auto for business regularly.

Problem #2

Travis is driving his personal car to a client’s office when he has an at-fault accident.


Will Rhodes' Business Auto Policy provide Travis liability coverage for his accident?


Answer: No



Employees as Insureds (CA 99 33)

Problem:

1. Becky has an at-fault accident while on the way to the bank. 2. Travis is driving his personal car to a client’s office when he has an at-fault accident.

The Business Auto Policy will not provide liability coverage for either Becky or Travis as they were driving vehicles owned by them. Who Is An Insured specifically excludes an employee if the covered auto is owned by that employee or a member of his or her household. Note: The only coverage available to Becky and Travis is the coverage from their Personal Auto Policy.

Solution: Employees As Insureds (CA 99 33)

COMMERCIAL AUTO CA 99 33 02 99


EMPLOYEES AS INSUREDS


BUSINESS AUTO COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM


The following is added to the Section II – Liability Coverage, Paragraph A.1. Who Is An Insured Provision:


Any "employee" of yours is an "insured" while using a covered "auto" you don't own, hire or borrow in your business or your personal affairs.



Employees as Insureds (CA 99 33) continued

More about Employees as Insured (CA 99 33

• This endorsement addresses the exclusionary language that states an employee is not an insured while driving a covered "auto" owned by that employee or a member of that employee's household.

• Who Is An Insured is changed to include employees while using a covered "auto" the named insured doesn’t own, hire or borrow in the named insured’s business or personal affairs.

• Employees using their personal vehicles on behalf of the named insured are now insureds for liability coverage.

• Liability coverage is provided on an excess basis. The employee’s personal insurance is primary. • This endorsement also prohibits the Business Auto Policy insurer from subrogating against the

employee when the employee’s negligence is the cause of the loss as the employee is now an insured.

• It should be noted that this endorsement, like all endorsements, is subject to underwriting approval. Insurance companies may require the named insured to verify that each employee has Personal Auto Policy liability coverage at specified minimum liability limits such as 100/300/50.



Example

Situation #4

Alpena Roofing, Inc., is the named insured on a Business Auto Policy. Art, the president of Alpena, leases his


personally owned 2009 Mercedes to the business for tax reasons.

Problem #1

Art wants the Mercedes to have coverage under Alpena's Business Auto Policy. He wants the coverage to extend to him as owner of the "auto".


Is there an endorsement available to provide Art the coverage he wants when adding the Mercedes to Alpena's Business Auto Policy?

Answer: Yes



Employee as Lessor (CA 99 47)

Problem: The "auto" is not owned by the named insured. Solution: Employee as Lessor (CA 99 47)



EMPLOYEE AS LESSOR


BUSINESS AUTO COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless

http://magma.magma.scic.com/Elearning/AI/CA9947.pdf


modified by the endorsement.

This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below.

Named Insured:

Endorsement Effective Date:

SCHEDULE

Description Of “Auto”:

Information required to complete this Schedule, if not shown above, will be shown in the Declarations.

A. Any "auto" described in the Schedule will be considered a covered "auto" you own and not a covered "auto" you hire, borrow or lease.

B. While any covered "auto" described in the Schedule is leased to you by one of your "employees", Who Is An Insured is changed to include that "employee" as an "insured".

• This endorsement is used to treat an "auto" hired, borrowed or leased by the named insured as an owned "auto".

• The "auto" is described on the endorsement and/or scheduled in the Declarations and is afforded primary liability and physical damage coverage just as if it was an owned "auto".

• Since the "auto" is leased from an employee, the Who Is An Insured provision is changed to include the employee as an insured for that "auto".

• Unlike the Employees As Insureds CA 99 33, this endorsement provides primary coverage.


Errors & Omissions Alert

If Art does not have a Personal Auto Policy, this is not the only endorsement he needs. He may also need


Drive Other Car Coverage - Broadened Coverage for Named Individuals or a Named Non-Owner Coverage to provide coverage for his personal use of non-owned vehicles. If it is decided to use the DOC endorsement, the Fellow Employee Exclusion of the BAP should be deleted for Art.



Example

Situation #5 Rincon Construction was hired by ADR, Inc. to haul debris from its property. Problem #1 ADR wants to be added to Rincon's Business Auto Policy as an additional insured in the event Rincon has an auto accident while hauling the debris. ADR is already an automatic insured by Policy language. We saw previously that Who Is An Insured includes:

• Anyone responsible for the conduct of an insured (Vicarious Liability).

However, ADR wants written proof this is true. See if you can answer this question:

Is there an endorsement available to specifically show ADR as an additional insured on Rincon's Business Auto Policy?

Answer: Yes




Designated Insured (CA 20 48)

Problem: ADR is already an insured by Policy language. However, ADR wants proof that this is true. Can ADR be shown as an additional insured on Rincon's Policy? Yes, an endorsement can be attached to the policy to reflect this status. Solution: Designated Insured (CA 20 48)



DESIGNATED INSURED


BUSINESS AUTO COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by this endorsement. This endorsement identifies person(s) or organization(s) who are "insureds" under the Who Is An Insured Provision of the Coverage Form. This endorsement does not alter coverage provided in the Coverage Form. This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below. Endorsement Effective: Countersigned By:

Named Insured: (Authorized Representative)

SCHEDULE

http://magma.magma.scic.com/Elearning/AI/CA20482I.pdf


Name of Person(s) or Organization(s):

(If no entry appears above, information required to complete this endorsement will be shown in the Declarations as applicable to the endorsement.)

Each person or organization shown in the Schedule is an "insured" for Liability Coverage, but only to the extent that person or organization qualifies as an "insured" under the Who Is An Insured Provision contained in Section II of the Coverage Form.

• This endorsement was developed to give insurers a way to respond to requests to specifically show a person or organization as an additional insured.

• This endorsement allows the insurance company to list person(s) or organization(s) as an additional insured even though the Who Is An Insured provision already grants insured status to that person or organization liable for the conduct of an insured.

• This endorsement does not provide coverage that wasn’t already there.



Example

Situation #6

Berg Industries, Inc. leases several of the autos insured on its Business Auto Policy.

Problem #1

The leasing company requires Berg to provide liability coverage and to protect its interest in the vehicles.


Does the Business Auto Policy automatically provide this protection for a lessor?

Answer: No




Lessor - Additional Insured and Loss Payee (CA 20 01)

Problem:

The leasing company requires Berg to provide liability coverage and to protect its interest in the vehicles. The Business Auto Policy does not automatically provide this protection for a lessor.

Solution: Lessor - Additional Insured and Loss Payee (CA 20 01)



LESSOR . ADDITIONAL INSURED AND LOSS PAYEE


BUSINESS AUTO COVERAGE FORM BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM

With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement. This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below.

http://magma.magma.scic.com/Elearning/AI/CA20013P.pdf


Named Insured: Endorsement Effective Date:

Countersignature Of Authorized Representative Name: Title: Signature: Date:

SCHEDULE

Insurance Company:

Policy Number: Effective Date:

Expiration Date:

Named Insured:

Address:

Additional Insured (Lessor):

Address:

Designation Or Description Of “Leased Autos”:

Coverages Limit of Insurance Liability $ Each “Accident”

Comprehensive Actual Cash Value Or Cost Of Repair Whichever Is Less, Minus $ Deductible For Each Covered "Leased Auto"

Collision Actual Cash Value Or Cost Of Repair Whichever Is Less, Minus $ Deductible For Each Covered "Leased Auto"

Specified Causes of Loss

Actual Cash Value Or Cost Of Repair Whichever Is Less, Minus $ Deductible For Each Covered "Leased Auto"

Information required to complete this Schedule, if not shown above, will be shown in the Declarations

A. Coverage 1. Any "leased auto" designated or described in the Schedule will be considered a covered "auto"

you own and not a covered "auto" you hire or borrow. 2. For a "leased auto" designated or described in the Schedule, Who Is An Insured is changed to

include as an "insured" the lessor named in the Schedule. However, the lessor is an "insured"


only for "bodily injury" or "property damage" resulting from the acts or omissions by: a. You; b. Any of your "employees" or agents; or c. Any person, except the lessor or any "employee" or agent of the lessor, operating a "leased

auto" with the permission of any of the above. B. Loss Payable Clause

1. We will pay, as interest may appear, you and the lessor named in this endorsement for "loss" to a "leased auto".

2. The insurance covers the interest of the lessor unless the "loss" results from fraudulent acts or omissions on your part.

3. If we make any payment to the lessor, we will obtain his or her rights against any other party.

C. Cancellation 1. If we cancel the policy, we will mail notice to the lessor in accordance with the Cancellation

Common Policy Condition. 2. If you cancel the policy, we will mail notice to the lessor. 3. Cancellation ends this agreement.

D. The lessor is not liable for payment of your premiums. E. Additional Definition

As used in this endorsement: "Leased auto" means an "auto" leased or rented to you, including any substitute, replacement or extra "auto" needed to meet seasonal or other needs, under a leasing or rental agreement that requires you to provide direct primary insurance for the lessor.

• This endorsement is used to treat an auto leased by the named insured as an owned "auto". • This endorsement is used to add the lessor of a leased "auto" as an insured on the Business Auto

Policy. • This endorsement also adds the lessor of the leased "auto" as a loss payee. • The endorsement defines a leased "auto" as an auto leased or rented to the named insured under a

leasing or rental agreement that requires the named insured to provide direct primary insurance for the lessor.

• If the lease does not require direct primary insurance for the lessor, this endorsement will not provide physical damage coverage for the lessor’s interest in the "auto".


Lesson 1 Topic F - Liability Insuring Agreement

Lesson 1 Topic F Liability Insuring Agreement (BAC) p1 (2IC)

Learning Objective: Recognize the paragraphs of the Insuring Agreement in the BAC Form.


SECTION II - LIABILITY COVERAGE

A. Coverage 1. Who Is An Insured 2. Coverage Extensions

a. Supplementary Payments b. Out-Of-State Extensions

B. Exclusions C. Limit Of Insurance

We will continue our study of the Business Auto Coverage Form by examining Section II - Liability Coverage. You will find it at the top of the second column on page 2 of your Business Auto Coverage Form. We will review the following in this topic as they apply to the Business Auto Policy. We have already discussed the Who Is An Insured portion of the Coverage.

• Insuring Agreement • Supplementary Payments • Out-Of-State Coverage Extensions

Following the Coverage provisions we will examine the Exclusions applicable and then the Limit of Insurance. At this point, click here to read the first three paragraphs of the liability insuring agreement from the Business Auto Coverage Form.

SECTION II LIABILITY COVERAGE A. Coverage

We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance or use of a covered "auto". 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". We have the right and duty to defend any "insured" against a "suit" asking for such damages or a "covered pollution cost or expense". However, we have no duty to defend any "insured" against a "suit" seeking damages for "bodily injury" or "property damage" or a "covered pollution cost or expense" to which this insurance does not apply. We may investigate and settle any claim or "suit" as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.



Insuring Agreement


The first paragraph of the liability insuring agreement states that the insurance company will pay all sums that an insured must legally pay because of:

• "Bodily injury" or "property damage"; • That arises from the ownership, maintenance, or use of a covered "auto"; • Caused by an "accident"; and is • Not excluded by this Policy.

The second paragraph of the insurance agreement states that the insurance company will pay "covered pollution cost or expense" caused by an "accident" resulting from the ownership, maintenance or use of a covered "auto".

As you will see in the BAC Exclusions Section, there are only a few covered pollution losses; therefore, there are few instances that "covered pollution cost or expense" will be paid.



Insuring Agreement continued


The third paragraph indicates that besides paying for covered "accidents", the insurance company has the right and the duty to defend any insured against a "suit" seeking covered damages or covered cleanup costs. If there is no coverage, the company does not have to defend. The company can investigate and/or settle any claim as it sees fit. Once the insurance company has paid the Limit of Insurance, it no longer has a duty to defend.


Learning Objective: Explain the two Coverage Extensions in the BAC Form.

Coverage Extensions


Section II-Liability Coverage in the BAC Form contains two Coverage Extensions.

• Supplementary Payments • Out-of-state Coverage Extensions

2. Coverage Extensions a. Supplementary Payments

We will pay for the "insured": 1) All expenses we incur. 2) Up to $2,000 for cost of bail bonds (including bonds for related traffic law

violations) required because of an "accident" we cover. We do not have to furnish these bonds.

3) The cost of bonds to release attachments in any "suit" against the "insured" we defend, but only for bond amounts within our Limit of Insurance.

4) All reasonable expenses incurred by the "insured" at our request, including actual loss of earnings up to $250 a day because of time off from work.

5) All costs taxed against the "insured" in any "suit" against the "insured" we defend. 6) All interest on the full amount of any judgment that accrues after entry of the

judgment in any "suit" against the "insured" we defend, but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.

These payments will not reduce the Limit of Insurance. b. Out-Of-State Coverage Extensions

1) While a covered "auto" is away from the state where it is licensed we will: Increase the Limit of Insurance for Liability Coverage to meet the limits specified by a


compulsory or financial responsibility law of the jurisdiction where the covered "auto" is being used. This extension does not apply to the limit or limits specified by any law governing motor carriers of passengers or property.

2) Provide the minimum amounts and types of other coverages, such as nofault, required of out-of-state vehicles by the jurisdiction where the covered "auto" is being used.

We will not pay anyone more than once for the same elements of loss because of these extensions.



Coverage Extensions continued

Supplementary Payments

The Supplementary Payments are paid in addition to any limit of insurance provided by the BAP. There are six types of supplementary payments included in the BAP.

1. The insurance company will pay costs it incurs on behalf of the insured while investigating, settling, and/or defending the insured. Examples include, but are not limited to, investigative reports, expert testimony, legal fees, and court costs.

Example: Fee for Expert Witness' Testimony





Bail Bonds

2. The insurance company will pay up to $2,000 for the cost of bail bonds (including bonds for related traffic law violations) required because of a covered "accident". The insurance company does not


have to provide these bonds, only pay for them.





Bonds for release of attachments made against the insured

3. The insurance company will pay the cost of bonds for release of attachments made against the insured in any "suit" the insurance company is defending. (Attachments are legal proceedings where a defendant files and gets a legal claim against the insured's assets to assure value to pay any judgment and/or claim.) In order to have use of the assets, the insured may be required to post a bond for the assets' value. The insurance company does not have to provide these bonds, only pay for them.





4. The insurance company will pay all reasonable expenses that the insured incurs at the company's request. These include, but are not limited to, travel, meals, and lodging. In addition, the insurance company will pay the insured up to $250 per day for lost earnings because of missed work.

Example: Reasonable travel expenses incurred at the request of the insurance company






Filing Fees

5. The insurance company will pay all court costs taxed against the insured in any "suit" that the company defends. However these payments do not include attorneys' fees or attorney's expenses imposed by the court.





Post judgment interest

6. The insurance company will pay for post-judgment interest. Remember from the CGL Policy that post-judgment interest is set by the court. This interest accrues from the date of the judgment until the judgment is paid. (Pre-judgment interest is paid as part of the Limit Of Insurance in most states.)




Out-Of-State Coverage Extensions When a covered "auto" is operating in another jurisdiction, these coverage extensions give additional coverages required by that jurisdiction's law. These two are:

1. Higher limits than policy limits to comply with the laws where the "auto" is being used. However


this extension does not apply to the laws governing motor carriers of passengers or property. 2. Additional benefits, such as no-fault or mandatory personal injury protection, required of out-of-

state vehicles by the jurisdiction where the covered "auto" is being used.

Please refer to the end of Lesson 1 Topic F to complete Self Quiz 4 at this time.


Lesson 1 Topic G - Liability Exclusions

Lesson 1 Topic G BAC Liability Exclusions p1 (2IC)

Learning Objective: Apply the Liability Coverage Exclusions of the BAC Form to specific situations.


As with the CGL Policy, the BAC Form's Insuring Agreement is very broad. Thirteen liability exclusions restrict the scope of liability coverage found in the Insuring Agreement.

1. Expected Or Intended Injury 2. Contractual 3. Workers Compensation 4. Employee Indemnification And Employer’s Liability 5. Fellow Employee 6. Care, Custody Or Control 7. Handling Of Property 8. Movement Of Property By Mechanical Device 9. Operations 10. Completed Operations 11. Pollution 12. War 13. Racing



13 BAC Form Liability Exclusions

Exclusions

We will study the exclusions that restrict the insurance protection of the BAC Form on the next several pages, and offer additional explanation for the exclusions which impact loading and unloading. As with all exclusions, coverage is excluded for:


• exposures better covered under other types of policies, • exposures covered by endorsement for an additional premium, or • exposures that are not insurable under any policy or endorsement.



The Major BAC Liability Exclusions

Expected Or Intended Injury:

If the insured expects or intends to cause "bodily injury" or "property damage", then the Policy does not provide coverage.

The CGL Policy has an exception for "bodily injury" resulting from the use of reasonable force to protect persons or property, but there is no such exception in the BAC Form.

Contractual Liability:

This BAC Form does not cover liability assumed under any contract or agreement other than liability assumed in an "insured contract" or that the insured would have in the absence of the contract. We discussed the definition of "insured contract" in Topic B. If you need to review that definition, navigate back there now.

Workers Compensation:

The BAC Form will not cover any obligation of the insured to provide benefits under workers compensation, disability benefits or unemployment compensation law. In general, almost any claim involving the injury to an "employee" will not be covered by the BAC Form.

Employee Indemnification and Employer’s Liability:

Any obligation of the insured to pay for liability arising out of work-related accidents to an "employee", or to any consequential liability to his family, is not covered. However, this exclusion does not apply to domestic "employees" not entitled to workers compensation benefits or to liability assumed by the insured under an "insured contract".

Fellow Employee:


Liability for bodily injury arising out of an auto accident in which one "employee" of the insured negligently injures a fellow "employee" in the scope of employment is not covered.

This exclusion also applies to consequential bodily injury to the injured "employee's" family members.

Care, Custody Or Control

This exclusion states that damage to property owned by, being transported by, or in the care, custody, or control of the insured is not covered (There are special inland marine policies to cover these exposures). This exclusion does not apply to liability assumed under a sidetrack agreement.



The Major BAC Form Liability Exclusions

Handling of Property

This BAC Form does not cover "bodily injury" or "property damage" resulting from the handling of property:

• Before it is moved from the place where it is accepted by the insured for movement into or onto the covered auto; OR

• after it is moved from the covered auto to the place where it is finally delivered by the insured.

The BAP and CGL Policy dovetail the treatment of loading and unloading. The CGL Policy stops when goods are accepted for movement onto the "auto", the BAP covers the exposure associated with loading, in transit, and unloading, and the BAP continues until the goods are finally delivered. At that time the CGL Policy picks up the coverage. Let's look at some examples.

Example #1: Ozzie's Office Supply Store stacks boxes by the front door for pickup. The top two boxes fall, injuring a pedestrian.

Policy: Ozzie's CGL Policy provides coverage because the goods have not been accepted for movement onto an "auto".

Example #2: Ozzie's driver begins moving the boxes onto the delivery truck. He drops one of the boxes and injures another pedestrian.


Policy: Ozzie's BAP provides coverage because the goods have been accepted for movement onto an auto.

Example #3: While driving across town, one of the boxes falls off the truck, causing extensive damage to the parked Jaguar it hit.

Policy: Ozzie's BAP provides coverage because the goods have been accepted for movement onto an "auto", are in transit, and have not been finally delivered.

Example #4: After final delivery of the shipment, the improperly stacked boxes fall and damage some computer equipment at the purchaser's office.

Policy: Ozzie's BAP no longer provides coverage because the goods have been finally delivered by the insured. This represents liability arising out of a completed operation that Ozzie's CGL Policy will cover.

Tip: When you have clients who move property around frequently, it is a good idea to be sure the BAP and the CGL Policy are written by the same insurance company to avoid coverage disputes involving the loading and unloading of vehicles.




Movement Of Property By Mechanical Device

This insurance does not apply to "bodily injury" or "property damage" resulting from the movement of property by a mechanical device (other than a hand truck) unless the device is attached to the covered "auto".

If the insured uses any type of mechanical device in the loading or unloading process, the BAC Form provides coverage only if the mechanical device is attached to the covered "auto" or the mechanical device is a hand truck (dolly). Loading and unloading an "auto" using an attached hydraulic lift-gate or attached mechanical crane is covered under the BAC Form. If it involves detached equipment (e.g., forklift), then the CGL Policy provides insurance protection.





Operations:

This insurance does not apply to "bodily injury" or "property damage" arising out of the operation of any equipment listed in Paragraphs 6.b. and 6.0 of the definition of "mobile equipment". This corresponds to the similar language in the CGL Policy for this type of equipment. If you remember, these are "autos" designed to give mobility to permanently mounted cherry pickers, welders, compressors, lighting systems, pumps, sprayers, building cleaning, well servicing, and geophysical exploration equipment.

The mobility or over-the-road exposure of these "autos" is covered by the BAC Form. Whereas the operation of the equipment attached to these "autos" is covered by the CGL Policy.

Completed Operations:

The insurance does not apply to "bodily injury" or "property damage" arising out of the named insured's work after that work has been completed or abandoned. Insurance protection for liability arising from completed operations is covered under the CGL Policy, subject to the terms and conditions of the CGL Policy.




Pollution:

The BAC Form excludes almost all "bodily injury" and "property damage" arising out the pollution exposure, including the actual damage or harm caused by the pollutants and costs to clean up and/or test for pollutants.


By means of exceptions found in this exclusion, the BAC Form gives coverage for "bodily injury" and "property damage" arising out of a pollution incident under the following circumstances:

1. Fluids , lubricants, fuels, exhaust gases or other similar "pollutants" that are needed for or result from the normal electrical, hydraulic or mechanical functioning of a covered "auto" are covered if they escape directly from an "auto" part designed by its manufacturer to hold, store, receive or dispose of such "pollutants". For example, the covered "auto" is involved in an "accident", causing fuel to leak from the fuel tank.

2. A covered "auto" causes damage to property containing a "pollutant" as long as this does not occur on premises the "insured" owns or rents and as long as the property containing the pollutant is not carried or contained on a covered auto.

For example, the insured runs into an oil storage tank on a neighbor's premises, causing it to leak. This is an example of a pollution covered by the BAP.




War:

This insurance does not apply to “bodily injury” or “property damage” due to war.

Racing:

This insurance does not apply to covered "autos" while used in any professional or organized racing or demolition contest or stunting activity, or while practicing or preparing for such contest or activity. Note the word used instead of operated or participating.

Please refer to Lesson 1 Topic G BAC Liability Exclusions p9 (2IC) to complete the Knowledge Check at this time.


Lesson 1 Topic H - Limit Of Insurance

Lesson 1 Topic H - Limit of Insurance p1 (2IC)

Refer to page 5 of the BAC Form.

The last provision of Section II - Liability Coverage addresses the Limit Of Insurance. It indicates that the number of covered "autos", the number of insureds, the number of premiums paid, the number of claims made, nor the number of vehicles involved in the "accident" does not increase the Limit Of Insurance for Liability Coverage.

Example:

The named insured causes an auto accident involving two other autos and injuring four people. Regardless the number of claims, the most the BAP will pay for this one accident is the limit of liability indicated in the Declarations.

Please refer to the end of Lesson 1 Topic H to complete Self Quiz 5 at this time.


Lesson 1 Topic I BAC Form Section III - Physical Damage Coverage and Exclusions

Lesson 1 Topic I BAC Form Physical Damage Coverage and Exclusions p1 (2IC)

Learning Objective: Explain the application of the BAC Form's Physical Damage Coverage.

Please refer to page 6 of your Business Auto Coverage Form. The Physical Damage Coverage begins near the top of the left column.

Section III of the BAC Form is Physical Damage Coverage. Many businesses face potential losses if their "autos" are damaged, destroyed, or stolen. They may also incur additional expenses to rent replacement "autos" while repairs are being made. In this topic, you will study the ways you can provide physical damage coverage for your clients, as outlined in the four areas of the Policy provisions: Coverage, Exclusions, Limit Of Insurance and Deductible.



BAC Form Physical Damage Coverage

Please refer to page 6 of your Business Auto Coverage Form. The Physical Damage Coverage begins near the top of the left column.

We will discuss four separate items of coverage granted under the Business Auto Coverage Form:

1. "We will pay..." 2. Towing 3. Glass Breakage - etc. 4. Coverage Extensions



BAC Form Physical Damage Coverage - We Will Pay


Under "We..." the insuring agreement promises to pay for "loss" to a covered "auto" or its equipment. Three types of coverage are offered.

Comprehensive Coverage is coverage for any cause except collision or overturn.

Specified Causes Of Loss Coverage is For "Loss" Caused By:

• Fire, lightning, or explosion; • Theft; • Windstorm, hail or earthquake; • Flood • Mischief or vandalism; or • The sinking, burning, collision, or derailment of any conveyance transporting the covered "auto"

Collision Coverage is for collision with another object or overturn.

The named insured can choose either Comprehensive or Specified Causes Of Loss Coverage when insuring the vehicles. Most companies require one of these two coverages before they will include collision coverage.



BAC Form Physical Damage Coverage - Towing & Glass Breakage


Towing

Towing includes labor costs if performed at the place of disablement. It can be purchased for private passenger type "autos" only.

Glass Breakage - Hitting A Bird Or Animal - Falling Objects OR Missiles

Glass breakage will be covered under Comprehensive Coverage if the named insured has purchased that coverage. The named insured has the option of having glass breakage coverage under Collision if caused by collision or overturn.

In addition, if the named insured has purchased Comprehensive Coverage, loss caused by hitting a bird or


animal and loss caused by a missile or falling object will be covered under Comprehensive Coverage.



BAC Form Physical Damage Coverage - Coverage Extensions

Refer to page 6 of your Business Auto Policy - Physical Damage Exclusions

Coverage Extensions

• Transportation Expenses

This extension pays for the transportation expense (taxi, bus, delivery costs as well as rental cost), subject to a daily maximum of $20 and a per loss maximum of $600, because of the total theft of an auto of the private passenger type. There is a 48-hour waiting period before the insurer will begin paying this expense.

• Loss Of Use Expenses

This extension adds loss of use coverage resulting from physical damage to rented or hired autos when an insured becomes legally responsible under a written rental contract or agreement. The BAP must show Symbol 8 (Hired Autos) next to the appropriate physical damage coverage in order to collect under this part of the Policy. The most the insurer will pay for any expenses for loss of use is $20 per day, subject to a maximum of $600.


Learning Objective: Apply the Physical Damage Coverage exclusions of the BAC to specific situations.

BAC Form Physical Damage Exclusions

The BAC Form excludes or limits physical damage losses by applying the following exclusions:

1. Specific causes of loss such as nuclear hazards or contamination, war, insurrection, rebellion, and revolution


excluded. 2. Specific activities such as professional or organized racing, demolition contests or stunting activity,

including practice and/or preparation is excluded. 3. Specific perils to specific equipment such as loss caused by or resulting from wear and tear,

freezing, mechanical or electrical breakdown, blowouts, punctures, or other road damage to tires are excluded unless such "loss" results from the total theft of the covered "auto". Example: A thief steals a covered auto that has Comprehensive Coverage. When the "auto" is recovered, there is engine damage and/or tire damage as a result of the thief s misuse of the covered "auto". Coverage applies because the cause of the loss is the theft.

4. Specific types of equipment are excluded: • Tapes, records, CDs, visual or data electronic devices • Speed-measuring and/or jamming equipment • Electronic equipment (regardless of type of installation) that reproduces, receives or transmits

audio visual, or data signals • Accessories used with the electronic equipment described above

There is, however, some coverage for certain types of electronic equipment.

5. There is an exception that applies to some of the electronic equipment and accessories described in exclusion 4. Exclusion 4 and 4.d. do not apply to equipment operated and solely powered the "auto's" electrical system that at the time of "loss" is:

A. Permanently installed in or upon the covered "auto"; B. Removable from a permanently installed housing unit; or C. An integral part of the same unit housing electronic equipment described above; or D. Necessary for the "auto's" normal operation or monitoring of the operating system.

6. Will not pay for "loss" to a covered "auto" due to "diminution in value". This means the actual or perceived loss in market value or resale value which results from a direct and accident loss will not be covered. For decades disputes about claims related to reduction in value of an "auto" damaged in a covered "loss" has been discussed. It is almost impossible to calculate without selling the "auto" and it is not the intent of the BAC Form to provide for payment of a loss in market value.



Limits Of Insurance



The Limit of Insurance Provision in the BAC Form indicates how the Policy will pay in the event of covered "loss".

1. The insurance company will pay the smaller of: o Actual cash value at the time of the "loss"; or o The cost of repairing or replacing with like kind and quality.

2. $1,000 is the most that will be paid for "loss" in any one "accident" to all covered electronic equipment that reproduces, receives or transmits audio, visual or data signals which at the time of loss is permanently installed in housing or location that is not normally used by the "auto" manufacturer for the installation of such equipment.

Example:

Some sales reps, adjustors, fire, EMS, or law enforcement workers install AVD equipment in areas of an "auto" not intended for such use by the manufacturers. In the event of a loss this equipment is limited to $1,000.

3. The insurance company can adjust for depreciation. 4. The insurance company does not have to pay for betterment.



Deductible


Physical damage "losses" that are subject to the deductible are shown on the BAP Declarations. This deductible applies to each covered "auto". However, if Comprehensive Coverage deductible is selected, it does not apply to "loss" caused by fire or lightning.

Example:

Hail damages several autos parked at a single location. The deductible applies to each covered "auto".


Lesson 1 Topic J – Conditions

Lesson 1 Topic J BAC Form Conditions p1 (2IC)

Learning Objective: Recognize Conditions provisions under the BAC Form.


Like all other insurance policies, the BAP has conditions that apply. There are two groups of conditions outlined in the BAC Form that apply in addition to the Common Policy Conditions:

• Loss Conditions • General Conditions

In this topic, we will discuss the Five Loss Conditions and five of the eight General Conditions.



Loss Conditions

Appraisal For Physical Damage Loss

The named insured and insurance company only enter the appraisal provision when there is a disagreement on the amount of "loss" under Physical Damage Coverage.

The decision reached through this process is binding on both the named insured and the insurance company.

Duties In the Event Of Accident, Claim, Suit Or Loss

This is the condition that deals with an insured's duties in the case of a loss.

The insurance company has no duty to provide coverage if the named insured or any other insured does not comply with these duties. The named insured must give notice to an authorized representative of the insurer if there has been an "accident" or "loss".

Legal Action Against Us


No one can bring legal action against the insurance company until:

• There has been full compliance with the coverage terms; and • The insurance company has agreed to pay for the "insured's" obligation or if the amount of

obligation has been determined by a trial judgment.

Loss Payment - Physical Damage Coverage

Indicates the options that the insurance company has when paying for a "loss" under Physical Damage Coverage. The choice belongs to the insurer, not the named insured.

Transfer Of Rights Of Recovery Against Others To Us

The fifth loss condition requires that individuals or organizations benefiting from payment for "accidents" or "losses" under the BAP assist the insurance company in subrogating or recovering the amount paid to them from another who caused or contributed to the loss. They must do nothing after "accident" or "loss" to impair rights against another.



General Conditions

Bankruptcy

The first General Condition states that if the insured becomes bankrupt or insolvent, the insurance company must still meet the contract obligations.

Concealment, Misrepresentation Or Fraud

The second General Condition states that the BAP is void if there is fraud by the named insured as it relates to the Policy. It also states that any concealment or misrepresentation of a material fact or concerning certain provisions by an insured voids coverage. There is no coverage and there is no obligation to defend.

Liberalization

This means if the insurance company revises the BAP during the policy period, and the revision provides additional coverage with no increase in premium, then this Policy automatically gets the additional coverage on the revision effective date. The named insured does not have to wait until the next renewal or


get a written revised policy.

Other Insurance

The other insurance condition states that coverage under this BAP is primary for the named insured's owned covered "autos" and excess for any other covered "auto".

The exception is liability coverage will be primary if liability arises from an "insured contract". If Physical Damage Coverage is purchased for hired autos, then the hired "auto" is considered owned. If two BAPs apply, payment under the Policy is pro rata.

Policy Period, Coverage Territory

This condition indicates that the Policy covers "accidents" and "losses" occurring during the policy period shown in the Declarations.

This condition also defines the coverage territory. The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada.

The coverage territory is also anywhere in the world if:

1. A covered "auto" of the private passenger type auto is leased, hired, rented, or borrowed (without a driver) for a period of 30 days or less;

and

2. The insurance company agrees to a settlement or where damages are awarded in a "suit" brought in the coverage territory described above.

Note: Mexico is NOT included!

Please refer to the end of Lesson 1 Topic J to complete Self Quiz 6 at this time.

commercial casualty iimagma.magma.scic.com › elearning › 2ic_pdf › 2ic_lesson_1.pdf · it is...

Documents