HAPPY New Year! In the grand tradition of new beginnings andclean slates, naturally I'm going to start off the new year byreturning to a former subject: my article from last October aboutBusiness Auto Symbol 1. It seems my argument that Symbol 1 (“anyauto”) means exactly what it says has created a bit of controversyamong regular practitioners of the insurance arts, including morethan a couple of industry experts.

If you recall from that article, a student had questionedwhether using Symbol 1 for liability in a BAP would createautomatic coverage for any number of vehicles newly acquired duringthe policy year, even if such vehicles had never been reported tothe carrier. Without repeating all of the detail in that articleabout forms language, my response to the question was a simple“yes.” My basis for such a short, sweet answer was what I considerto be a perfect example of clear policy language-the BAP formdefinition for Symbol 1: “any auto.”

Alas, dear friends, even a new year cannot alter the fact thatnothing in our business is accepted as being so clear-cut. “Oh,no,” some said, “it's not that simple.” These are the type of folkswho might respond to a cheerful “good morning” by launchingdetailed inquiries as to just what such a greeting means. “What doyou mean by good? Why not say great? And once the sun is up, isn't“mid-morning” a more accurate phrase?” I always want to ask suchfolks who they think really shot John F. Kennedy, but I'm afraidthey'd miss the joke.

For example, one reader asked if I thought Symbol 1 also coveredexisting autos that the insured failed to report to the carrier atpolicy inception. If an insured owned 20 vehicles at policyinception but only declared five of them on the application, wouldthe other 15 automatically be covered if Symbol 1 is used? Ianswered in the affirmative. I read the term “any auto” to meanjust that. If a property form covers “any cause of loss,” it wouldbe considered to cover all risks not otherwise limited or excluded.In the BAP, there are no limitations or exclusions for existingautos. So those additional autos are covered.

This reader then pointed out that several others consideredconversant with policy language at the highest levels beg todiffer, arguing that since the policy language speaks to automaticcoverage for autos newly acquired during the remainder of thepolicy period, it must be accepted as implied that any coveredautos existing at policy inception are not offered automaticcoverage and must be declared.

These others are referring to Section I, Paragraph B, of theBAP, which reads:
“B. Owned Autos You Acquire After The Policy Begins
“1. If Symbols 1, 2, 3, 4, 5 or 6 are entered next to a coverage inItem Two of the Declarations, then you have coverage for 'autos'that you acquire of the type described for the remainder of thepolicy period.”

This language clarifies and expands the coverage intended by“any auto.” With this additional language, this term will includenot only “any auto,” but also any “autos you acquire of the typedescribed for the remainder of the policy period.” If these wordsimply anything, it is that “any auto” clearly intends to includeall existing autos at inception, since Section I, Paragraph B findsit necessary to clarify the situation only for newly acquiredvehicles.

The argument against this interpretation (and I understand a fewcourt cases out there seem to back up such an argument) may besummed up as follows: Such an interpretation would encourage fraudand concealment by an insured, and the carrier would thus becheated out of the proper premium. I'm all in favor of attackingfraud, but this is a question of coverage, not fraud. The properquestion is, “Does an existing auto (or autos) owned by the insuredat policy inception meet the definition of 'any auto'”? If so,absent any exclusion or limitation elsewhere in the form, thecurrently owned auto (or autos) is covered. Since there are no suchlimitations or exclusions, I vote for coverage.

The carrier is far from helpless in this matter. If it feels theinsured meant to mislead or lie about the matter (for example, ifthe insured was asked as part of the application process if heowned other autos than the five listed, and he responded with adefinite “no”), the carrier can refuse to provide coverage based onthe “Concealment, Misrepresentation or Fraud” condition of theBAP:

“This Coverage Form is void in any case of fraud by you at anytime as it relates to this Coverage Form. It is also void if you orany other 'insured,' at any time, intentionally conceal ormisrepresent a material fact concerning: a. This Coverage Form; b.The covered 'auto'; c. Your interest in the covered 'auto'; or d. Aclaim under this Coverage Form.”

Is it possible those additional owned autos may have slipped bywithout a deliberate cover-up by the insured? Sure! It could be a“renew as is” situation, or a mere clerical error could result inone or two vehicles being left off a policy application orschedule. I don't think a clerical error rises to the level offraud, intentional concealment or misrepresentation of a materialfact-and unless the insured does commit one of these acts, coverageis in full force for all such unknown vehicles.

Lest we are left thinking the carrier has been unfairly denied aproper premium, I refer you to another of the fine BAP conditions,“Premium Audit,” which reads in part:
“The estimated premium for this Coverage Form is based on theexposures you told us you would have when this policy began. Wewill compute the final premium due when we determine your actualexposures.”

Notice it doesn't say, “actual exposures other than those thatshould have been listed on the policy application or any attachedvehicle schedule.” The only effect innocently overlooked existingvehicles have on the carrier is a lowered up-front estimatedpremium. At audit time the insurer can collect a proper premium forthe entire “actual exposures” of the insured falling under Symbol1-autos existing at inception and autos newly acquired during thepolicy period. Indeed, the carrier can say, “You are going to oweus for any coverage we provide on any auto you own, hire, borrow,touch or lust after during the policy period. You even look at anauto, and we might bill you for it. So it would be in your bestinterest and ours if you were to keep track of just what autos youcurrently use or will use in your business at anytime during yourpolicy period.”

The BAP isn't the only policy form to allow possiblemisstatement of the actual exposure at inception and still providecoverage, collecting the proper premium at policy audit. Leave apertinent classification code off a CGL form, for example, and noform limitation or exclusion takes away coverage for that exposure.Ditto for workers compensation.

The real thorn here in the carrier's side arises from themistaken belief that underwriting determines coverage. It can befrustrating for a carrier when certain information is overlooked orpremiums that should have been collected up-front are onlydiscovered on an audit many months or years later. But as far asI'm aware, there is not a single policy form that includes a“frustration” exclusion. In a business drowning in detail,multi-page application forms and underwriting methodology thatoften seems to change with the tides, mistakes are going to bemade, details will be overlooked and information will fall throughthe cracks.

Proper underwriting is essential in determining whether a policyshould be issued. Agents should get their carriers all of theinformation they request, as accurately and comprehensively aspossible. The underwriters then can decide fairly which coverageforms and endorsements to approve in each instance. But theunderwriting world ends once a policy is issued, and the formwording has to stand as written.

So that's my position. And as long as claims are handled byadjusters instead of underwriters, I'm sticking to it! For thosewho disagree, Happy New Year anyway-and who DID shoot Kennedy?