HAPPY New Year! In the grand tradition of new beginnings and clean slates, naturally I'm going to start off the new year by returning to a former subject: my article from last October about Business Auto Symbol 1. It seems my argument that Symbol 1 (“any auto”) means exactly what it says has created a bit of controversy among regular practitioners of the insurance arts, including more than a couple of industry experts.

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

Alas, dear friends, even a new year cannot alter the fact that nothing in our business is accepted as being so clear-cut. “Oh, no,” some said, “it's not that simple.” These are the type of folks who might respond to a cheerful “good morning” by launching detailed inquiries as to just what such a greeting means. “What do you 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 such folks who they think really shot John F. Kennedy, but I'm afraid they'd miss the joke.

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

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

These others are referring to Section I, Paragraph B, of the BAP, 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 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.”

This language clarifies and expands the coverage intended by “any auto.” With this additional language, this term will include not only “any auto,” but also any “autos you acquire of the type described for the remainder of the policy period.” If these words imply anything, it is that “any auto” clearly intends to include all existing autos at inception, since Section I, Paragraph B finds it necessary to clarify the situation only for newly acquired vehicles.

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

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

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

Is it possible those additional owned autos may have slipped by without a deliberate cover-up by the insured? Sure! It could be a “renew as is” situation, or a mere clerical error could result in one or two vehicles being left off a policy application or schedule. I don't think a clerical error rises to the level of fraud, intentional concealment or misrepresentation of a material fact-and unless the insured does commit one of these acts, coverage is in full force for all such unknown vehicles.

Lest we are left thinking the carrier has been unfairly denied a proper 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 the exposures you told us you would have when this policy began. We will compute the final premium due when we determine your actual exposures.”

Notice it doesn't say, “actual exposures other than those that should have been listed on the policy application or any attached vehicle schedule.” The only effect innocently overlooked existing vehicles have on the carrier is a lowered up-front estimated premium. At audit time the insurer can collect a proper premium for the entire “actual exposures” of the insured falling under Symbol 1-autos existing at inception and autos newly acquired during the policy period. Indeed, the carrier can say, “You are going to owe us for any coverage we provide on any auto you own, hire, borrow, touch or lust after during the policy period. You even look at an auto, and we might bill you for it. So it would be in your best interest and ours if you were to keep track of just what autos you currently use or will use in your business at anytime during your policy period.”

The BAP isn't the only policy form to allow possible misstatement of the actual exposure at inception and still provide coverage, collecting the proper premium at policy audit. Leave a pertinent classification code off a CGL form, for example, and no form limitation or exclusion takes away coverage for that exposure. Ditto for workers compensation.

The real thorn here in the carrier's side arises from the mistaken belief that underwriting determines coverage. It can be frustrating for a carrier when certain information is overlooked or premiums that should have been collected up-front are only discovered on an audit many months or years later. But as far as I'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 that often seems to change with the tides, mistakes are going to be made, details will be overlooked and information will fall through the cracks.

Proper underwriting is essential in determining whether a policy should be issued. Agents should get their carriers all of the information they request, as accurately and comprehensively as possible. The underwriters then can decide fairly which coverage forms and endorsements to approve in each instance. But the underwriting world ends once a policy is issued, and the form wording has to stand as written.

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

Special Reports /

Policy Issues: New Year's declaration: Symbol 1 still means any auto

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