ISO 2013 Business Auto Coverage Form
Introduction
The Business Auto Coverage form (CA 00 01) was developed by the Insurance Services Office (ISO) to provide businesses with coverage for auto-related exposures excluded by commercial general liability policies. The Business Auto Coverage form may be issued as part of a package policy that includes other coverages such as property, general liability, inland marine and crime. When not purchased as part of a package policy, the form is combined with a Declarations page, "Common Policy Conditions" form, and any necessary endorsements to create a complete stand-alone policy.
The 2013 version of the Business Auto Coverage form contains five sections:
Section I—Covered Autos
Section II—Liability Coverage
Section III—Physical Damage Coverage
Section IV—Business Auto Conditions
Section V—Definitions
Coverage under each of these sections is described below. Umbrella liability policies typically do not provide excess coverage for the auto physical damage exposure (except when liability for such exposure is assumed under contract). Therefore, only a brief discussion of physical damage coverage is included in the following text.
Section I—Covered Autos
The 2013 Business Auto Coverage form defines ten auto coverage categories which are designated by symbols "1" – "9" and "19". Unless a symbol is noted on the Declarations page beside a particular coverage description, that coverage does not apply.
•The broadest coverage is provided by the designation of symbol "1." Coverage under symbol "1" applies to any auto, and includes autos owned, nonowned or hired by the insured. The word auto means a land motor vehicle, and includes nonowned trailers or semi-trailers designed for travel on public roads while attached to owned power units. Effective with the 2006 Business Auto Coverage form revision, the definition also includes land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law where the vehicle is licensed or principally garaged. The auto definition specifically excepts mobile equipment. Coverage is automatically extended to any auto acquired after policy inception.
•Symbol "2" designates coverage for owned autos only. Under this symbol, there is no coverage for hired, nonowned, or borrowed autos. Coverage is automatically extended to owned autos acquired after policy inception, and to the insured's liability as respects nonowned trailers attached to owned power units.
•Symbol "3" designates coverage for owned private passenger autos only, and includes those autos which the named insured acquires after inception of the policy. Underwriters sometimes use this designation if they are concerned that the insured will acquire larger vehicles (such as trucks) and assume coverage is provided for the newly acquired vehicles.
•Symbol "4" designates coverage for owned autos other than private passenger autos, and includes those autos acquired after policy inception. Coverage extends to liability as respects nonowned trailers while attached to owned power units.
•Symbol "5" designates coverage for owned autos that are subject to no-fault insurance requirements in the state where the autos are licensed or principally garaged. Newly acquired autos subject to the same requirement are automatically covered.
•Symbol "6" is used to designate owned autos subject to a compulsory uninsured motorists law in the state where the autos are licensed or principally garaged. Newly acquired autos subject to the same requirement are automatically covered.
•Symbol "7" is used to designate coverage for specifically described autos (i.e. those autos scheduled on the policy). Coverage is extended to newly purchased autos if (1) the named insured already insures all owned vehicles or if the new purchase is a replacement auto and (2) the insured reports the new acquisition within 30 days. Coverage also extends to liability as respects nonowned trailers while attached to owned power units.
•Symbol "8" designates coverage for hired autos only, and includes autos that are borrowed, rented, or leased by the insured. Coverage does not apply to autos the insured borrows, rents, hires, or leases from its employees, its partners, members of limited liability companies, or members of their households.
•Symbol "9" is used to designate coverage for nonowned autos only, and provides the insured with liability coverage for employees' autos used for business purposes. Coverage is also provided for autos belonging to the insured's partners and members of their households when they are used in the insured's business or personal affairs.
•Symbol "19" was added with the 2006 form revision and is used to designate mobile equipment that is subject to compulsory or financial responsibility or other motor vehicle where it is licensed or principally garaged. Newly acquired mobile equipment subject to the same requirement is automatically covered.
Underwriters are sometimes reluctant to use symbol "1" (any auto) and, instead, will use a combination of other symbols. They also may use symbol "7" (specifically described autos). Because symbol "7" requires the insured to schedule all vehicles to be covered on the policy, the underwriter can more closely monitor the insurer's exposure. Symbol "7" may also be used if only some of the insured's vehicles are to be covered under the business auto policy.
The use of symbol "1" is preferable from the standpoint of the insured. When symbol "1" is designated, the insured is automatically provided coverage for all newly acquired autos without having to notify the insurer of the acquisition. To obtain coverage for newly acquired autos under symbol "7," however, the insured must notify the insurer of the acquisition within thirty days.
In addition to liability coverage for autos, the Business Auto Coverage form provides liability coverage for trailers with a load capacity of 2,000 pounds or less and designed for use primarily on public roads. Mobile equipment carried or towed by a covered auto is also covered under this section. Coverage for carried or towed mobile equipment is important because the policy form specifically excludes other coverage for the mobile equipment exposure.
The Business Auto Coverage form also provides liability coverage for any nonowned auto used with permission of its owner as a temporary substitute vehicle when an owned covered auto is out of service.
Section II–Liability Coverage
Section II of the Business Auto Coverage form contains three parts: Part A. Coverage, Part B. Exclusions, and Part C. Limit of Insurance. Each of these parts is discussed in the following sections.
Part A. Coverage
The insurer promises to pay all sums the insured legally must pay as damages arising out of bodily injury or property damage covered by the policy. The injury or damage must be caused by an "accident" and result from the ownership, maintenance, or use of a covered auto. The term accident is defined in the policy to include continuous or repeated exposure to the same conditions resulting in bodily injury or property damage. This language is similar to that found in the "occurrence" definition in general liability policies. However, use of "accident" adequately conveys the purpose of the auto liability coverage – to apply to unforeseen, unplanned, and unexpected events arising out of the use, maintenance, or ownership of autos.
The insurer also agrees to pay all sums the insured must legally pay as a "covered pollution cost or expense." Covered pollution cost or expense is defined in the policy "Definitions" section to mean costs or expenses arising out of any request, claim or suit (governmental or otherwise) that demands the assessment, testing, monitoring or clean up of pollutants. However, such expense is covered only if bodily injury or property damage also results from the same accident.
Coverage for pollution cleanup costs is not intended to apply to situations where the insured is transporting pollutants and an accident results in the pollutants spilling from their containers onto the roadway. Rather, the coverage is intended to apply to spills or leaks of pollutants from parts of the auto designed to hold fuels, lubricants, or other fluids needed to operate the vehicle. If an auto transporting containers of pollutants is involved in an accident that results in both rupture of the auto's gas tank and the breakage of the containers, the Business Auto Coverage form will provide coverage for cleanup of the spilled gasoline.
The insurer has the right and duty to defend any insured against a suit asking for the types of damages specified above. There is no intention on the part of the insurer "to defend any insured against a suit seeking damages for bodily injury or property damage to which the insurance does not apply". As a general rule, however, the duty to defend is said to be broader than the duty to pay damages. So, if the allegations of a complaint against the insured are potentially within coverage, even if they may be false or fraudulent, the insurer is ordinarily obliged to defend. If a complaint against the insured contains numerous allegations, some potentially within policy coverage and others that are not, the insurer will still usually be required to defend. The insurer also reserves the right to investigate and settle any claim or suit as it considers appropriate.
The promise to pay damages and the promise to defend any claim or suit asking for those damages are separate and independent promises. The insurer has a duty to indemnify and a duty to defend an insured. For this reason, defense costs are paid in addition to the limit of liability. However, the insurer's duty to pay defense costs does end when the limit of liability has been exhausted by payment of judgments or settlements
The named insured is protected for liability arising from the ownership, maintenance, or use of any covered auto, regardless of the symbol used on the policy Declarations page. Anyone else is also an insured while using an auto owned, hired, or borrowed by the insured with the named insured's permission.
The permitted-use requirement for coverage to apply is important. A thief who takes the named insured's car on a joyride is not using the vehicle with permission, and so would not qualify as an insured under the named insured's auto form if an accident occurs. Also, the covered auto being used by the permittee must be owned, hired, or borrowed by the named insured.
There are some exceptions to the "insured" status. These exceptions are:
1.The owner or anyone else from whom the named insured hires or borrows a covered auto. The exception does not apply if the covered auto is a trailer connected to an owned covered auto.
This exception can create a problem if the insured or an employee of the insured assumes the liability of the owner of an auto under contract. Such a situation often occurs when renting automobiles from car rental agencies. The policy definition of insured contract extends the insured's liability coverage to any of the insured's employees, but not to the owner of the covered auto (e.g., the car rental agency.) If the liability of the owner or lessor of an auto is to be assumed by the named insured under an insured contract, the Business Auto Coverage form must be endorsed to provide this additional coverage. Also, under the insured contract definition, liability coverage does not extend to property damage to the rented or leased vehicle.
2.Employees of the named insured, if the covered auto is owned by the employee or a member of his or her household. Employee is defined in the policy to include a leased worker, but not a temporary worker.
Thus, if an employee's auto is used in the business of the employer, the employer is covered but the employee is not. The employee would have to rely on his or her own personal auto insurance for liability (and physical damage) coverage, unless the Business Auto Coverage form is modified specifically to provide liability coverage for the employee. This modification can be accomplished through purchase of an Employees As Insureds endorsement (CA 99 33).
If one employee borrows another employee's personal auto for company business purposes, both the employee who borrows the auto and the employer would be protected under the business auto policy. However, the employee whose auto was borrowed would have to look to his or her own personal auto policy for coverage. If an employee used the named insured's covered vehicle with the named insured's permission, however, that employee would have coverage under the business auto coverage form.
3.Persons who use a covered auto while working in the business of selling, servicing, repairing, parking, or storing autos, unless that business is owned by the named insured. For example, parking lot attendants who park the named insured's auto or employees of a repair shop who might test drive the named insured's auto are not covered if they work for a business that is not owned by the named insured. This exposure is more properly insured through a garage liability policy.
4.Anyone moving property to or from a covered auto unless that person is an employee or partner of the named insured, member of a limited liability company, the lessee or borrower of the covered auto, or an employee of one of these entities.
5.The insured's partners (including members of limited liability companies) for use of covered autos owned by them or by their family members.
Also covered is anyone liable for the conduct of an insured, to the extent of that liability.
Under the supplementary payments coverage extension, the insurer agrees to pay all expenses it incurs in the investigation and defense of a claim or suit. These supplementary payments will be made in addition to the policy's limit of liability.
Supplementary payments include the cost of bail bonds (up to $2,000 for a covered accident) and the cost of bonds to release attachments in any suit the insurer defends. The insurer is not obligated to supply either of these bonds and the amount of the bonds is subject to the policy's limit of liability. Also included as supplementary payments are reasonable expenses incurred by the insured at the insurer's request (including actual loss of earnings of up to $250 a day), all costs taxed against the insured in suits defended by the insurer, and accrued post-judgment interest. (With the 2010 Business Auto Coverage form revision, wording was added to clarify that "costs taxed against the insured" do not include attorneys' fees or attorneys' expenses.) The duty to pay post-judgment interest ends when the insurer has paid, offered to pay or has deposited in court that part of the judgment that falls within the policy's limit of liability.
Business auto liability coverage extends to covered autos while in a state other than the state in which the auto is licensed. In some states, the required minimum amount of liability insurance may be higher than the minimum amount required in the state where the vehicle is principally operated or garaged. In such instances, if the business auto coverage limits are less than the required limits in the other state, the policy limits are automatically increased to meet the higher coverage requirement. For example, if a covered auto is being driven in a state that requires a $200,000 limit, the insured's $100,000 limit is increased to $200,000 while the automobile is in that state. However, this extension does not apply as respects laws governing motor carriers of passengers or property.
In addition to different minimum limits of liability, some states may also have other or more stringent coverage requirements, such as no-fault protection or compulsory uninsured motorists coverage. The Business Auto Coverage form also provides these additional coverages where necessary, even if the insured does not have the coverage on his or her auto form. These increased limits and additional coverages are usually not subject to an additional premium.
The business auto policy states that the insurer will not pay anyone more than once for the same elements of loss because of the above-described supplementary payments or out-of-state coverage extensions. This is an attempt by the insurer to make sure it does not pay more than once for a covered accident.
Part B. Exclusions
Part B of the Liability Coverage section of the Business Auto Coverage form contains thirteen exclusions. Each of these exclusions is summarized in the following paragraphs:
1.Expected Or Intended Injury. Coverage is excluded for bodily injury or property damage expected or intended from the insured's standpoint.
Sometimes "expected or intended" is interpreted by courts as meaning that the exclusion does not apply unless the insured expects or intends the injury; in other words, even if the act is intended by the insured, the exclusion will not apply unless the insurer can show that the insured also intended the resultant injury.
2.Contractual Liability. Coverage is excluded for liability assumed by the insured under any contract or agreement that is not an insured contract, as that term is defined in the policy. For coverage to apply, bodily injury or property damage must occur after the execution of the insured contract.
The insured contract definition in the 2013 Business Auto Coverage form is similar to the insured contract definition under the ISO-CGL forms. However, to avoid a potential duplication of coverage, the ISO-CGL policies specifically exclude coverage for liability arising out of the operation, maintenance and use of any automobile.
If the contract qualifies as an insured contract, the Business Auto Coverage form provides liability coverage for autos rented or leased by the insured, including its employees' autos, except when the auto is loaned, leased or rented with a driver. Coverage is thus provided for the insured's employees who rent autos for business purposes. However, the physical damage exposure to rented, leased or borrowed autos is still not covered even if this exposure is assumed under contract. Coverage for physical damage to autos leased, hired, rented or borrowed without a driver is provided under the physical damage section of the coverage form only if symbol "8" is designated on the declarations page.
If any symbol other than "8" is used on the declarations, other methods must be used to cover physical damage to rented autos. One of these methods is to modify the definition of insured contract so that the liability for physical damage assumed under a rental agreement contract is covered. Another method is the creation of a new coverage symbol (for example, symbol "10") that applies to such contracts.
Still another alternative to modifying the insured contract definition wording is to endorse the policy to include the lessor of the auto (e.g., a car rental agency) as an additional insured. An endorsement available for this purpose is the "Additional Insured-Lessor" endorsement (CA 20 01). When this endorsement is attached to the policy, the leased auto described in the endorsement is considered to be an "owned auto." The "Who Is An Insured" section of the Business Auto Coverage form is also amended to include the lessor of the vehicle as an additional insured and loss payee.
Endorsement CA 20 01 is designed for long-term auto leases, however, and is not suitable for insureds (or their employees) that frequently enter into short-term auto rental agreements for business purposes. Insureds (or employees) who have a frequent, short-term auto rental exposure should consider purchase of the loss-damage-waiver (LDW) or collision-damage-waiver (CDW), from the car rental company. It should be noted, however, that the protection under these waivers is sometimes conditional. For example, even if the waiver is purchased, the lessee may still be responsible to the rental agency if the vehicle is damaged by a collision or rollover that results from the lessee's negligent use of the auto. The lessee could end up paying the daily CDW charge and still be responsible for all damage to the vehicle.
Coverage under the Business Auto Coverage form extends to liability that the insured would have even in the absence of a contract (i.e., tort liability). For example, assume an insured (lessee) leases an auto and agrees to hold the lessor harmless for liability arising out of the lessee's negligence. Since the lessee would be liable for its own negligence even if there were no contractual assumption of liability, the Business Auto Coverage form provides coverage. Conversely, if the liability does not exist without a contract, and the liability is not assumed under an insured contract, there is no coverage under the policy for the assumed liability.
3.Workers' Compensation. Coverage is excluded for any obligation for which the insured or the insurer may be held liable under any workers' compensation, disability benefits, unemployment compensation or any similar law. Statutory workers' compensation coverage or other insurance is usually available to cover these exposures.
4.Employee Indemnification and Employers' Liability. Coverage is excluded for employment-related bodily injury to an employee (including a leased worker) of the insured. Resulting consequential bodily injury to the employee's spouse or other immediate family members is also excluded. Coverage is therefore precluded for claims alleging loss of affection or consortium by an injured employee's family member. The exclusion applies whether the insured may be liable as an employer or in any other capacity. Coverage is therefore precluded for cases involving "dual capacity" issues and "third-party-over" actions.
As an example of a "third-party-over" action, assume an employee is injured while driving a company car for work purposes. The employee may collect workers' compensation benefits and still sue the manufacturer of the vehicle based on faulty design. The manufacturer in turn might sue the employer for alleged negligence in failing to maintain (i.e. service) the vehicle properly.
The employers' liability exposure is specifically excluded under both the Business Auto Coverage form and the ISO-CGL policy forms. Coverage for this exposure is usually provided under the employers' liability portion of a workers' compensation and employers' liability policy. In jurisdictions where workers' compensation is available from state funds but does not include employers' liability coverage, employers' liability protection is usually available as "stop-gap" coverage as part of a general liability policy.
The employers' liability exclusion does not apply to any obligation to share damages with or repay another party who must pay damages because of injury or to domestic employees who are not entitled to workers' compensation benefits. The reference to domestic employees attempts to clarify what a domestic employee is so that if, for example, a maid drives the named insured's car on the business of the named insured and has an accident in which she is injured, coverage for bodily injuries will not be automatically excluded by the insurer simply because the maid is an employee of the named insured.
As noted previously, the purpose of the workers' compensation exclusion is to preclude auto liability coverage for injuries to employees that should be covered by a workers' compensation policy. However, state workers compensation laws do not necessarily mandate coverage for all domestic employees. In such an instance, if the injured domestic cannot collect workers compensation, he or she can seek payment for injuries through the named insured employer's auto policy. All other provisions of the policy apply, of course, but the domestic employee exception to the exclusion rules out any automatic rejection of the employee's claim.
The employers' liability exclusion also does not apply to liability assumed by the insured under an insured contract.
5.Fellow Employee. Coverage is excluded for bodily injury to a fellow employee (or leased worker) of the insured that arises out of and in the course of the fellow employee's employment. With the 2010 form revision, wording was added stating that the exclusion also refers to consequential injury claims in keeping with the employee indemnification and employer's liability exclusion.
While employees are covered as permissive users of covered autos, there is no coverage for claims or suits filed against them by fellow employees. This exclusion is intended to maintain workers' compensation as an "exclusive remedy" in the case of work-related bodily injury. Some insurers may delete the fellow employee exclusion by endorsement for an additional premium.
6.Care, Custody or Control. With the exception of liability assumed under a "sidetrack agreement," the policy specifically excludes coverage for damage (including covered pollution cost or expense) to property owned, transported by or in the care, custody or control of the insured. Other forms of insurance, such as cargo liability or other inland marine insurance, best cover this exposure.
By using the term "the insured", the exclusion applies to the particular insured owning, transporting or controlling the property, but not to other insureds. If the term "an insured" were used, the exclusion would apply to any insured deemed as such on the policy. This latter term, then, could be seen as an omnibus term, denying coverage to any and all insureds regardless of which insured or how many insureds have custody or control of the property at the time of loss.
7.Handling of Property. The Business Auto Coverage form covers bodily injury or property damage resulting from the handling of property (e.g., loading and unloading of a covered auto.) However, coverage is precluded for losses that occur before the property is moved from the place where it is accepted by the insured for movement into or onto the covered auto. Coverage is also excluded once the property is moved from the covered auto to the place where it is finally delivered by the insured.
To illustrate how exclusion 7 applies, assume the insured has agreed to pick up a sofa at a department store warehouse and deliver it to a third floor apartment. If the loading dock at the warehouse is the place where the sofa is accepted by the insured's employees, the insured's Business Auto Coverage form will cover liability arising out of the employees' handling of the property from the time they pick it up at the loading dock until they deliver it to the customer's apartment. If, however, after bringing the sofa as far as the apartment building stairwell, the employees decide to go to lunch before moving the sofa the rest of the way to the customer's apartment, and if leaving the sofa in the stairwell creates an obstruction that causes injury for which the insured becomes liable, the Business Auto form will apply to the claim, because at the time of the loss the sofa would not have been finally delivered by the insured.
8.Movement of Property by Mechanical Device. There is no coverage for bodily injury or property damage that results from the movement of property by a mechanical device (other than a hand truck) unless the device is attached to a covered auto. For example, coverage would apply for injury or damage caused by a crane that was attached to the bed of an insured truck. However, if the loading or unloading equipment is not attached to a covered vehicle, there is no coverage under the policy. There is also no coverage if merchandise falls off a portable conveyor, for example, that is used to unload a truck.
For example, injury resulting from the use of an attached hoist on a flatbed truck to load or unload bricks from the truck is not subject to the exclusion, since the hoist is attached to the truck. However, the use of a conveyor belt not attached to the truck, even though being used to load or unload the truck, is excluded. The only exception to the exclusion, as noted previously, is the use of a hand truck.
9.Operations. This exclusion applies to bodily injury or property damage arising out of the operation of mobile equipment, and attempts to make clear that the operation of the described equipment itself is not covered under the auto form. For example, a crane, air compressor or generator mounted on an auto is considered part of the auto and is therefore covered under the Business Auto Coverage form while in transit. When the equipment is actually being operated, however, such operation is normally covered by general liability insurance, not business auto coverage. If a truck hauling a crane were involved in an accident, the appropriate source of coverage would be a business auto policy. However, if bodily injury results from use of the crane, a general liability policy should provide coverage.
Wording was added with the 2006 form revision to extend the exclusion to machinery or equipment that is on, attached to, or part of a land vehicle that would qualify as mobile equipment if it were not subject to a compulsory or financial responsibility law, or other insurance law where the vehicle is licensed or principally garaged. The added language simply clarifies that while the vehicles themselves might be covered by the business auto policy, the machinery and equipment is not. Coverage for the machinery and equipment is typically provided by a general liability policy.
10.Completed Operations. The policy does not cover bodily injury or property damage arising out of the named insured's work after that work has been completed or abandoned. The definition of work in the Business Auto Coverage form is the same as the definition of your work in the ISO-CGL forms.
The wording as respects when the insured's work is considered completed is identical to the wording found in part b. of the products/completed operations hazard definition in the ISO-CGL forms. Coverage for this completed-operations exposure is typically provided by a general liability policy.
11.Pollution. Coverage is excluded for bodily injury and property damage arising from the actual, alleged or threatened discharge of pollutants contained in property being transported, handled, or otherwise in transit by or on behalf of the insured. There is also no coverage pollutants stored, disposed of, treated or processed in or upon a covered auto.
The pollution exclusion applies before the pollutants are moved from the place where they are accepted by the insured for movement into or onto a covered auto, and after they are disposed of, delivered or abandoned by the insured. However, coverage is provided if the pollution results from an accident that occurs away from the insured's premises and if the pollution results from property containing the pollutants being damaged following the auto's upset, overturn or damage.
The Business Auto Coverage form covers the cleanup of any pollutants that are normally contained in a covered auto and are necessary for the auto's operation. Should a pollution spill result from the rupture of an auto's gasoline tank during an accident, for example, the business auto form would provide coverage for the bodily injury, property damage and cleanup expense resulting from the spill.
To summarize the pollution exclusion, it can be said to be an almost absolute elimination of coverage for pollution incidents, subject to very limited exceptions. Some illustrations may help to explain this particular exclusion.
If, for example, one of the named insured's trucks (not carrying pollutants) collides with a tank truck not operated by the named insured, causing the tank trucks' hazardous cargo to spill, any resulting bodily injury or property damage for which the insured becomes liable will not be subject to the exclusion. The same is true if a covered auto collides with a stationary storage tank containing pollutants or causes the derailment of a train carrying a hazardous cargo. The exclusion is aimed at discharge that originates from the covered auto itself. Note, however, that the exclusion does apply while pollutants are being handled for movement into, onto, or from the covered auto; the pollutants need to be in or on the covered auto in order to be excluded in such cases.
As another example, a truck's crankcase is ruptured in a collision with another vehicle in a busy intersection. The oil from the crankcase creates an oil slick next to the truck that results in another accident a moment later. If the insured truck owner is held liable for damage to the vehicle involved in the second accident, the pollution exclusion will not apply, since the oil was for the normal mechanical functioning of the auto and it escaped from an auto part designed to hold the oil for that purpose.
As a last example, the insured has "finally delivered" a hazardous cargo to his customer without incident. However, while attempting to drive off the customer's lot, the insured accidentally backs his truck into the delivered cargo, resulting in a chemical spill that injures an employee of the customer. Even though the cargo has been finally delivered, the pollution exclusion will not apply, because the pollutants were not in the covered auto and were upset as results of the use of a covered auto.
Obviously, the narrow exceptions to the exclusion do not provide adequate pollution liability coverage for insureds that transport or otherwise handle property meeting the policy definition of "pollutants." Such insureds can buy back coverage for some of the excluded exposure through use of endorsement CA 99 48 – Pollution Liability—Broadened Coverage for Covered Autos. This endorsement states that the first part of the pollution exclusion applies only to liability assumed under a contract or agreement. Therefore, if an insured transports pollutants and desires some insurance coverage should an accident occur, that insured can attain the coverage through the use of CA 99 48. The important points to remember are that the coverage will be at a price, some insurers may not be willing to provide such coverage, and the endorsement's coverage will not apply to liability that the insured has agreed to assume under a hold harmless contract or agreement. (Note that any such hold harmless agreement does not come into play where the cause of loss and liability rest solely with the insured.)
The current version of CA 99 48 also changes the definition of "covered pollution cost or expense". The endorsement deletes that part of the definition that deals with covered pollution costs or expenses not including any costs arising out of the discharge or release of pollutants transported by the insured. In effect, CA 99 48 working in tandem with the insuring agreement on covered pollution cost or expense, allows the insured to purchase coverage for incurred cleanup costs. These are not just the cleanup costs from cargo leakage. Therefore, if an insured causes an auto accident while transporting gasoline and damage occurs from the cargo leaking out, CA 99 48 will provide cleanup costs if a governmental authority demands or orders the insured to remove, contain, neutralize, or in any way respond to the gasoline spill.
The definition of pollutants is not found in the pollution exclusion. Rather, it is found in the definitions section of the Business Auto Coverage form. Pollutants are defined as 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.
12.War. Coverage is excluded for bodily injury or property damage resulting from declared or undeclared war, or any act or condition incident to war. War includes civil war, insurrection, revolution and rebellion. War also includes action taken by a military force, including action taken to hinder or defend against an actual or expected attack.
13.Racing. Coverage is excluded while covered autos are used in any professional or organized racing, demolition or stunting activity. The practice and preparation for such activities is also excluded. These exposures should be insured under a specialty policy.
Part C. Limit of Insurance
The most the insurer will pay for all damages arising from any one accident, including covered pollution cost or expense, is the limit of insurance for liability coverage indicated in the policy Declarations. This limit applies regardless of the premium paid or number of covered autos, insureds, claims made or vehicles involved in an accident. All injury, damage and expense resulting from continuous or repeated exposure to similar conditions is considered as resulting from one accident.
The Business Auto Coverage form also provides that no one will receive duplicate payments for the same elements of loss under this policy and any medical payments, uninsured motorists or underinsured motorists endorsement that may also be attached to the policy.
Section III—Physical Damage Coverage
The physical damage coverage section of the Business Auto Coverage form contains four parts: Part A. Coverage, Part B. Exclusions, Part C. Limit of Liability and Part D. Deductible.
Coverage for physical damage is designated by use of the appropriate coverage symbol on the Declarations page. The symbols that may be used by the underwriter to designate physical damage coverage are "2," "3," "4"; "7" and "8." When symbols "2," "3" or "4" are designated, the insured has automatic physical damage coverage for any auto covered under those symbols and that is acquired during the policy period. No notification to the insurer is necessary for newly acquired autos.
If symbol "7" is designated, newly acquired autos are covered for physical damage for a maximum of 30 days. For coverage to continue for a longer period, the insured must notify the insurer within the 30 days after acquisition of the auto. If symbol "8" is designated, physical damage coverage applies automatically to all hired or borrowed autos. This coverage is primary and not excess of other insurance available to the insured. Underwriters rarely provide coverage under symbol "8" because it is virtually impossible to quantify (and properly charge for) the exposure.
In addition to the above symbols, the insurer may be willing to grant coverage under one or more additional coverage symbols. For example, if the insured wants to self-insure physical damage for owned vehicles that are more than ten years old, a new coverage symbol (such as "10") may be used that limits the policy's physical damage coverage to vehicles of more recent vintage. When the additional coverage symbol is added to the declarations, the definition of that symbol is typically contained in an attached endorsement.
A. Coverage
The Business Auto Coverage form provides three types of physical damage coverage: (1) Comprehensive coverage, (2) Specified Causes of Loss coverage, and (3) Collision coverage. Each of these coverages is briefly described in the following paragraphs.
Comprehensive coverage provides coverage for loss to a covered auto from any cause that is not specifically excluded. Coverage is excluded if the loss results from the covered auto's overturn or collision with another object. Glass breakage and loss resulting from contact with birds, animals, falling objects or missiles is also covered.
Specified Causes of Loss coverage is an enumerated perils form of comprehensive coverage. Coverage is limited to loss caused by fire, lightning or explosion; windstorm, hail, theft; earthquake; flood; mischief or vandalism. Loss resulting from the sinking, burning, collision or derailment of any conveyance transporting a covered auto is also included as a covered peril.
By the use of endorsement CA 99 14 – Fire; Fire and Theft; Theft and Windstorm; and Limited Specified Causes of Loss Coverages - the named insured can select any of four different packages of specified perils: (1) fire, (2) fire and theft, (3) fire, theft, and windstorm and (4) limited specified causes of loss. The first three packages also cover loss by lightning, explosion or by the sinking, burning, collision, or derailment of any conveyance transporting the covered auto. The fire, theft, and windstorm package and the limited specified causes of loss coverage include all of the above plus loss by hail or earthquake; the limited specified causes of loss package goes on to include loss by flood
Collision coverage provides coverage for loss caused by the covered auto's overturn or collision with another object. Some physical damage forms used prior to the current business auto form have defined collision as including "upset," rather than "overturn." With respect to collision insurance, both terms have the same meaning. Courts have consistently held that overturn or upset takes place upon a vehicle's loss of equilibrium; the vehicle need not "roll over" or come to rest on its side or roof.
Coverage for towing and labor costs is also included in the Business Auto Coverage form. The most that the insurer will pay under this coverage is the limit shown on the Declarations page, so the insured and the insurer should agree on a limit that is acceptable and appropriate for both parties. In addition, the insurer will pay each time a covered auto is disabled, so payment will be made even if it is the same auto that is disabled multiple times. Coverage is limited to private passenger vehicles, so no trucks or trailers will receive this towing coverage. Finally, the labor must be performed at the place of disablement, so the insurer is not going to pay for labor costs that are incurred after the disabled auto is towed into the repair shop.
If the named insured carries comprehensive coverage on the damaged auto, a separate insuring agreement states that glass breakage and loss by collision with a bird or animal or by falling objects or missiles will be paid as comprehensive losses. (Note that if the policy does not include comprehensive coverage—perhaps the insured has selected specified causes of loss coverage—then this provision of course has no applicability). The provision also states that the named insured has the option of having glass breakage caused by a covered auto's collision or overturn considered a collision loss. Without this option, the provision respecting glass breakage could result in the application of both the collision deductible and the comprehensive deductible in an accident where a collision resulted in both glass breakage (subject to comprehensive deductible) and damage to other parts of the auto (subject to collision deductible).
An extension of coverage under this section provides up to $600 ($20 per day) for temporary transportation expenses incurred by the insured following the theft of a covered private passenger auto. Coverage begins 48 hours after the theft and may last no longer than when the covered auto is returned to use or the insurer pays for its loss. Expiration of the policy period does not end the period of coverage for transportation expense coverage. This coverage extension for temporary transportation expenses is not meant to be permanent in nature and the inclusion of this term in the extension clause simply reinforces that point.
If similar coverage is desired on vehicles of other than the private passenger type, it can be provided through endorsement CA 99 23 – Rental Reimbursement Coverage. Rental reimbursement coverage, however, is a broader form of coverage in that it can be arranged to apply to the expenses incurred by the named insured for the rental of an auto because of loss of use resulting from collision, comprehensive, or specified causes of loss instead of just theft alone. Moreover, rental reimbursement coverage can be written to provide higher daily and aggregate limits than the $20/$600 limits found on the auto coverage form, and it is subject to a 24-hour waiting period instead of the 48-hour waiting period for transportation expense coverage. Rental reimbursement coverage can be purchased for private passenger autos as well if the named insured wants broader loss of use coverage than transportation (theft) expense. However, the coverage provided by this endorsement does not apply while there are spare or reserve autos available for use by the named insured. Also, no deductibles apply to this coverage.
Another coverage extension pays for loss of use of hired autos, providing the loss of use results from covered cause of loss. The amount payable is $20 per day, to a maximum of $600.
This loss of use coverage applies when the insured becomes legally responsible to pay for the loss of use of a rented or hired vehicle under a written rental contract. The covered causes of loss are collision, specified causes of loss, and other than collision, as long as they are designated on the insured's policy. If so indicated, and providing the insured has collision coverage, the policy will pay the rental agency's loss of use expense claim.
B. Exclusions
Coverage is excluded for physical damage losses caused by nuclear and war or military action hazards. Also excluded is damage resulting from the practice, preparation or conduct of any professional or organized racing, demolition or stunting activity. If the insured wants coverage for an auto engaged in racing or demolition derbies, there are specialty markets that provide policies for that exposure. These exclusions apply whether or not any other cause contributes to the loss.
Loss caused by or resulting from any of the following is also excluded from coverage, unless caused by other loss that is covered by the policy:
1. Wear and tear mechanical or electrical breakdown and freezing.
With the 2010 form revision, wording was added stating that this exclusion does not apply to loss resulting from total theft of a covered auto. This exception is important in theft losses. If, for example, an auto covered for theft is stolen while in good mechanical condition and later recovered with burned-out clutch and brakes, the "wear and tear" and "mechanical breakdown" could be attributed to the theft and therefore will be covered. Naturally, the exception can apply in connection with any other type of covered loss. If, for example, electrical circuitry found in the dashboard of the auto is damaged as a result of a covered collision that occurs after a theft of the auto, the exclusion will not apply to the resulting "electrical breakdown."
This exclusion may be troublesome to adjusters. The problem lies in trying to determine the "due and confined to" phrase. As an example, assume the insured has an older vehicle and the seal around the sun roof deteriorates (unknown to the insured). This deterioration allows rain water to seep into the vehicle and damage the interior. Without the "due and confined to" language, a case could be made that the resulting damage was caused by the normal wear and tear, and so, the claim would be denied by the adjuster. However, with the language as it now is, and since exclusions have to be read as narrowly as is reasonable in order to give the insured as much coverage as possible, the better course for the insurer is to deny coverage just for the wear and tear of the seal, and then pay for the water damage to the interior of the vehicle.
The most frequent application of the freezing portion of the exclusion is probably when the engine block cracks due to freezing and the resulting expansion of engine fluids. The freezing exclusion is not applicable to sudden and accidental cracking of vinyl seats, windows, or other plastic parts of an auto that results when cold weather makes such items brittle. This type of damage is simply not due to freezing. Freezing is the changing from a liquid to a solid by reduction in temperature. Plastic, being a solid, is already "frozen" when installed in the car. The further reduction in temperature merely causes contraction and possibly an increase in brittleness, but not "freezing."
2. 2. Road damage to tires, including but not limited to blowouts and punctures. This exclusion also does not apply to loss resulting from total theft of a covered auto. The classic example of tire damage that is not reached by this exclusion is tire slashing by vandals if the insured has comprehensive or specified causes of loss coverage.
3. Loss to radar detectors, records and tape decks, discs or similar electronic devices unless they are solely designed for use with audio, visual or data electronic equipment.
Sound reproducing equipment that is permanently installed or is removable from a permanently installed housing is excepted from the exclusion, providing such equipment is powered by the auto's electrical system. Also excepted from the exclusion is other electronic equipment necessary for the normal operation of the auto or which is permanently installed in a housing in or upon the vehicle, such as the dashboard or console normally used by the manufacturer for installation of a radio.
4.Loss due to "diminution of value." Diminution of value as defined in the policy, means the actual or perceived loss of value resulting from a direct, accidental loss.
The market value of a damaged auto is less than it was prior to the accident even if the auto has been completely repaired. However, since an exact loss in value cannot be easily and objectively established, and since such a market loss is not a direct physical loss to the auto, the Business Auto Coverage form will not cover such a loss.
C. Limit Of Insurance
As respects any one accident, the insurer promises to pay the lesser of:
1. The actual cash value of the damaged or stolen property at the time of loss, or
2., the cost of repairing or replacing the damaged or stolen property with other property of like kind and quality.
The insurer will pay no more than the actual cash value of the damaged or stolen property at the time of loss. If, however, it would cost less to repair or replace damaged or stolen property with property of like kind and quality, the insurer may pay that lesser amount.
The actual cash value provisions described above can be modified by attaching endorsement CA 99 28 – Stated Amount Insurance. This endorsement limits recovery for any loss to no more than the amount shown for that auto in the endorsement, even if less than actual cash value or repair cost. However, if the actual cash value or repair cost of the damaged property is less than the stated amount, the lower amount governs. In other words, attachment of the stated amount endorsement does not create a valued policy as it may do in some inland marine or other property coverage forms.
Added with the 2010 form revision is the provision that the insurer will also pay up to $1,000 for loss to all electronic equipment that reproduces, receives, or transmits audio, visual, or data signals in accordance with the exception noted previously in the exclusions section of the Business Auto Coverage form.
If the insured suffers a total loss to his covered auto, an adjustment for depreciation and physical condition is made when the insurer determines the actual cash value. However, if the repair or replacement results in better value than the original, the insurer will not pay for the amount of betterment.
D. Deductible
Auto Physical Damage coverage is usually subject to a deductible in an amount shown in the declarations. When a deductible applies, the amount the insurer is obligated to pay for any covered loss is reduced by the deductible amount. The deductible does not apply as respects Comprehensive losses caused by fire or lightning.
The deductible typically applies both per vehicle and per accident. Therefore, an insured with numerous cars garaged at a single location might prefer to have the application of deductibles amended to a per occurrence basis, if possible. For example, if a fleet of fifty autos were damaged by one tornado or hailstorm, the insured could become responsible for up to fifty times the comprehensive deductible stated in the policy in the absence of such an amendment.
Section IV—Business Auto Conditions
The Business Auto Coverage form conditions are separated into two groups: "Loss Conditions" and "General Conditions." These conditions are in addition to the "Common Policy Conditions" typically issued as part of a business package policy. Some of the Business Auto Form conditions apply solely to liability or to physical damage coverage. Other conditions apply to all coverages under the policy. Because umbrella policies typically only provide coverage excess of the underlying liability exposure, only the portion of those conditions which apply to liability coverages under the Business Auto Coverage form are discussed in the following paragraphs.
Loss Conditions
Duties In The Event Of Accident, Claim, Suit Or Loss. The insured must give the insurer prompt notice of the accident or loss. The notice must include how and where the accident or loss occurred, the insured's name and address and, to the extent possible, the names and addresses of any injured persons and witnesses.
Insureds may not assume any obligation, make any payment or incur any expense without the insurer's consent. Any obligations assumed without the insurer's consent will be at the insured's expense. The insured must also provide the insurer with copies of all demands, notices, summonses or legal papers received in connection with a claim or suit and must cooperate with the insurer in the investigation, settlement or defense of the claim or suit. Further, the insured must authorize the insurer to obtain medical records or other pertinent information and submit to examination by a physician of the insurer's choice as often as reasonably required, at the insurer's expense.
This condition points out the importance that the insurer puts on the prompt notification of a loss and the cooperation of the insured in handling or settling a claim. Also of importance is the requirement that the insured "assume no obligation and make no payment" phrase. The insured should not try to settle a claim on his or her own and then bring the insurer in at the end of the process. If, for example, an insured makes a payment then wants compensation from the insurer, the insurer may deny coverage based on the violation of this loss condition.
If there is a physical damage loss to a covered auto, a physical damage loss, the named insured has additional duties. Notifying the police if the auto is stolen is the most important duty. Obviously, the sooner the police are notified of the theft of a car, the sooner they can make some progress in retrieving the car. Also, the named insured must take all reasonable steps to protect the covered auto from further damage. To preclude any dispute over this particular duty and what constitutes "reasonable" protection, the insured should make sure such actions are approved by the insurer in advance. Finally, the insurer has the right to inspect the auto before its repair. Such inspection helps set the appropriate amount of payment for the loss and prevents any possible fraud on the part of the insured.
Legal Action Against Us. No one can bring any legal action against the insurer until all terms of the policy have been fully complied with. In addition, no one may bring legal action against the insurer unless and until the insured's negligence and obligation to pay have been determined by judgment after a trial.
This condition underlines the intent of the insurer to control the processing of a claim, in that, the insurer does not want to allow the insured to try to force the payment of a claim before legal liability has been established or before the actual cost of physical damage to a covered auto has been established. Furthermore, the insurer wants to make the point that the coverage form is for the benefit of the insured and that any claim or lawsuit should be filed against the insured. The insurer pays sums that the insured becomes legally liable for, but the insurer is not supposed to be a party to any lawsuit that determines the legal liability of the insured. Some jurisdictions have statutes allowing a third party claimant to name both the insured and the insurance company in a lawsuit; where applicable, such statutes invalidate this condition.
Transfer Of Rights Of Recovery Against Others To Us. The rights of any person or organization to recover damages from another party to or for whom the insurer has made payment are transferred to the insurer. The insured must do everything necessary to secure the insurer's rights and do nothing after an accident or loss to impair them.
Regardless of the name of this clause, the subject matter is subrogation. If the insurance company makes a payment under the coverage form and the person to or for whom payment was made has a right to recover damages from another, the insurance company is subrogated to that right.
General Conditions
Bankruptcy. Bankruptcy nor insolvency of the insured or the insured's estate will relieve the insurer of its obligations under the policy.
In other words, even if the insured is protected by the bankruptcy laws from a legal obligation to pay a claimant, the insurer affirms that it is not similarly protected.
Concealment, Misrepresentation or Fraud. Fraud, concealment or misrepresentation of a material fact by the insured concerning the policy, a covered auto, the insured's interest in the auto, or any claim voids coverage.
To illustrate, if an insured is involved in a scheme whereby an accident is faked and injuries and damages are claimed, the coverage will be void if the insurer can prove the fraud.
Liberalization. If the insurer revises the coverage form to provide more coverage without additional premium, the changes will automatically apply to the policy as of the day the revision is effective in the insured's state.
Other Insurance. Coverage provided under the policy applies on a primary basis with regard to owned autos. If liability is assumed under an insured contract, coverage applies on a primary basis, regardless of the ownership status of the auto.
However, coverage under the policy is excess over any other collectible insurance as respects nonowned autos and owned trailers connected to nonowned autos. If other insurance is available and provides coverage on the same primary or excess basis as the business auto coverage form, coverage applies on a pro rata basis.
This condition affirms that coverage for a covered auto that the insured owns applies on a primary basis, whereas coverage for a covered auto that is nonowned applies on an excess basis. It should be noted that for hired auto physical damage coverage, any covered auto hired or borrowed by the named insured is deemed to be a covered auto owned by the named insured. As such, coverage is primary under the Business Auto Coverage form.
However, in spite of the foregoing, liability coverage for covered autos that are trailers follows the status of the vehicle to which the trailer is attached. If the auto doing the towing is owned by the named insured, the trailer — whether owned by the named insured or not — is also covered on a primary basis. If the towing vehicle is not owned by the named insured, the trailer is covered on an excess basis. The trailer exception applies only for purposes of liability coverage. Physical damage coverage on an owned trailer, for example, is primary whether the trailer is being towed by an owned or a nonowned vehicle.
The condition goes on to state that any auto hired or borrowed with a driver is not a covered auto. This part of the condition parallels the wording and reasoning found in the policy's definition of insured contract which states that an agreement pertaining to the rental of an auto with a driver is not considered an insured contract.
The condition further states that when two or more policies provide coverage on the same basis, either excess or primary, the insurer will pay its pro rata share only. That is, it will pay the proportion of the loss that its limit of liability bears to the total of all limits of all policies that apply to the loss on the same basis.
Premium Audit. This condition provides that the estimated premium shown on the Declarations is based on the exposures the insured disclosed at policy inception. Final premiums will be calculated when the actual exposures are determined. Any additional or return premium will be payable by or refunded to the first named insured. The condition further specifies that if the policy is issued for a term of more than one year, premiums will be calculated annually based on the rates in effect at the beginning of each policy year.
The first part of the condition simply states that the coverage is being written on an estimated premium basis. A final premium will be computed when the actual exposures are determined by the insurer at an audit. If any premium is to be returned, the first named insured will receive it; if any additional premium is needed, the first named insured will be billed for it.
The second part to this condition is for policies issued for a term of more than one year. In such a case, the premium is to be computed annually based on rates in effect at the beginning of each year of the policy.
Policy Period, Coverage Territory. The Business Auto Coverage form provides coverage for accidents and losses that take place during the policy period and within the coverage territory. The coverage territory includes the U.S., its territories and possessions, Puerto Rico and Canada. In addition, coverage for private passenger autos applies worldwide if the auto is leased, hired, rented or borrowed for a period of thirty days or less or if the insured's liability is determined in a suit filed in the coverage territory or by settlement to which the insurer agrees. Accidents and losses involving covered autos being transported between any of the locations within the coverage territory are also covered.
For example, if the insured rents or leases a private passenger auto during a trip to England, the Business Auto Coverage form will provide coverage for the auto during the trip. However, coverage will only be limited to a thirty-day period and any lawsuit attempting to establish liability of the insured must be filed in the United States, Puerto Rico, or Canada for the policy to respond.
Two Or More Coverage Forms Or Policies Issued By Us. This condition applies when more than one policy is issued to the insured by the insurer (or an affiliated company), and both policies provide coverage for the loss. The aggregate maximum limit of insurance payable by the insurer under all of the coverage forms or policies is the highest applicable limit of insurance under any single form or policy. The only exception to this rule is when the other applicable insurance is specifically intended to apply as excess coverage (for example, an umbrella policy).
This condition comes into play only when the same accident is covered by two or more policies issued by the insurer or any affiliated company. The most that the named insured can collect under all policies is the highest applicable limit under any one policy. This condition, in other words, is the insurer's attempt to prohibit stacking of limits of multiple policies issued by the same insurer or group. The condition has no applicability when another policy applying to the same loss is issued by a second insurer not affiliated with the first.
Section V—Definitions
Section V of the Business Auto Coverage form contains sixteen definitions. Each of these definitions are summarized below.
A.Accident. Accident means bodily injury or property damage resulting from continuous or repeated exposure to the same conditions.
The word "accident" is meant to convey the point that the auto policy insures against unforeseen and unplanned events. However, even if this definition does not adequately convey the point, the first exclusion in the Liability Coverage section of the form states that the insurance does not apply to injury or damage expected or intended from the standpoint of the insured.
B.Auto. Auto is a land motor vehicle, trailer or semi-trailer designed for travel on public roads. Auto does not include mobile equipment. The term land motor vehicle is generally interpreted as including motorcycles, motorhomes, pickup trucks, and similar vehicles. Mopeds, three-wheelers and tractor-trailer combinations can all come under the term "auto."
With the 2013 form revision, language was added to this definition to clarify that an auto is 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. This clarification was made as the result of situations in states where uninsured motorists coverage is mandatory and courts required general liability insurers to pay uninsured motorists claims by operators of mobile equipment who got involved in accidents while traveling on public roads. Such claims are to be covered under an auto policy and not the general liability policy. It was also made to emphasize the point that such vehicles are not to be covered for over-the-road exposures by the CGL form, but, rather, by the business auto policy. This revision may not have any great coverage impact on an umbrella policy that covers both general liability and auto liability exposures, but it does help clarify whether the general liability limits of insurance or the auto liability limits are the primary limits that are affected by a claim involving the motor vehicles described in the definition.
The significance of the statement that "mobile equipment" does not qualify as a covered auto is that such equipment must be insured through some other means. The liability exposure for mobile equipment is for the most part covered under the standard CGL form. However, one aspect of the liability exposure that is not covered under the CGL form is mobile equipment while being transported by an auto. This exposure is covered by the Business Auto Coverage form, provided the form includes liability coverage and the vehicle transporting the mobile equipment is a covered auto.
C. Bodily Injury. "Bodily injury" is defined as bodily injury, sickness, or disease sustained by a person, including death resulting from any of these. This definition is essentially the same as found in the standard CGL form.
D. Covered Pollution Cost Or Expense. Covered pollution cost or expense includes costs or expenses arising out of any request, demand, order or statutory or regulatory requirement that the insured or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, or in any way respond to or assess the effects of pollutants. The term pollutants is defined in the "Definitions" section of the policy. Also covered is any claim or suit by or on behalf of a governmental authority for damages resulting from the testing, cleanup or assessing the effects of pollutants.
However, covered pollution cost or expense does not include the cost of cleaning up pollutants on or being transported by a covered auto unless the pollution results from property containing the pollutants being damaged following the auto's upset, overturn or damage. An exception is made for pollutants that are normally contained in the covered auto, such as oil and gasoline needed for the auto's operation. For example, should a pollution spill result from the rupture of an auto's gasoline tank during an accident, coverage would be provided for cleanup expenses resulting from the spill.
The defining of this phrase puts some limits on the coverage afforded under the Liability Coverage insuring agreement of the Business Auto Coverage form. The insurer agrees to pay all sums that an insured legally must pay as a "covered pollution cost or expense". That is, while the insuring agreement gives an insured coverage for pollution cleanup costs, the definition of "covered pollution cost or expense" means that coverage is not extended to instances in which the insured is delivering fuel oil or carrying waste products in its covered autos and then has such pollutants spill out onto the highway after an accident. The definition limits the coverage to spills or leaks from an auto part designed by its manufacturer to hold fuels, lubricants, or fluids needed for the normal functioning of the covered auto; for example, such things as a gasoline tank or a radiator filled with antifreeze.
If an insured causes an accident while driving on the highway and the gasoline from the business auto's gas tank leaks onto the roadway or surrounding ground, the auto form will respond if the government demands that the insured clean up or pay for the cleanup of that leaking gasoline. However, the auto form will not apply to any liability claims resulting from the cargo of that business auto being spilled over the road or surrounding property.
The definition also clarifies the point that the Business Auto Coverage form will respond to an accidental leak or spillage of pollutants caused by the covered auto under certain circumstances. For example, if the insured's covered auto is on the property of a customer of the insured in order to pick up pollutants for delivery to their final destination and the auto backs into a tank containing the pollutants, spilling the pollutants onto the ground and into the soil, the insured's auto form will pay for the cleanup costs. The vital requirements here are that the accident must occur away from premises owned by or rented to an insured, the pollutants cannot be in or upon the covered auto, the pollutants are upset or overturned as a result of the maintenance or use of a covered auto, and the discharge or escape of the pollutants must be caused directly by that upset or overturn.
E. Diminution in Value. This phrase means the actual or perceived loss in market value or resale value which results from a direct and accidental loss.
This definition was included to combat the idea that physical damage coverage included diminution in value. The thinking in some quarters was that since, after an accident, the covered auto lost market value even if fully repaired, the business auto policy should cover this lost value so as to return the insured to the position he or she was in prior to the accident. However, calculating diminution in value is a subjective task and the exact lost value cannot be determined unless the car is sold. Additionally, the insuring agreement for physical damage coverage states that the insurer will pay for direct and accidental loss or damage – "direct" meaning actual physical damage done to the covered auto. Diminution in value is now specifically excluded under the physical damage coverage of the policy, and this definition simply explains the scope of the exclusion.
F. Employee. Leased workers are included within the definition of employee. However, temporary workers are specifically excluded from the employee definition. By including leased workers within the definition, the policy's fellow-employee exclusion also applies to those workers. Leased employees therefore cannot claim that they are entitled to coverage under the policy if injured by a co-employee.
This definition matches that found on the standard CGL form and is meant to show that leased employees are to be considered the same as regular employees when it comes to coverages, exclusions, and conditions under the insurance policy.
G. Insured. Any person or organization qualifying as an insured in the "Who Is An Insured" section of the policy is covered by the policy. Coverage applies separately to each insured, subject to the Limits of Insurance under the policy.
To see who is an insured for liability coverage under the auto form, the reader of the coverage form must look to that particular section of the form.
The definition includes the "severability" provision whereby the coverage afforded under the Business Auto Coverage form applies separately to each insured who is seeking coverage or against whom a claim or suit is brought. Total coverage, however, is limited to the policy's Limit of Liability.
H. Insured Contract. The definition of insured contract clarifies those types of contracts or agreements for which the policy provides coverage for the insured's assumed liability. Because there is no requirement that covered contracts or agreements be written, both oral and implied contracts are encompassed by the definition.
The types of contracts or agreements for which the policy specifically provides coverage are:
•Premises leases;
•Sidetrack agreements;
•Easement or license agreements;
•Ordinance-required obligations to indemnify a municipality;
•Any other contract or agreement pertaining to the insured's business (including indemnification of a municipality in connection with work performed for the municipality) under which the insured assumes the tort liability of another party; and
•Rental or lease agreements pertaining to the use of an auto by the insured or the insured's employees. However, coverage does not apply to that portion of such agreements that obligates the insured or its employees to pay for property damage to the auto.
There is no coverage for bodily injury or property damage to any person or organization arising out of construction or demolition operations within fifty feet of a railroad or that pertains to autos loaned, leased or rented by the insured or its employees with a driver. Also excepted from the definition is that portion of a contract or agreement which holds a common carrier harmless for the insured's use of a covered auto over a route or territory the common carrier is authorized to serve by public authority.
Although the definition encompasses the potential of liability arising from the use of a rented auto, it does not include an obligation to pay for actual damage to the rented car itself. Also, while the renting of an auto is included in the definition of an "insured contract", if a driver comes with the loan or lease or rental, that rental agreement is not an "insured contract". Endorsement CA 20 33 – Autos Leased, Hired, Rented or Borrowed With Drivers — Physical Damage Coverage is an optional endorsement that provides the physical damage coverage that would otherwise be excluded under the Business Auto Coverage form for autos leased, hired, or rented with drivers.
I. Leased Worker. "Leased worker" is defined as a person leased to the Insured by a labor leasing firm under an agreement between the Insured and the labor leasing firm, to perform duties related to the conduct of the Insured's business. The term "leased worker" does not include a "temporary worker".
J. Loss. Loss is defined to mean direct and accidental loss or damage. The important facet of this definition is the contrast it offers when compared to the definition of "property damage". A "loss" is the direct loss or damage and does not include indirect loss, such as loss of use. "Property damage", on the other hand, includes loss of use, so it is clear that when the Business Auto Coverage form uses the word "loss", it means direct loss only.
K. Mobile Equipment. The definition of mobile equipment clarifies those types of vehicles and equipment for which coverage is provided or excluded. Under the definition, coverage is provided for equipment such as bulldozers, forklifts and vehicles providing mobility to permanently mounted equipment such as loaders and diggers. Also considered covered mobile equipment are non-self-propelled vehicles designed to provide mobility for permanently attached equipment such as air compressors, cherry pickers and similar devices.
Similarly, self-propelled snow removal, road maintenance, cherry pickers and similar equipment are not considered mobile equipment and are covered as autos under the policy. By virtue of wording added with the 2006 BAP form revision, any other land vehicles that are subject to a compulsory financial responsibility law or other motor vehicle insurance law where they are licensed or principally garaged are not considered mobile equipment. For insurance purposes, these vehicles are considered autos, rather than mobile equipment and, as such are within the scope of coverage provided by the business auto policy. The new wording complements the revised auto definition and helps the insured to know just what mobile equipment is.
L. Pollutants. The term pollutants includes solids, liquids, gases and thermal irritants or contaminants. Pollutants also include smoke, fumes, vapor, soot, chemicals, acids, alkalis, and waste. Waste is defined as including materials that are to be reclaimed, recycled or reconditioned. This is a very broad definition and has some insurers trying to apply the pollution exclusion in every instance when something gets spilled or leaked. In response, some courts then focus on whether the substance in question fits the definition and is therefore subject to the pollution exclusion.
M. Property Damage. Property damage is defined to mean damage to or loss of use of tangible property.
Because the scope of the definition includes loss of use, an insured that is liable for damaging a taxi in an auto accident, for example, would also be covered for the amount of income lost by the taxi driver while the taxi is being repaired.
N. Suit. The term suit is defined as a civil proceeding in which damages resulting in covered bodily injury, property damage or covered pollution cost or expense are alleged. Included within the definition is an arbitration or any other alternative dispute resolution proceeding in which the insured participates with the insurer's consent.
O. Temporary Worker. The term temporary worker means a person who is furnished to the insured as a substitute for a permanent employee (as that term is defined in the policy) and who is hired to meet seasonal or short-term workload conditions.
The definitions of "employee" and "leased worker" above both state that a temporary worker is not considered an employee of the named insured. This means that, for example, if a temporary worker that is brought in to work on a short term basis due to a regular full time employee's being on vacation is injured due to the negligence of the named insured, the policy will respond to a claim against the named insured, since the temporary worker is not considered an employee, and coverage therefore is not subject to the policy's fellow-employee, workers' compensation or employers' liability exclusions.
P. Trailer. The term trailer also includes a semitrailer. Since the policy's covered autos designation symbols delineate between "autos" and "trailers the named insured does not own", this definition may help clarify coverage should a dispute arise in this area.