Sections V and VI
Summary: The conditions and definitions on the motor carrier coverage form are mostly similar to those found on the business auto coverage form. This article will highlight those conditions and definitions that are different and that are unique to the motor carrier form. For an analysis of the other conditions and definitions that affect commercial auto coverage, see Business Auto Form — Conditions and Business Auto Definitions respectively.
Other Insurance — Primary and Excess Insurance Conditions
a.While any covered “auto” is hired or borrowed from you by another “motor carrier” this Coverage Form's liability coverage is:
(1)Primary if a written agreement between you as the lessor and the other “motor carrier” as the lessee requires you to hold the lessee harmless.
(2)Excess over any other collectible insurance if a written agreement between you as the lessor and the other “motor carrier” as the lessee does not require you to hold the lessee harmless.
b.While any covered “auto” is hired or borrowed by you from another “motor carrier” this Coverage Form's liability coverage is:
(1)Primary if a written agreement between the other “motor carrier” as the lessor and you as the lessee does not require the lessor to hold you harmless, and then only while the covered “auto” is used exclusively in your business as a “motor carrier” for hire.
(2)Excess over any other collectible insurance if a written agreement between the other “motor carrier” as the lessor and you as the lessee requires the lessor to hold you harmless.
c.While a covered “auto” which is a “trailer” is connected to a power unit, this Coverage Form's Liability Coverage is:
(1)Provided on the same basis, either primary or excess, as the liability coverage provided for the power unit if the power unit is a covered “auto”.
(2)Excess if the power unit is not a covered “auto”.
d.Any Trailer Interchange Coverage provided by this Coverage Form is primary for any covered “auto”.
e.Except as provided in paragraphs a., b., c., and d. above, this Coverage Form provides primary insurance for any covered “auto” you own and excess insurance for any covered “auto” you don't own.
f.For Hired Auto Physical Damage coverage, any covered “auto” you lease, hire, rent, or borrow is deemed to be a covered “auto” you own. However, any “auto” that is leased, hired, rented, or borrowed with a driver is not a covered “auto”.
g.Regardless of the provisions of paragraphs a., b., c., d., and e. above, this Coverage Form's Liability Coverage is primary for any liability assumed under an “insured contract”.
h.When this Coverage Form and any other Coverage Form or policy covers on the same basis, either excess or primary, we will pay only our share. Our share is the proportion that the Limit of Insurance of our Coverage Form bears to the total of the limits of all the Coverage Forms and policies covering on the same basis.
Analysis
This other insurance condition reflects the nature of the motor carrier business in that it is more detailed than the other insurance condition clause that is found on the business auto form. This is needed due to the possibly frequent interchange of equipment and vehicles among motor carriers and the insurance complications entailed by the combination of trailers and power units that may not be covered on the same basis.
The first and second paragraphs in this clause apply to situations where the named insured interchanges covered autos with another motor carrier. Paragraph a. deals with the other motor carrier hiring or borrowing a covered auto from the named insured. Coverage provided by the named insured's motor carrier form is primary if the written agreement requires the named insured to hold the other motor carrier harmless; if the agreement does not require such action, the named insured's policy is considered as excess over any other collectible insurance. If there is no other collectible insurance, the named insured's coverage will drop down to become primary.
Paragraph b. reflects the mirror image of paragraph a. in that it deals with the situation where the named insured hires or borrows a covered auto from another motor carrier. In this situation, the named insured's coverage form is primary if the written agreement between the named insured and the other motor carrier does not require the other motor carrier to hold the named insured harmless. Additionally, the named insured's coverage form is primary only while the covered auto is used exclusively in the named insured's business as a motor carrier for hire. Of course, again as the reverse of paragraph a., if the agreement does require the other motor carrier to hold the named insured harmless, the named insured's coverage form is considered excess over any other collectible insurance.
Paragraph c. deals with trailers connected to a power unit. If the power unit is not a covered auto, the policy of the named insured provides excess coverage for the trailer. If the power unit is a covered auto, the primary or excess status of the coverage on the trailer is governed by the primary or excess status of the coverage on the power unit itself. As an example, if motor carrier A, the named insured, agrees to lend an owned covered trailer to motor carrier B to be pulled by one of B's tractors, the arrangement would result — from A's side — in a covered trailer's being attached to a power unit that is not a covered auto; A's policy therefore would provide excess coverage on the trailer borrowed by B. Assuming that B has a motor carrier coverage form, that form's liability coverage will be primary with respect to the borrowed trailer since, from B's point of view, a covered trailer is attached to a power unit that his or her policy covers on a primary basis. If, in this example, the equipment borrowed were not just a trailer but a combined tractor and trailer, A's liability insurance on the trailer would again be excess but for the reason, in this case, that the trailer is attached to a covered power unit (A's tractor lent to B) to which A's policy applies on an excess basis.
Any trailer interchange coverage provided by CA 00 20 is primary for any covered auto. And, regardless of other provisions in the other insurance condition, the liability coverage is primary for any liability assumed under an insured contract.
It should be noted that for hired auto physical damage coverage, any covered auto that the named insured leases, hires, rents, or borrows is deemed to be a covered auto owned by the named insured, thereby putting that particular auto on a primary basis. However, any auto that is hired or borrowed with a driver is not considered a covered auto under the motor carrier form and so, the issue of primary or excess status is not relevant.
Except for the strictures that appear in the other paragraphs of the other insurance condition, paragraph e. states the usual point that the coverage is primary for covered autos owned by the named insured and excess for nonowned covered autos. Another usual point made in this condition is the one about pro-rata contribution in the event that two or more policies cover the same insured loss on the same basis.
The definitions on the motor carrier form are the same as the ones on the business auto form except that the terms of the “insured contract” definition and the “trailer” definition are changed to a degree; also, there are two definitions that do not appear on the business auto form.
The definition of “insured contract” is changed as follows:
An “insured contract” does not include that part of any contract or agreement:
c.That holds a person or organization engaged in the business of transporting property by “auto” for hire harmless for your use of a covered “auto” unless the covered “auto” is used in your business as a “motor carrier” for hire as in Section II, Paragraph A.1.d. of the Who Is An Insured provision.
Analysis
This paragraph is in that part of the insured contract definition that tells what an insured contract is not, but it provides an exception that considers the business exposures of a motor carrier. Under the provisions of other commercial auto forms, an insured contract does not include an agreement that holds a person or organization engaged in the business of transporting property by auto for hire harmless for the named insured's use of a covered auto over a route or territory that that person or organization is authorized to serve by public authority. The motor carrier form changes this provision in two ways.
First, the motor carrier form drops the reference to a route or territory authorized by a public authority for service. This change simply recognizes that a motor carrier, as a matter of business, transports property over routes and territory regulated by public authorities; it makes no sense to have such a reference in a clause that would act as brake on the named insured's business activities.
Second, the motor carrier form creates an exception to the hold harmless exclusion. If the covered auto is used in the named insured's business as a motor carrier for hire, a hold harmless agreement between the named insured and a person or organization engaged in the business of transporting property by auto will be considered an insured contract. This exception also makes reference to the who is an insured provision that deals with making a lessor of a covered auto an insured under the named insured's motor carrier form. And so, basically, what the insured contract provision here is saying is that if the named insured leases an auto and that lease calls for the named insured to hold the lessor harmless, the named insured's motor carrier form will not consider that hold harmless agreement an insured contract unless the leased auto is used in the business of the named insured as a motor carrier for hire.
The definition of “trailer” is changed as follows:
“Trailer” includes a semitrailer or a dolly used to convert a semitrailer into a trailer. But for Trailer Interchange Coverage only, “trailer” also includes a container.
Analysis
The business auto form simply states that a trailer includes a semitrailer. The motor carrier form expands on that by including items that are familiar to those in the motor carrier business. The inclusion of these items is meant to prevent, or at least cut down the number of, disputes between insured and insurer as to exactly what a trailer is when a trailer is the covered auto involved in a claim or lawsuit.
The following two terms are not defined on the business auto form: “motor carrier” and “private passenger type.”
“Motor carrier” means a person or organization providing transportation by “auto” in the furtherance of a commercial enterprise.
Analysis
This is a rather broad definition that acts as a guideline to say just what type of entity should be insured by a motor carrier coverage form. Any person or organization that uses a land motor vehicle designed for travel on public roads to convey something (or someone) from one place to another in the furtherance of his or her chosen business can be included in this definition of a motor carrier.
Due to the broad nature of the definition, a question can arise as to what difference there is between a motor carrier and a trucker. The commercial lines manual, division one — automobile does have separate definitions for motor carrier and trucker with the distinction being that a motor carrier provides transportation in the furtherance of a commercial enterprise and a trucker is in the business of transporting goods, materials, or commodities for another. In other words, a trucker holds himself or herself out to the public as a transporter of goods and materials — that is his or her business, the be-all and end-all of the business; a motor carrier is in a business wherein transporting something is just a part of a much wider commercial enterprise. However, if this distinction in the commercial lines manual does not clear things up, the insured will have to work with the agent and the insurer to make sure that a proper classification is made and the proper coverage form is used.
(Of course, this distinction between a trucker and a motor carrier for insurance purposes will not be relevant in the future since ISO is withdrawing the truckers coverage form from use.)
“Private passenger type” means a private passenger or station wagon type “auto” and includes an “auto” of the pickup or van type if not used for business purposes.
Analysis
The term “private passenger type” is used throughout the motor carrier form and aims to draw a clear distinction between vehicles that fit the definition and things like trucks and other larger or heavier vehicles. Remember that a pickup or van is considered a private passenger type auto but only if not used for business purposes.