Topics covered:

Loss conditions

General conditions

Loss Conditions

1. Appraisal for Physical Damage Loss

If you and we disagree on the amount of "loss," either may demand an appraisal of the ""loss". In this event, each party will select a competent appraiser. The two appraisers will select a competent and impartial umpire.

The appraisers will state separately the actual cash value and amount of "loss". If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:

a.     Pay its chosen appraiser; and

b.     Bear the other expenses of the appraisal and umpire equally.

If we submit to an appraisal, we will still retain our right to deny the claim.

2. Duties in the Event of Accident, Claim, Suit, or Loss

We have no duty to provide coverage under this policy unless there has been full compliance with the following duties:

a.     In the event of "accident," claim, "suit" or "loss," you must give us or our authorized representative prompt notice of the accident or "loss". Include:

(1)     How, when and where the "accident" or "loss" occurred;

(2)     The "insured's" name and address; and

(3)     To the extent possible, the names and addresses of any injured persons and witnesses.

b.     Additionally, you and any other involved "insured" must:

(1)     Assume no obligation, make no payment or incur no expense without our consent, except at the "insured's" own cost.

(2)     Immediately send us copies of any request, demand, order, notice, summons or legal paper received concerning the claim or "suit".

(3)     Cooperate with us in the investigation or settlement of the claim or defense against the "suit".

(4)     Authorize us to obtain medical records or other pertinent information.

(5)     Submit to examination at our expense, by physicians of our choice, as often as we reasonably require.

c.     If there is "loss" to a covered "auto" or its equipment you must also do the following:

(1)     Promptly notify the police if the covered "auto" or any of its equipment is stolen.

(2)     Take all reasonable steps to protect the covered "auto" from further damage. Also keep a record of your expenses for consideration in the settlement of the claim.

(3)     Permit us to inspect the covered "auto" and records proving the "loss" before its repair or disposition.

(4)     Agree to examinations under oath at our request and give us a signed statement of your answers.

Analysis

The appraisal clause sets out rules for both insured and insurance company when they are unable to agree on the amount of physical damage loss. Either party may demand an appraisal. Each party then hires an appraiser and the two appraisers select an umpire. In case the appraisers are unable to agree on figures for the actual cash value of the property and the amount of loss, the matter is thrown to the umpire, whose decision is binding.

The insured's duties include the obvious one of giving prompt notice to the insurance company or its agent of any accident, claim, suit, or loss. Even if an insured is confident that a claim will not be pressed or that the circumstances do not involve the garage liability coverage, the insurer must be put on notice even so. No matter how unexpected the claim, failing in the duty to report could leave the insured unprotected.

The obligation to make a prompt report is keyed to the promptness expected of an ordinary, reasonably prudent person. Anything less than an immediate notice of an accident involving serious bodily injury could hardly be prompt. But a Monday morning notification of a Saturday afternoon fender-bender with no injuries and minor damage constitutes prompt notice in that situation.

Insureds are required to cooperate with the insurance company in bringing about a settlement of any claim. Suit papers must be forwarded to the insurer immediately and insureds must refrain from inserting themselves into the settlement process except at the insured's own cost. Insureds must also submit to physical examination by physicians chosen by the insurer as often as is reasonably required by the insurer and make medical records available to the insurer.

If the loss is physical damage to a covered auto, the insured must protect the car from further loss and make sure a representative of the insurer gets an opportunity to see the damaged car along with any records that help to prove the loss before disposing of it. The police must be notified if the loss involves theft. The insured must also agree to examinations under oath, including a signed statement, if requested by the insurer.

3. Legal Action Against Us

No one may bring a legal action against us under this Coverage Form until:

a.     There has been full compliance with all the terms of this Coverage Form; and

b.     Under Liability Coverage, we agree in writing that the "insured" has an obligation to pay or until the amount of that obligation has finally been determined by judgment after trial. No one has the right under this policy to bring us into an action to determine the "insured's" liability.

4. Loss Payment — Physical Damage Coverages

At our option we may:

a.     Pay for, repair or replace damaged or stolen property;

b.     Return the stolen property, at our expense. We will pay for any damage that results to the "auto" from the theft; or

c.     Take all or any part of the damaged or stolen property at an agreed or appraised value.

If we pay for the "loss", our payment will include the applicable sales tax for the damaged or stolen property.

5. Transfer of Rights of Recovery Against Others to Us

If any person or organization to or for whom we make payment under this Coverage Form has rights to recover damages from another, those rights are transferred to us. That person or organization must do everything necessary to secure our rights and must do nothing after "accident" or "loss" to impair them.

Analysis

It is a condition of the contract that the insurance company cannot be sued until and unless all the terms of the policy have been met. This was once called the suit clause. If liability insurance is the issue, no third party may take the insurance company to court for purposes of determining the insured's liability and no one may sue for performance unless a judgment has been delivered or the insurance company has agreed in writing as to its insured's obligation.

If a covered auto is damaged by an insured peril, the insurer alone decides what form the loss payment will take. If the insurer decides to pay the actual cash value of the auto instead of paying to repair or replace it, the insurer has the right to take the damaged auto for salvage. If the auto has been stolen, the insurer agrees that the cost of its recovery is a legitimate part of the adjustment expense.

The garage policy's transfer of rights is from the recipient of policy benefit to insurer. The insurer's right of assumption does not extend to the detriment of a co-insured whose negligence injures another insured. Also, the courts are generally in agreement that the insurance company acquires no rights by its payment for loss or claim that the insured would not be able to exercise on his or her own behalf. If an insured has a contractual agreement–that was created before the loss–that would relieve the negligent party of responsibility for loss or damage, the insurance company is also unable to recover from that party. However, the insured must do nothing after the accident or loss to impair the insurer's right of recovery.

General Conditions

1. Bankruptcy

Bankruptcy or insolvency of the "insured" or the "insured's" estate will not relieve us of any obligations under this Coverage Form.

2. Concealment, Misrepresentation, or Fraud

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.

3. Liberalization

If we revise this Coverage Form to provide more coverage without additional premium charge, your policy will automatically provide the additional coverage as of the day the revision is effective in your state.

Analysis

These three conditions are simply stated rules governing the mechanics of the contract and seldom cause a problem.

Bankruptcy of the insured does not relieve the insurance company of its obligations.

Fraud on the part of a named insured in matters relating to the insurance contract will cause it to be void. Certain instances of deliberate and material concealment or misrepresentation by any insured will void the policy also.

If the insurance company adopts a form with more liberal provisions for the same premium, the insured gets the benefit automatically as soon as the new form is introduced in the state.

4. No Benefit to Bailee — Physical Damage Coverages

We will not recognize any assignment or grant any coverage for the benefit of any person or organization holding, storing or transporting property for a fee regardless of any other provision of this Coverage Form.

5. Other Insurance

a.     For any covered "auto" you own, this Coverage Form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this Coverage Form is excess over any other collectible insurance. However, while a covered "auto" which is a "trailer" is connected to another vehicle, the Liability Coverage this Coverage Form provides for the "trailer" is:

(1)     Excess while it is connected to a motor vehicle you do not own.

(2)     Primary while it is connected to a covered "auto" you own.

b.     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".

c.     Regardless of the provisions of paragraph a. above, this Coverage Form's Liability coverage is primary for any liability assumed under an "insured contract".

d.     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

Bailees of covered property are not to benefit from any physical damage insurance the insured may own. Bailees stand in a special relationship to property that is in their care, custody, or control. Because they benefit in some way from having charge of the property (just a garage owner benefits from having customers' cars to work on, for example) they are subject to rigid responsibility for the care of the property. The no benefit to bailee clause keeps the insurer from covering an obligation that rightfully belongs to the bailee. Garagekeepers coverage responds to this exposure among garage owners; see Garage Liability Section III.

If there is other insurance, the garage coverage is primary as to owned autos and excess as to nonowned autos. The same arrangement holds for covered trailers; owned or not, the insurance is primary when the trailer is attached to an owned auto and excess when attached to a nonowned auto. Furthermore, if the other insurance carries the same arrangement as to primary and excess, than the garage policy pays its proportion of any covered claim in the same ratio that its limit bears to the total limits of all policies.

For hired auto physical damage coverage, any covered auto that the named insured leases, hires, rents, or borrows is held under the terms of the garage form to be a covered auto owned by the named insured. Thus, the insurance of the garage form should become primary for those autos. Any auto that is leased, hired, rented, or borrowed with a driver is not considered a covered auto.

6. Premium Audit

a.     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. The estimated total premium will be credited against the final premium due and the first Named Insured will be billed for the balance, if any. If the estimated total premium exceeds the final premium due, the first Named Insured will get a refund.

b.     If this policy is issued for more than one year, the premium for this Coverage Form will be computed annually based on our rates or premiums in effect at the beginning of each year of the policy.

7. Policy Period, Coverage Territory

Under this Coverage Form, we cover:

a.     "Bodily injury," "property damage" and "losses" occurring; and

b.     "Covered pollution cost or expense" arising out of "accidents" occurring during the policy period shown in the Declarations and within the coverage territory.

The coverage territory is:

a.     The United States of America ;

b.     The territories and possessions of the United States of America ;

c.     Puerto Rico;

d.      Canada ; and

e.     Anywhere in the world if:

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

(2)     The "insured's" responsibility to pay damages is determined in a "suit" on the merits, in the United States of America, the territories and possessions of the United States of America, Puerto Rico, or Canada or in a settlement we agree to.

We also cover "bodily injury," "property damage," "covered pollution cost or expense" and "losses" while a covered "auto" is being transported between any of these places.

The coverage territory is extended to anywhere in the world if the "bodily injury" or "property damage" is caused by one of your "products" which is sold for use in the United States of America, its territories or possessions, Puerto Rico or Canada. The original "suit" for damages resulting from such "bodily injury" or "property damage" must be brought in one of these places.

8. Two or More Coverage Forms or Policies Issued by Us

If this Coverage Form and any other Coverage Form or policy issued to you by us or any company affiliated with us applies to the same "accident," the aggregate maximum Limit of Insurance under all the Coverage Forms or policies shall not exceed the highest applicable Limit of Insurance under any one Coverage Form or policy. This condition does not apply to any Coverage Form or policy issued by us or an affiliated company specifically to apply as excess insurance over this Coverage Form.

Analysis

As to time and territory, the liability coverage applies to bodily injury or property damage and losses occurring during the policy period and to covered pollution cost or expense arising out of accidents occurring during the policy period, all within the coverage territory. The coverage territory is the United States, its territories or possessions, Puerto Rico, and Canada . Coverage applies as well to an accident involving a covered auto in transport between any of these places. For products coverage, the territory is worldwide if the product was sold for use in the aforesaid territories and the original suit is brought in one of these places. If a customer in the United States takes a faulty product to Mexico and the accident occurs there, products liability responds to the claim only if suit is brought in the United States , or in a Canadian or Puerto Rican court. This worldwide coverage also applies if the insured rents, leases, or borrows a car anywhere in the world. For example, if the insured is on a trip to France and rents a car for a week while he is there, the coverage territory under the insured's garage form is extended to France .

If there is other insurance by way of a policy issued by the same or an affiliated insurance company, then the highest applicable limit of any one policy becomes the maximum limit available under all policies. If one policy has a limit of $500,000 and another has a limit of $100,000, the maximum limit available to the insured is $500,000. However, if one (or more) of the policies specifies its limit as excess, this provision does not apply. If in the previous example, the policy with the $500,000 limit is specified as excess insurance, the $100,000 limit applies first and the $500,000 limit applies to any amount over $100,000 up to an additional $500,000.

The common conditions form, IL 00 17, is, of course, also attached to the garage policy. The common conditions govern how changes and assignments are to be made, how cancellation is to be effected, and set out the insurer's right to examine books and records, to make inspections and surveys, and to collect the premium from the first named insured. See Common Policy Conditions.