Part 3 – Exclusions / Limitations and Special Physical Damage Conditions

Part 4 – Common Conditions

TOPICS COVERED:

Introduction

Common Glossary

Covered Auto Descriptions

Introduction

The policy begins with an index of pages and an introduction explaining that certain terms are defined in the policy, and that terms not specifically defined should be taken at their conventional definition based on the context in which they are used. Courts often refer to a standard desk reference when a case goes to court and the policy term is not defined. The word "provisions" is used to refer to all parts of the text of the policy, including agreements, conditions, exclusions, limits and all other terms. This is so that an insured knows that the policy should be viewed as a whole.

Common Glossary 

GLOSSARY

While the Glossary is presented last in the policy form, since the terms are used throughout the policy, we will discuss that section first. 

Certain words and phrases used in this policy are defined for the purposes of this insurance contract. These are described in the following paragraphs:

Accident

Accident includes continuous or repeated exposure to substantially the same general harmful conditions resulting in bodily injury or property damage.

Actual Cash Value

Consideration may be given by us in our determination of actual cash value to: age; condition; cost to repair, replace, or restore the property, subject to deduction for depreciation; deterioration; economic value; market value; obsolescence; original cost; use; utility; or other circumstances that may reasonably affect value.

Auto

Auto means:

1. Any land motor vehicle or trailer (including semitrailers) designed for travel on public roads.
2. Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.

Auto does not include mobile equipment.

Diminution in Value

Diminution in value means the actual or perceived reduction in market or resale value that results from a loss.

Employee

Employee means a person employed by you and includes a leased worker. Employee does not include a temporary worker or independent contractor.

Family Member

Family member means any person related to you by adoption, blood, or marriage who is a resident of your household. This includes a ward or foster child.

Fungi

Fungi means any type or form of fungus, mold, mildew spores, algae, smut, protists, rusts or rot and decay organisms, and any similar or related organisms and any mycotoxin, substance, compounds, chemicals, mist or vapor produced by any fungi in any form, or any by products or waste produced by fungi, but does not include any fungi intended to be edible.

Insured

Insured means any person or organization listed as such in the applicable Who Is An Insured provision.

Analysis:

Many of the definitions are similar to those found in ISO forms, although there are variations and there are some terms defined here that ISO does not define. In these forms defined terms are shown in italics, and not within quotation marks (").

The definition of Accident is straightforward and standard. The term includes continuous or repeated exposure to substantially the same general harmful conditions that result in property damage. It can be one exposure, such as an auto accident that occurs at a given point in time, or exposure to a harmful element that results in some type of property damage. A hail storm consists of multiple strikes of hail to the vehicle, yet it is considered one exposure, not an exposure for each hail stone. 

The determination of Actual Cash Value includes consideration of an item's age, condition, and cost to repair, replace or restore to preloss condition. The determination is also subject to deductions for depreciation, deterioration, economic or market value, obsolescence, original cost, use, utility, or other factors that affect the overall value of the item. Basically, the condition of any damaged property will affect the value of said property, and whether the property is repairable or will be considered a total loss, and whether the insured or claimant will be paid for the loss of the item. A vehicle that is ten years old is not worth the same amount as a brand new vehicle; therefore the cost to replace the vehicle will be based on the value of a ten year old vehicle, not a new one. 

Land motor vehicles or trailers, including semi-trailers, that are designed for travel on public roads are included in the definition of Auto. Also included is any other land vehicle that is subject to compulsory or financial responsibility law or other motor vehicle insurance law in the state where the vehicle is licensed or principally garaged. Commercial operations often use vehicles other than private passenger autos. 

A business may have operations in multiple states; that will affect how coverage is applied, and if a land vehicle of some sort is required to have insurance in the state where that vehicle is garaged, that vehicle is considered an auto barring any exclusions or other definitions that would put that vehicle into a different category. Mobile equipment such as bulldozers, vehicles on crawler treads, forklifts and farm machinery are not considered to be autos. Refer to the definition of mobile equipment for a description of those items.

The decrease in value of property, whether actual or perceived, is Diminution of Value. The decrease is in either the market value or resale value of an item that results from a loss. For example, a covered auto is damaged and repaired; because the auto was new the insured perceived that its market value was less than before the accident because it had been wrecked, even though the auto was repaired and looked as it did prior to the accident. This is an example of diminution of value.

In Blakely v. State Farm Mut. Ins. Co., No. 04-60577, 2005 WL 880422 (Apr. 18, 2005 5th Cir.), the court ruled that an auto insurer was not liable for paying diminished postrepair value and that a policy preclusion for recovery of diminished value was not against public policy. Several insureds who submitted claims for auto repairs to their auto insurer, State Farm, brought action against the insurer because they alleged they should have been compensated for the lowered market values of their vehicles following repairs. The case is presented here. 

Employees are those individuals employed by the insured and leased workers are included in the definition. Not included in the definition are temporary workers or independent contractors, as the nature of their employment is different from others hired for various tasks. Even though the definition includes the words leased worker and temporary in italics, indicating these are defined terms, the coverage form does not contain definitions for either of these terms. These terms are defined in the main Commercial Auto Form, MCA 010 11 14. 

Leased workers are defined as:  a person who is leased to you by a labor leasing firm under an agreement between you and such firm to perform duties related to the conduct of your business / operations.

Leased worker does not include a temporary worker. Temporary workers are defined as: a person who is furnished to you as a substitute for a permanent employee on leave or to meet seasonal or other short-term workload conditions.

A leased worker will be working for the insured on a longer term basis; a temporary worker is someone on just that, a temporary basis, filling in for a regular employee on an extended medical leave, or filling in during the insured's busy season.

Any person related to the insured by adoption, blood, or marriage who resides in the household is considered a family member. Wards and foster children are also considered to be family members as they are under the care of an insured and in the household on an ongoing basis.

Fungi are defined as any type or form of fungus, mold, mildew, spores, algae, smut, protists, rusts or rot and decay organisms. This includes similar or related organisms and any mycotoxin, substance, compounds, chemicals, mist or vapor produced by any fungi in any form, or any by-products or waste produced by fungi. Not included is edible fungi. Mushrooms grown for consumption would not fall under this definition of fungi. The intent is to define fungi that are harmful and need to be restricted or excluded from coverage.

The definition of Insured is straightforward; anyone listed as such under the applicable Who Is An Insured provision of the policy is included in the definition of insured. This coverage form however does not contain a Who Is An Insured provision, that is found in the MCA 010 11 14. You is the individual shown in the Declarations, to which the insuring agreement applies. Refer to the definition of You / Your / Yourself.

Loss

Loss means fortuitous direct physical damage or destruction,  including the taking of property by theft. 

Mobile Equipment

Mobile Equipment means any of the following land vehicles (including any equipment or machinery permanently attached to, or forming an integral part of, the vehicle):

1. Vehicles used solely at premises owned or rented by you. 
2. Vehicles designed for primary use off public roads such as bulldozers, farm machinery, forklifts, and similar commercial types. 
3. Vehicles used primarily to provide mobility to the following:

1. Concrete mixers (other than mix-in-transit type).*
2. Diggers, drills, loaders, power cranes, or shovels.*
3. Road construction and resurfacing equipment, such as graders, rollers, or scrapers.*

D. Vehicles that are not self-propelled used primarily to provide mobility to:

1. Air compressors, generators, or pumps; building cleaning, geophysical exploration, lighting, spraying, welding, or well servicing equipment.*
2. Cherry pickers and similar devices used to lower / raise workers.*

E.   Vehicles that travel on crawler treads.

F.  Vehicles not otherwise used as described in the preceding Paragraphs A through E that are maintained by you primarily for uses other than the transportation of cargo or persons.

However, self-propelled vehicles designed as described in the following Paragraphs 1, 2 and 3 or equipped with any of the following permanently attached devices are not mobile equipment but are considered autos for the purposes of this Insurance:

1. Designed primarily for road maintenance (other than road construction or resurfacing), snow removal, or street cleaning.
2. Equipped with air compressors, generators, or pumps; building cleaning, geophysical exploration, lighting, spraying, welding, or well servicing equipment.
3. Equipped with cherry pickers and similar devices mounted on automobile or truck chassis and used to raise / lower workers.

However, mobile equipment does not include any land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered autos.

* But only if permanently attached to, or forming an integral part of, the vehicle.

Occupying

Occupying means getting in, getting off, getting out of, in, on, or upon.

Pollutants

Pollutants are any gaseous, liquid, solid, or thermal contaminant or irritant, including acids, alkalis, chemicals, fumes, smoke, soot, vapors, and waste (including materials to be reclaimed, reconditioned, or recycled).

Private Passenger Type

If you are an individual, private passenger type also includes any covered auto owned by you that is a pickup or van type truck not used for business purposes, other than farming or ranching.

Rot and Decay Organisms

Rot and decay organisms means any living organism that causes decomposition of physical property.

Trailer

Trailer includes semitrailer.

We / Us / Our

We, us, and our refer to the Insurance Company named in this policy.

You / Your/ Yourself

You, your and yourself refer to the named insureds who are the insured named in the Declarations. First named insured is the insured named first in the Declarations. You also includes the insured's spouse if a resident of the same household.

Analysis:

Loss is defined as direct physical damage or destruction, including the taking of property by theft. A loss is often the result of an accident. While stolen property may be returned, it is still lost to the owner; the owner no longer has access to it while it is in the custody of the thief. While theft is a deliberate action by the thief, it is an accident as far as the owner is concerned. 

The definition of mobile equipment is extensive. It is any of the listed land vehicles, including equipment or machinery permanently attached to, or forming an integral part of the vehicle.

• Vehicles used solely at the premises owned or rented by you. If the vehicle is taken off premises for use elsewhere, then there may not be coverage. 
• Vehicles designed for primary use off public roads – bulldozers, farm machinery, or other commercial types of vehicles.
• Vehicles used to provide mobility to the following as long as the equipment is permanently attached to or forms an integral part of the vehicle:
  • Concrete mixers (other than mix-in-transit types);
  • Diggers, drills, loaders, power cranes or shovels;
  • Road construction and resurfacing equipment, such as graders, rollers or scrapers.
• Vehicles that aren't self-propelled used primarily to provide mobility to the following equipment, again only if the equipment is permanently attached or is an integral part of the vehicle.
• Air compressors, generators, pumps, building cleaning, geophysical exploration, lighting, spraying, welding or well servicing equipment.
• Cherry pickers and similar devices used to lower/raise workers.
• Vehicles on crawler treads.
• Vehicles not otherwise described that are maintained by you for uses other than transportation of cargo or persons. There is a wide variety of vehicles available and it is impossible to list everything.
• The following vehicles or vehicles equipped with any of the following equipment permanently attached are an exception and are considered autos for coverage purposes:
  • Designed for road maintenance (other than construction or resurfacing), snow removal or street cleaning;
  • Equipped with air compressors, generators, pumps; building cleaning, geophysical exploration, lighting, spraying, welding or well servicing;
  • Equipped with cherry pickers and similar devices mounted on auto or truck chassis and used to raise/lower workers.

However, land vehicles that are subject to compulsory or financial responsibility law or other insurance law in the state where the vehicle is licensed or principally garaged are not considered mobile equipment. An example is an insured's pickup that he fitted with a plow for snow removal. 

Occupying is defined as getting in, getting off, getting out, of, in, on, or upon a vehicle. While this seems straightforward, what is considered being on a vehicle is often a point of discussion. Is leaning against a vehicle being on the vehicle, or does someone have to be sitting on the hood or trunk of the vehicle to be considered to be on the vehicle? What if someone is putting bags in the trunk; is that occupying the vehicle? It's a complicated issue to be sure. 

In Darno v. Davidson, 34 N.E.3d 967 (2015), the Ohio Court of Appeals, Ninth District, decided that the term "occupying" was ambiguous in this case; and concluded that Darno was not an occupant of his vehicle and therefore he was entitled to UM/UIM benefits. Darno was driving his father's auto insured by Westfield Insurance Company for UM/UIM coverage. The vehicle stalled, Darno and his friends exited the car and were pushing the car when another vehicle driven by Davidson approached. Darno began running away from his car and after taking only a couple of steps, was struck by the Davidson vehicle. The policy explicitly excluded coverage for bodily injury sustained by an individual named insured while occupying or when struck by any vehicle owned by the named insured that is not a covered auto for UM/UIM coverage. The question was whether Darno was occupying his car when struck. The court said that the meaning of the term "occupying" has been the subject of much litigation in the area of uninsured motorist and medical payment coverage; the appeals court said that Ohio favors a liberal interpretation of the term. The policy defined "occupying" as "in, upon, getting in, on, out, or off" the vehicle. Applying this definition to the facts of the case, the court decided that the only question was whether Darno was still occupying his vehicle at the same time he was running away from it. On the one hand, Darno had completely exited his car and was running away from it when he was struck; on the other hand, Darno was two or three feet away from the vehicle when he was struck. The court did take notice of the words of the Supreme Court of Ohio in a previous case when it ruled that "the determination of whether a vehicle was occupied by the claimant at the time of an accident should take into account the immediate relationship the claimant had to the vehicle, within a reasonable geographic area".

However, the court decided that the term "occupying" was ambiguous in this instance; thus, the policy must be strictly construed against Westfield.

However, in Lavoie v. Peninsula Ins. Cos, No. 2018-0711 (N.H. Nov. 8, 2019) the Supreme Court of New Hampshire concluded that since Lavoie had not offered a "reasonable alternative definition" of "getting in" or "occupying", therefore failing to establish that the terms were ambiguous, the court  ruled that he was not entitled to coverage for injuries sustained when he was struck by an uninsured vehicle while walking to his parked car. David Lavoie was walking toward his parked car after eating dinner to retrieve a tire that he had repaired at the request of a client, the person he had just finished eating dinner with, when he was hit by another car while crossing a street to reach his vehicle. The trial court granted summary judgment in favor of Pennsylvania Insurance, agreeing that Lavoie was not "occupying" his vehicle at the time of the accident; however the dispute went all the way to the Supreme Court of New Hampshire. Lavoie argued that although he had "reconnected" with his vehicle when he began walking back toward it, because he was physically oriented toward the vehicle and his attention was also oriented toward the vehicle. He also argued that whether or not he was "getting in" the vehicle depended on his "perspective on where he was going and what he was doing" when he was injured, not on a "myopic" focus on the facts.

The policy provided that Lavoie would be insured only if he was "occupying" the vehicle at the time of the accident; "occupying" being defined as "in, upon, getting in, on, out, or off." The court discussed the "vehicle determination test" to determine if Lavoie was "occupying the vehicle at the time of injury, which requires the claimant be engaged in an activity essential to use of the vehicle at time of accident, but does not require the claimant to have physical contact with the vehicle. The court said if the claimant severed connection to the vehicle he was no longer occupying the vehicle, and to be occupying a vehicle, he must be "vehicle-oriented" instead of oriented towards a highway or sidewalk. If Lavoie's theory stood, there would be coverage any time a claimant was traveling towards the insured vehicle, regardless of how long the journey to the vehicle is, or what the claimant does during the journey.

When asked about his focus when the accident occurred, Lavoie noted that he was looking at the curb he was about to step on. The court found that although crossing the road was "incidental to his work-related errand, which centered on his use of the insured vehicle," he was primarily sidewalk or crosswalk oriented at the time of the accident, not vehicle oriented. Lavoie argued that he was engaged in an activity essential to the use of the vehicle because he was delivering a repaired tire to a customer, and that the vehicle was necessary to complete the work-related task. The court decided that although the vehicle is necessary for the task, it did not establish that crossing the street to the vehicle was "essential to the use of the vehicle". Since he failed to offer a "reasonable alternative definition" of "getting in" or "occupying", Lavoie had not established that the terms were ambiguous and thus sided with the insurer. 

In D'Amour v. Amica Mut. Ins. Co, 891 A. 2d 534 (N.H. 2006) the insured was considered to be "getting out of" the vehicle when she had unloaded groceries from her car and was walking around it to the sidewalk when she slipped on the ice and fell, suffering injuries.

In Miller v. Amica Mut. Ins. Co.,931 A.2d 1180 (N.H. 2007), (where tragically the insured died in a motorcycle accident) the insured had a policy on his primary vehicle but not on his motorcycle. The policy had an exclusion precluding coverage for any injuries sustained while "occupying" a motor vehicle he owned that was not insured under the policy. The insured hit a pothole while driving his uninsured motorcycle and was subsequently hit and killed by an unknown vehicle and driver. The administrator of his estate sued the insurer seeking a judgment that the insurer was required to provide uninsured motorist coverage. The court determined that the insured was not "occupying" the vehicle, and that the connection had been severed at the time he was hit, so the exclusion did not apply.

Pollutants are defined as any gaseous, liquid, solid, or thermal contaminant or irritant, including acids, alkalis, chemicals, fumes, smoke, soot, vapors, and waste (including materials to be reclaimed, reconditioned, or recycled). This is the standard definition of pollutants used in most property policies. Carriers all want to exclude the same substances, and the standard language works for most carriers.

The definition of private passenger type is geared towards individual insureds. The definition states that private passenger type, if you are an individual, is a covered auto owned by you that is a pickup or van type truck not used for business purposes, other than farming or ranching. Therefore, if an insured has a pickup truck listed on the policy and that truck is not used in the business, then that truck is considered to be a private passenger type auto. There is no specified limit as to the size of the pickup truck or van. Personal auto policies limit the size of a pickup or van that can be considered a private passenger vehicle. 

Rot and decay organism is straightforward; it is any living organism that causes decomposition of physical property. Since fungi is separately defined, this would consist of organisms other than fungi, such as bacteria. Bacteria are single celled, while fungi are larger and include molds and mushrooms.

A trailer is defined to include a semi-trailer; there is no other description of types of trailers in this definition. The intent is to acknowledge that semi-trailers are considered trailers for the purpose of this policy form.

We/Us/Our uses the standard definition that when referenced in the policy form we/us/our refers to the insurance company named in the policy.

Likewise, you/your/yourself is used to refer to the named insureds who are listed as insureds in the Declarations. First named insured is the insured named first in the Declarations. If a spouse is a resident of the same household, then you includes that resident spouse as well.

Covered Auto Descriptions

1. COVERED AUTO SYMBOLS

The following numerical symbols describe the types of autos that are covered autos for those coverages provided in this policy for which that symbol is shown in the Declarations. If a symbol is not shown in the Declarations, then there is no coverage for that type of vehicle. This form omits symbols 5, 6 and 9. Those symbols are on the main Commercial Auto Form, MCA 010 11 14 which is discussed separately. 

SYMBOL DESCRIPTION

1. Any Auto.
2. Owned Autos Only. Only those autos you own. This also includes autos that you newly acquire ownership of during the current policy term. 
3. Owned Private Passenger Autos Only. Only those private passenger autos you own. This also includes private passenger autos that you newly acquire ownership of during the current policy term.
4. Owned Autos Other than Private Passenger Autos Only. Only those autos you own that are not of the private passenger type. This also includes such autos that you newly acquire ownership of during the current policy term. 

7. Specifically Described Autos. Only those autos described in the "Schedule of Covered Autos You Own" in the Declarations for which a related premium charge is shown. For Liability Coverage, Symbol 7 also includes trailers not owned by you while attached to an auto described in such Schedule.
8. Hired Autos Only. Only those autos you borrow, hire, lease, or rent. This does not include any auto you borrow, hire, lease, or rent from: any of your employees, executive officers, partners; (if you are a partnership), or members (if you are a limited liability company) or members of their households.

Analysis:

As in the ISO policy, the MSO policy identifies the different types of vehicles by the use of symbols. These are similar to the ISO symbols.

Symbol 1 is any auto, and is useful when an insured has multiple types of vehicles, or routinely obtains new vehicles throughout the year and gets rid of others. It provides the broadest coverage and as a result is the most expensive coverage symbol.

Symbol 2 is for owned autos only. These are vehicles the insured owns; not leases, not rents, but owns outright. This also includes vehicles the insured newly acquires during the policy term.

Symbol 3 covers only those autos that are private passenger autos. If a vehicle is not a private passenger auto, even though it is owned by the insured, symbol 3 will not provide coverage. Private passenger autos, owned by the insured that are newly acquired during the policy period are covered under this symbol as well. 

Symbol 4 is for owned vehicles other than private passenger autos; this covers what symbol 3 doesn't. A definition is provided for private passenger type autos, making it clear any vehicle that meets that definition is not covered by symbol 4.

Specifically described autos are covered under symbol 7; this is for vehicles specifically listed on a schedule of covered autos. The autos must be listed in the Declarations with a related premium charge listed as well. As with certain other symbols, symbol 7 includes liability coverage for trailers not owned by the insured but attached to vehicles described in the schedule. If this symbol is on the policy, it is important to make sure that all owned vehicles that need to be insured for physical damage are listed on the schedule. If additional vehicles are purchased during the policy term, the schedule needs to reflect that change. Otherwise, there is no coverage. 

Symbol 8 is for hired autos only. A hired auto is one the insured borrows, hires, leases, or rents, unless the vehicle belongs to any of the insured's employees, executives, officers, partners (if a partnership), or members (if the insured is a LLC), or members of their households. For example, a limousine company sometimes borrows a particular large limo from another limousine company for certain events; that would be covered under symbol 8. 

2. OWNED AUTOS ACQUIRED DURING THE POLICY TERM

1.  If Symbols 1, 2, 3, or 4 are entered for a coverage in the Declarations, then you have that coverage for the remainder of the policy term for any autos of the type described by such symbol that you newly acquire.
2. If Symbol 7 is entered for a coverage in the Declarations, then an auto you newly acquire will be a covered auto for that coverage only if:

1. We already insure all autos that you own for that coverage, or the newly acquired auto replaces an auto you previously owned which was insured for that coverage; and
2. You let us know within 30 days after acquiring the auto that you want us to insure it for that coverage.

Analysis:

This section simply clarifies under which symbols coverage is provided when vehicles are newly acquired during the policy period. For symbols 1-4, newly acquired vehicles are covered for whatever coverage is listed for the listed symbol. For example, an insured has symbols 3 and 4 on the policy, with collision and other than collision coverages on vehicles with those symbols. Therefore, any newly acquired vehicles that are owned private passenger autos (symbol 3) and owned autos that are not private passenger types (symbol 4) will have those coverages automatically applied to them.

When the insured has symbol 7 on the policy, with a specific schedule of vehicles, then coverage for newly acquired vehicles is very specific. Coverage for newly acquired autos applies only if two conditions are met; the first is all autos the insured owns are scheduled on the policy for that coverage, or the newly acquired auto is replacing an auto the insured previously owned that was listed on the schedule and insured for that coverage. Also, the insured is required to notify the carrier within thirty days of acquiring the auto that the insured wants to insure it for that particular coverage. 

For example, an insured has a specifically insured 2010 Jaguar with comprehensive and collision coverages. The insured sells the Jaguar and buys a 2021 Mercedes to replace the Jaguar on December 1, 2020. The insured notifies the carrier immediately of the change in cars. Therefore, the Mercedes will be covered under Symbol 7. However, if the insured gets busy and forgets to notify the carrier of the new vehicle until January 15, then the insured will have a lapse in coverage for that vehicle from December 31 through January 15.