Part 3 – Exclusions / Limitations and Special Physical Damage Conditions

TOPICS COVERED:

Common Conditions

COMMON CONDITIONS

The following are Conditions in addition to those shown under the separate coverage parts of this policy.

1. ACTION OR SUIT AGAINST US

No action may be brought against us until all conditions in this policy are complied with, and unless brought within one year from the date of loss.

No right exists under this policy for you or others to make us party to an action against any insured.

Analysis:

This is a standard condition that any action against the insurer must be made within one year of the date of loss; and then only if all conditions under the policy were met. No one has the right to name the insurer as a party in any action against an insured.

2. ASSIGNMENT OF YOUR INTEREST

No assignment of an interest under this policy is binding on us without our written consent. However, if you are an individual and die, this insurance applies to the following who become insureds under this policy in the described capacity:

1. Your legal representative, while acting within the scope of the representative's duties.
2. Those with custody of your property prior to appointment of a legal representative.

Analysis:

No one can be assigned an interest under this policy unless the insurer gives written consent to such assignment. The exception to this is in event of death of an insured individual, the following will be granted insured status under the policy in the described capacity; the insured's legal representative while acting within the scope of their duties as such; or those having custody of the insured's property until such time as a legal representative is appointed.

3. CANCELLATION / TERMINATION

1. General

You may cancel this policy by surrendering the policy to us or our agent or by mailing us or our agent notice stating a subsequent cancellation date for the policy. Such request made by the first named insured applies for all insureds / interests named in this policy.

If we cancel, any refund will be pro rata. If the first named insured cancels, refund may be less than pro rata.

Any return premium is payable to the first named insured – within 30 days after the cancellation date.

If you secure insurance with another insurer to replace our policy and do not pay the premium, or installment payment, for this policy when due: this policy terminates at the time such other insurance becomes effective. If you sell a covered auto to others, coverage under this policy terminates at the time title is transferred to others with respect to such auto.

B.  Our Right to Cancel or Terminate

Our rights to cancel or terminate this insurance are described elsewhere in this policy in the state mandatory endorsement.

Analysis:

Either the insurer or the insured may cancel the policy by following the provisions set forth under the cancellation / termination provisions. These are typical cancellation and termination provisions as in standard commercial policies, granting the insured any return premium due within 30 days of cancellation. With respect to replacement of this policy, if the insured obtains other replacement insurance and doesn't pay the premium or installment due on this policy when due, then this policy will terminate at the time the other insurance is effective. If a covered auto is sold, coverage will terminate at the time that auto's title is transferred.

4. CONCEALMENT / MISREPRESENTATION / FRAUD

This policy is void if, either before or after an accident or a loss, any insured misrepresents or knowingly conceals any material fact or circumstance, commits fraud, or swears falsely relating to any aspect of this insurance (including the information we relied upon in issuing this contract).

However, if we specifically choose not to declare this policy void, we do not provide insurance under this policy to, or for the benefit of, any such insureds.

5. CONFORMITY WITH STATUTE

It is agreed by us that the provisions of this policy are amended to conform to all applicable statutory requirements.

6. COVERAGE TERRITORY

We cover or losses occurring only within the United States of America (including its possessions and territories), the District of Columbia, Puerto Rico and Canada.

We also cover loss to a covered auto while being transported between any of these places.

Analysis:

The condition for concealment/misrepresentation/fraud allows the insured to void the policy if the insured knowingly conceals anything, commits fraud, or falsely swears to any aspect of this insurance, including information the insurer relied upon prior to issuing the policy. If the insurer opts not to void the policy, the coverage still will not apply to or for the benefit of any insured conducting any of these excluded acts.

The policy is amended to conform to any applicable statutory requirements.

The policy covers losses within the U.S. and its territories and possessions, D.C., Puerto Rico, and Canada, and also covers loss to a covered auto while being transported between any of these places. So if an insured is involved in an accident while traveling on business crossing the border into Canada, the loss will be considered to be in the coverage territory.

7. EXAMINATION / PREMIUM AUDIT

1. We may, at our option, inspect your property and operations at any time, make surveys, and make recommendations. However, our reports or recommendations or those of any inspection bureau or rating bureau do not constitute a determination or representation that any premises or operations are in compliance with law or regulation, healthful, or safe.

We may inspect and audit your books and records at any time (including up to three years after termination of this insurance contract) to the extent such pertains to the subject of this insurance or payment of premium. The first named insured is required to keep all records necessary for such and send complete accurate copies to us at our request.

B.    The estimated premium for this insurance is based on the exposures you told us you would have at the beginning of the policy term. We will compute the final premium due after we determine your actual exposures.

The estimated premium will be credited against the final premium due and the first named insured will be billed for any balance. If the estimated premium exceeds the final premium, the difference will be refunded to the first named insured.

Analysis:

Paragraph A. of this condition gives the insurer the right, but not the obligation, to inspect property and operations, make surveys, and give recommendations with respect to the insurance being provided. Any reports or recommendations made do not address compliance in matters of law, nor do they speak to the healthfulness or safety of the insured's premises or operations. Further, in connection with the insurance being provided, the insurer is granted the right to inspect and audit the insured's records for up to three years after the insurance terminates. If requested by the insurer, the insured must send complete and accurate copies of the books and records.

Paragraph B of the condition gives the insurer the right to compute the final premium based on true and accurate exposures, and if the premium estimated at the beginning of the policy issuance is insufficient to cover the exposures, the insurer will bill the insured for the difference. Conversely, if the estimated premium is greater than the final premium, the insurer will refund the excess to the insured.

8. LIBERALIZATION

This policy is automatically extended to include provisions approved during the policy period or within 45 days prior to its inception, which would broaden coverage under this policy, if such are not subject to additional premium or concurrent with coverage restrictions.

Analysis:

Insurers periodically introduce new policy editions that contain some changes. Any broadening of coverage produced by a revision of the policy that is introduced anytime during the policy period or in the 45 days preceding its inception will immediately apply to the insured's unrevised policy. However, the liberalization clause does not apply if the revision that broadens coverage also includes coverage restrictions or requires any extra premium. This provision is standard in many insurance forms.

9. OTHER INSURANCE

1. For any covered auto owned by you, this insurance is primary insurance. For any covered auto you do not own, this insurance is excess insurance over any other collectible insurance applicable to the loss.
2. When this insurance and any other insurance cover on the same basis, either excess or primary, we pay no greater proportion of the total amount of loss or the insured's obligation than the applicable limit of liability of this policy bears to the total amount of insurance of all insurers covering on the same basis.

Analysis:

In the event of other insurance that applies to an owned covered auto, this insurance will be the primary policy, but for nonowned covered autos any other insurance available to cover the loss will be primary, and this insurance will be excess. If insurance covers on the same basis as this insurance, this policy will pay no more than its proportion to the total loss.

10.   PREMIUMS

1. The first named insured is responsible for the payment of all premiums, and will be the sole payee of any premium we return. Premium adjustments, including audit premium adjustments, are due and payable on our notice of such to the first named insured.
2. If this policy is issued for a term longer than one year, the premium for this policy will be computed on an annual basis. We will use the rates / premiums in effect at the beginning of each year of the policy term.

11. RECOVERY FROM OTHERS

If any insured (or others) to whom, or for whom, we make payment has any rights of recovery for the damages or loss from another, those rights are transferred to us to the extent of our payment under this policy. Insureds (or such others) must do whatever we require to secure these rights.

Analysis:

The first named insured (the party whose name appears first in the Declarations) is responsible for making all premium payments when due and receiving any return premiums. The insurer need not notify or pay anyone else in regards to premium considerations.

If the policy is extended beyond a one-year term, the policy premium is computed on an annual basis using the rates and premiums in effect at the beginning of the year of the policy term.

The recovery from others condition defines the insurer's subrogation rights under the policy when the insurer makes a payment to or for any insured (or others). The reference to others preserves the insurer's subrogation rights with respect to third parties who might recover for a loss under the policy. It clarifies that the insurer takes over the subrogation rights of not only the named insured, but also of any third-party, but only to the extent of any payment the insurer has made to that third party; and that the insured must assist the insurer in the subrogation.

In essence, if the insured waives its right of recovery against a third party after a loss has occurred, the insurer may not be obligated to pay a claim that might otherwise be covered.

However if the insured waives its right of recovery before a loss, it does not affect the insured's right of recovery.

12. TIME OF INCEPTION

The time of inception and expiration is 12:01 A.M. Standard Time at the address shown in the Declarations.

13. TWO OR MORE POLICIES ISSUED BY US

If this policy and any other policy or coverage form issued to you by us, or by any company affiliated with us, apply to the same loss, our maximum limit of liability under all of the policies and coverage forms shall not exceed the highest applicable limit of liability provided under any one policy or coverage form. In no event will any limit of liability of this policy be excess over or added to the limit of any other such policy or coverage forms.

Analysis:

The policy inception time is the same as in all standard policies, 12:01 A.M. standard time based on the insured's address shown in the Declarations. So if a loss occurs at 11:59 P.M. on October 15th, but the insured is unable to report it until 1:00 A.M. on October 16th, the policy in effect on October 15th will be the applicable policy.

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 $1,000,000 and another has a limit of $500,000, the maximum limit available to the insured is $1,000,000. 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 $1,000,000 limit is specified as excess insurance, the $500,000 limit applies first and the $1,000,000 limit applies to any amount over $500,000 up to an additional $1,000,000.

14. WAIVER OR CHANGE OF PROVISIONS

Only the first named insured may request changes in this policy. The terms of this policy may not be waived or changed except in writing, signed by our agent and attached to this policy. The exercise of our rights in this policy is not an act of waiver. This policy contains all related agreements between you and us.

Analysis:

This condition stipulates that any changes in the terms of the policy can be made only by request of the first named insured and all changes must be agreed to in writing, signed by the insurer's agent and endorsed onto the policy. The entire policy, including any endorsements or attachments, constitutes all of the agreements between the insurer and the insured.