Summary: ISO has available seven endorsements to address the exposures associated with leasing or rental companies. Here we will provide a brief analysis of each of these endorsements.
Lessor – Additional Insured and Loss Payee CA 20 01
Endorsement CA 20 01 11 20 permits an insured to schedule a leased auto to be designated as an owned covered auto, rather than a hired or borrowed auto. The endorsement includes the lessor named in the schedule as an insured for bodily injury or property damage for acts or omissions of an insured, an insured's employees or agents, or anyone else with permission to operate the leased auto (other than the lessor or anyone connected with the lessor).
The endorsement is available when the insured is required by the leasing or rental agreement to provide direct primary insurance for the lessor, to protect the interests of the lessor. Coverage ends at the earliest of either the expiration date in the schedule, or when the lessor takes possession of the auto.
Leasing or Rental Concerns – Contingent Coverage CA 20 09
Endorsement CA 20 09 10 13 is available on policies with autos on long term lease agreements of at least six months, to be used when required by the leasing or rental agreement.Typically, a lease or rental agreement will require that the lessee (the party leasing the vehicle or equipment) provide primary insurance coverage on the leased/rented vehicle or equipment.
The endorsement provides liability and no-fault coverages to the lessor on a contingent basis. The endorsement applies when the lessee has provided proof that the lessor is named as additional insured on the lessee's policy or certificate of insurance; and the required insurance on the leasing or rental agreement is not collectible at the time of the accident. This could be because the insurance was never put in place,or it was terminated for whatever reason.
The limits of insurance will be the lesser of either the limits required by the leasing agreement or the amount shown in the endorsement schedule.
If the lessee's or rentee's policy is cancelled, the coverage provided by this endorsement will end at the earlier of either the date you regain custody of the "leased auto" or30 days after the effective date of the cancellation.
A definition of "leased auto" is added, which means an "auto" you lease or rent to a lessee or rentee, including any substitute, replacement or extra "auto" needed to meet seasonal or other needs, under a lease or rental agreement that requires the lessee or rentee to provide primary insurance to you.
An example of application of this endorsement would be an insured vehicle leasing company leases a refrigerated van to a bakery business for one year. The lease agreement requires the bakery business to obtain business auto insurance and name the leasing company as an additional insured on that policy. If the bakery business fails to maintain its insurance and an accident occurs, or if their insurer becomes insolvent and cannot pay a claim,endorsement CA 20 09could provide contingent coverage for the leasing company's liability.
Leasing or Rental Concerns – Conversion, Embezzlement Or Secretion Coverage CA 20 10
Endorsement CA 20 10 10 13 excludes coverage for the illegal acts of theft, conversion, embezzlement or secretion under comprehensive and specified causes of loss coverage by anyone in possession of a covered auto under a bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance, or with respect to an auto lease or rental. The endorsement includes a limited buy-back provision for those autos shown in the schedule, providing for no more than 75% of the actual cash value at time of the loss, less any paid rental or lease deposit.
This endorsement would apply for example,if an insured car rental company rents a vehicle to a customer but the car is not returned at the agreed date,and that customer cannot be contacted. This is considered a conversion, and the car rental company would look to this endorsement to recover the financial loss of the unrecovered car.
Leasing Or Rental Concerns – Exclusion Of Certain Leased Autos CA 20 11
Endorsement CA 20 11 10 13 excludes liability and no-fault coverage for leased autos stemming from acts or omissions of the lessee/rentee, their employees or agents, or anyone operating a leased auto with the permission of any of these. By exception in Paragraph A.3., it does not exclude such coverage for the insured, the insured's employees or agents who are authorized by the insured to operate the leased auto.
CA 20 11 is designed to be complementary to Who Is An Insured in the business auto policy with respect to leased autos, and to the Lessor - Additional Insured and Loss Payee endorsement CA 20 01. CA 20 11 excludes any auto leased or rented to a lessee or rentee, including any substitute, replacement, or extra auto needed to meet seasonal or other needs, under an agreement requiring the lessee or rentee to provide primary insurance for the lessor.The exclusion applies only with respect to liability insurance and any required no-fault insurance.Therefore, any physical damage coverage is not affected by this endorsement.
In the current CA 20 11 endorsement, ISO has limited the exclusion to "bodily injury" or "property damage" resulting from the acts or omissions of the lessee/rentee, or their employees or agents, or any person, except the named insured or the named insured's employees or agents, operating a leased auto with the permission of the lessee/rentee or their employees or agents.
We will illustrate with an example:
Joe (Insured) has Exotic Cars Limited, and leases out a variety of exotic cars.Lisa has a photography studio and takes pictures of people in exotic cars. She leases multiple exotic cars from Joe, and per the leasing agreement, buys liability and no fault coverage on the vehicles she leases. As such, the vehicles she leases from Joe are subject to the terms of CA 20 11.
The CA 20 11 endorsement maintains coverage for Joe and his employees while operating the vehicles, but excludes liability and no fault coverage for Lisa, her employees, or any other person. So, If Lisa asks Joe to come get one of the vehicles because it is malfunctioning, the exclusion does not apply to Joe's employee while he is operating the vehicle with Lisa's permission.
However, if Lisa's liability or no fault policy is cancelled, the exclusion does not apply to Joe or his employees or agents 30 days after the date of the cancellation. Lisa's policy cancellation is on April 1. The exclusion will not apply to Joe and his employee30 days after that date.
Leasing Or Rental Concerns – Rent-It-There/Leave-It-Here Autos CA 20 12
Endorsement CA20 12 10 13 excludes coverage for the owner or rentee of any auto not owned by the named insured in a rent-it-there/leave-it-here auto agreement. A "rent-it-there/leave-it-here auto" means an "auto" a rentee rents from someone other than the insured but leaves it with the insured. This prevents the named insured's policy from inadvertently providing primary coverage for autos they do not own and did not initially rent out.
For example, an insured rental agency runs out of cars and sends a renter to a different rental agency to fulfill a rental contract, so the renter picks up the car at the other rental agency but when finished, he brings the other agency's car back to the rental agency he had the agreement with. In this situation, the endorsement would preclude coverage for the car picked up from the other rental agency because it was not owned by the insured rental agency.
Leasing Or Rental Concerns – Schedule Of Limits For Owned Autos CA 20 13
Endorsement CA 20 13 10 13 enables an insured to schedule specific and varying limits of liability for autos owned by a leasing or rental concern.The typical business auto policy has a single limit of liability that applies to all covered autos. This endorsement modifies that by providing a schedule where the insured can specify different limits for distinct groups of owned autos.
For example, an insured rental company might want higher liability limits for vehicles rented to the general public, over whom they have less control, and potentially lower limits for vehicles rented to a specific business who frequently rents from them and they know the vehicles are being driven only locally by experienced drivers. This endorsement allows for this type of customized scheduling.
Leasing Or Rental Concerns – Second Level Coverage CA 20 14
Endorsement CA 20 14 10 13 can be added to provide excess liability coverage for the leasing concern when the lessee's policy provides such coverage on a primary basis for both the leasing concern and the lessee. This endorsement comes into play when the lessee's auto liability policy is considered primary for both the lessee and the lessor, but the lessor desires a higher limit of coverage for its own protection. Coverage is limited to the difference between the limit on the lessee's policy and the limit shown in the schedule of the endorsement.
To illustrate, an insured leasing company leases a fleet of delivery vans to a local bakery, and the lease agreement requires the bakery to maintain primary auto liability insurance naming the leasing company as an additional insured. The insured leasing company might add the endorsement scheduling higher liability limits for itself for additional protection in case of a major accident involving one of the leased vans.
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