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Commercial Auto Insurance can cover some or all of the following items:
The insured party (medical payments)
Property damage caused by the insured
The insured vehicle (physical damage)
Third parties (car and people, property damage and bodily injury)
Third party, fire and theft
In some jurisdictions coverage for injuries to persons riding in the insured vehicle is available without regard to fault in the auto accident (No Fault Auto Insurance)
The cost to rent a vehicle if yours is damaged.
The cost to tow your vehicle to a repair facility.
Accidents involving uninsured motorists.
Different policies specify the circumstances under which each item is covered. For example, a vehicle can be insured against theft, fire damage, or accidental damage independently.
Commercial Auto Insurance policies are designed to protect business entities from exposures that arise from the ownership, maintenance, or use of motor vehicles. Such exposures include lawsuits seeking damages for BI or property damage (PD) sustained by third parties in auto accidents for which business entities or certain individuals driving the entities’ vehicles on their behalf may be liable. Policies also cover physical damage to insured companies’ vehicles.
The most commonly used commercial auto policy is the ISO (BAP) Business Auto Policy. The policy
utilizes a set of numeric symbols to indicate both the coverages that have been purchased and the
autos deemed covered autos with respect to those coverages. The symbols are numbers 1 through 10 as well as 19. For each of the coverages afforded by the policy, one or more numbers is shown in the declarations. Each number represents a category of autos. For example, symbol 1 means “any auto.”
While the numeric symbols determine what types of autos are covered autos, the Who is an Insured
section of the policy determines who is covered for the use of those autos. Under the BAP, named
insureds are covered for any covered auto.
“Permissive users,” meaning individuals using covered autos with the named insured’s permission, are insureds only for the use of autos owned, hired, rented, or borrowed by the named insured. Also, an insured is anyone liable for the conduct of a named insured or a permissive user. (Source IRMI)
Our brokers, agents and selected companies will help fill Commercial Auto Insurance coverage gaps such as:
– identify the problems that can result from using the wrong type of policy (personal versus
business) to insure a vehicle;
Private passenger autos that are not used for business purposes should be insured under a PAP.
Likewise, private passenger autos that are used for business purposes should be insured under a
commercial auto policy. Problems can arise when private passenger autos are insured under the
wrong type of policy because of key differences between PAPs and commercial auto policies. One
difference is that PAPs typically provide family auto coverage while commercial auto policies do not.
– identify and correct problems resulting from the incorrect assignment of covered auto
Coverage gaps may occur if covered auto symbols are used incorrectly in a commercial auto policy. One of the most serious mistakes an insured may make with regard to covered auto symbols is the use of symbol 7 for liability coverage. This symbol covers specifically described autos, meaning the autos described in Item Three of the declarations. It affords very limited coverage for newly acquired autos.
– explain the coverage gaps that drive other car coverage can address;
Commercial auto policies are primarily intended to protect business organizations. Employees and other individuals who perform work or services on the organization’s behalf are insureds under the policy while driving autos that the organization owns. (Coverage Gap) Not covering executives or others who are provided with company vehicles with drive other car coverage, when they have no PAP (including no-fault coverage, where applicable)
– explain why businesses with no owned vehicles have auto liability exposures and how these
exposures can be covered;
Many business entities do not own any vehicles. This is particularly common for small firms that
have few employees. When a business entity owns no autos, the owner or managers may believe
commercial auto coverage is unnecessary. Someone’s autos are likely to be used on the company’s behalf, and that use creates an auto liability exposure. Hired autos are covered for liability by listing symbol 1 (any auto) or symbol 8 (hired autos) next to liability coverage in the declarations. “Hired autos” includes autos the named insured leases, hires, rents, or borrows. This term does not include any auto the named insured leases, hires, rents, or borrows from any of its employees, partners (if the named insured is a partnership), members (if the named insured is a LLC), or members of their households.
– identify the pitfalls associated with handling uninsured/underinsured motorists (UM/UIM)
selection or rejection forms;
State laws regarding UM/UIM coverages vary widely. Some states require auto policyholders to purchase UM coverage and do not allow them to reject it. Other states impose similar rules regarding underinsured motorists coverage. Yet, many states allow policyholders to elect or reject UM and UIM. Some states require insurers to offer UM and UIM coverage on any auto policy that includes liability coverage. In some states, insurers are also required to offer UM and/or UIM at the same limit as liability coverage. The appropriate selection or rejection forms must be completed and forwarded to the insurer promptly. Problems may occur if forms are not completed properly or if forms are completed but never sent to the insurance company.
– explain why it is important to recognize and properly insure mobile equipment that is subject
to a motor vehicle law;
State vehicle registration laws are often silent on the subject of compulsory insurance. That is, laws may not specify whether a forklift or a front-end loader requires liability insurance. In general, however, vehicles that must be registered must also be insured for liability. State laws vary widely with regard to the types of vehicles that must be registered and insured. For example, state A may require backhoes to be registered, while state B does not. Likewise, a forklift may be subject to
registration laws in state A but not in state B. It is important to insure mobile equipment deemed an auto on the insured’s commercial auto policy, especially when the definitions of “auto” and “mobile equipment” in the insured’s auto policy do not match those in the insured’s CGL policy. Because of the potential for problems when the definitions of “auto” and “mobile equipment” in the liability policy conflict with those in the auto policy, these definitions should be the same in both policies. If they are not the same, then one policy should be endorsed so that the definitions of “auto” and “mobile equipment” in that policy match those in the other policy.
– explain how aggregate deductibles can reduce the insured’s retained exposure when many
covered vehicles are kept in the same location;
Vehicles that are parked or garaged together create the potential for a catastrophic loss under comprehensive coverage. Comprehensive coverage applies to loss to a covered auto by any cause other than the covered auto’s collision with another object or the covered auto’s overturn. As the number of vehicles clustered together increases, the size of a potential comprehensive loss also increases. Business entities like service stations and parking garages are bailees because they have their customers’ autos in their care, custody, and control (CCC). Auto service businesses may also have a catastrophic exposure if they store large numbers of customers’ autos at a single location. First, a deductible applies to each covered auto with respect to theft, mischief, or vandalism, or to all perils. The insured may elect either option. Secondly, a “per loss” (aggregate) deductible applies; this is the maximum deductible that will apply to all loss in any one event caused by theft or vandalism; or by all perils. Again, the insured may choose either option.
A dealer may have hundreds or even thousands of autos at a single location. In the absence of the “per loss” deductible, the “per auto” deductible would apply to each damaged auto. If, say, 100 autos are damaged, the “per auto” deductible would apply 100 times. An aggregate deductible may save the insured a considerable amount of money, particularly when a large number of autos is damaged. As the “per loss” deductible increases, the premium generally decreases. The amount of the “per loss” deductible will need to be balanced against the premium. The insured should choose an aggregate deductible that is manageable but also provides an adequate premium reduction.
– explain how physical damage coverage on hired autos can be provided;
Many people recognize the importance of insuring hired autos for liability but may overlook the significance of hired auto physical damage coverage. ISO rules dictate that vehicles leased or rented for 6 months or longer should be rated in the same manner as owned autos. Such vehicles are generally referred to as leased autos. Conversely, autos hired or rented for less than 6 months are rated based on the cost of hire; this applies to liability and physical damage coverages. The ISO BAP contains two exclusions that are relevant to hired auto physical damage exposures. The first is the “CCC” exclusion. Remember that the BAP precludes PD or “covered pollution cost or expense” to property in the insured’s CCC. Secondly, the definition of “insured contract” in the BAP excludes any agreement, or part thereof, that requires the named insured or any of its “employees” to pay for PD to any auto the named insured rents or leases. Consequently, neither the policyholder nor its employees are covered for liability they assume under an auto rental agreement for physical damage to a rental vehicle.
– describe the coverage gap that can occur when employees hire autos in their own names for
business use and explain how the gap can be addressed.
Problems can arise if an employee is traveling on business on behalf of his or her employer, and the employee hires an auto in his or her own name rather than in the name of the business entity. The insurer contends that the rental car does not qualify as a hired auto because it was not rented or hired by the business. A claim is submitted and according to the insurer, the rental vehicle is a non owned auto. The insurer reminds the business that an employee is not an insured under his or her employer’s BAP while driving an auto that the employer does not own. Had the lawsuit and the demand from the rental agency been filed against the business rather than the employee, it would likely have been covered under the employer’s commercial auto policy. A named insured employer is an insured for the ownership, maintenance, or use of non-owned vehicles.
Commercial Insurance Near Me offers commercial insurance options custom designed to insure your business in case of employee injuries, accidents, property damage, legal liability, business auto, employee-related risks, loss prevention and more.