(September 2013)
SECTION II–LIABILITY COVERAGE
A. Coverage
1. Who Is An Insured
a. The named insured is an insured for any covered auto.
Note: Naturally, the party listed is an insured according to the auto symbols that apply.
b. Anyone else using a covered auto the named insured owns, hires or borrows with the named insured’s permission is an insured with some exceptions.
Related Court Cases:
Court In Favor Of Defense For Unauthorized Driver (Classic)
Vehicle's Fire Loss In Repair Shop Not Covered Under Auto Policy
1)
The owner or any other party the insured hired or borrowed a covered auto from is not covered.
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Example: Polly, the named insured, rents an import car from Jalopy Motors, Inc. Polly is covered during her use of the rented car but Jalopy Motors is not. |
Note:
An exception to this is any trailer connected to an owned and covered auto.
2) Employees of the named insured are not covered if they or members of their household own the auto.
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Example: Mavis is vice president of Karla Consultants. On Karla's behalf, she borrows her son’s car to impress a client. If an accident occurs, Karla Consultants is covered but Mavis is not. |
3)
Anyone while working in the business of selling, servicing, repairing, parking, or storing autos that uses a covered auto is not covered unless it is the named insured's business.
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Example: James works for Heffernan International and takes his company vehicle to A-1 Garage for repairs. John, the garage mechanic, takes the vehicle for a test drive. The brakes fail, resulting in a serious accident. Neither John nor A-1 Garage is covered but both Heffernan International and James are covered if they are named in a suit. |
4)
Anyone moving property to or from a covered auto is not an insured but there are numerous exceptions. The named insured’s partners, employees and LLC members are covered, as well as lessees and borrowers of autos, including their employees.
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Example: John is a carpenter with a business-use pickup truck. He lets George use it to move his household items to a new home. While unloading a dishwasher, George loses his grip, the dishwasher falls and seriously injures a young child who was watching. The accident is not covered since George is not an insured. |
5)
Partners and members of a LLC are not insureds for any auto owned by the partner or member or for any auto owned by a member of their households. This means that a partner that borrows his or her spouse’s car for company business is not an insured under the Business Auto Coverage Form.
c. Anyone held liable for the conduct of an insured is also considered an insured, but only to the degree that the insured is responsible (legally accountable) for that insured’s actions.
Note: CA 20 54–Employee Hired Autos is available to add coverage if an employee hires an auto in his or her own name as an individual to perform business-related duties and activities on behalf of his or her employer. When this endorsement is added, the definition of Who Is an Insured is amended to also include the employee while operating the vehicle owned or rented in his or her name.
Related Court Case: Insurer Not Liable for Driver’s Unauthorized Use of Employer’s Truck
CG 00 01 AND CG 00 02–COMMERCIAL GENERAL LIABILITY COVERAGE FORMS ANALYSIS
(April 2013)
SECTION II–WHO IS AN INSURED
1. The declarations lists different types of entities. Who is an insured is based on the type(s) of entities selected.
a. If the named insured is an individual, the named insured and his or her spouse are insureds. They are insureds only with respect to operations of the business the named insured solely owns.
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Example: Mr. John, a sole proprietor, sells farm produce. Both he and Mrs. John are insureds. In addition, Mr. John is the sole proprietor in another venture where he makes wood kitchen cabinets. Here again, both he and Mrs. John are insureds. However, if he and his brother own the carpentry business as a partnership, coverage does not apply to the partnership. |
b.
If the named insured is a partnership or joint venture, that named insured is an insured. The named insured's members and partners and their spouses are also insureds. Their status as insureds is limited to operations of the named insured's business.
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Example: Mr. John and Mr. Joe are partners in a carpentry business. Both partners and their spouses are insureds with respect to conduct of the carpentry business. However, none of them are insureds under this coverage form for any personal exposures or for any other business activities. |
Related Court Case: Partnership Personal Conduct Is Distinguished From Business Activity
c. If the named insured is a limited liability company, the named insured is an insured. Members of the company are insureds but only when conducting the named insured's business. The named insured's managers are also insureds but only when performing specific duties as managers.
d. If the named insured is any other organization, the named insured is an insured. The executive officers and directors are insureds while performing their duties as such. Stockholders are insureds but only in their very limited capacity as stockholders.
e. If the named insured is a trust, the named insured is an insured. The trustees are insureds but only while performing duties the trust requires.
Related Court Case: Insurer Not Notified of Trust Beneficiary Change (Classic)
2. Each of the following is also an insured:
a. Volunteer workers but only when performing duties related to the named insured's business. Employees, excluding executive officers and managers of a limited liability company, are insureds within the narrow range of activities within the scope of their employment or while conducting the named insured's business.
(1) Volunteers and employees are not insureds for bodily injury or personal and advertising injury:
- To the named insured, its partners, or members of a LLC
- To other employees. This restriction applies only when those co-employees act within their employment boundaries or conduct the named insured’s business.
- To the named insured's volunteer workers. This restriction applies only when those workers conduct the named insured's business.
- To consequential loss a relative of any co-employee or volunteer sustains because of injuries to a co-employee or volunteer described in the prior two bullet items
- Where an obligation exists to share damages with or repay others for damages because of injury described in any of the preceding bullet items
- When an employee or volunteer provides or fails to provide professional health care services
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Example: The Hometowne Daily Journal is insured under a CGL Coverage Form. Joe shares some candy with Ken, a visiting salesman. Ken starts to choke. Joe is a trained EMT and he attempts the Heimlich Maneuver. Unfortunately, his efforts are unsuccessful and Ken dies before a city emergency unit arrives. Ken's family sues Joe when it learns that he did not administer the Heimlich Maneuver properly. Hometowne’s CGL Coverage Form does not respond to this lawsuit. |
(2)
Volunteers and employees are not insureds for property damage to property owned, occupied, used by, rented to, or in the named insured's physical custody.
Note: It is important to understand how coverage extends to volunteers and their duties. Their covered duties are not the same as employee duties. Volunteers are usually involved in non-work activities, such as special events and charitable functions. For this reason, their covered duties are those that the business establishes for them.
b. Any party, other than an employee or volunteer, who acts as the named insured's real estate manager
Related Court Case: Hotel Held Not Covered Under Tailhook Association's Policy as Its "Real Estate Manager"
c.
Any party that has proper temporary legal custody of a deceased named insured's property but only with respect to liability that arises out of or is caused by maintaining or using that property. However, this is only until a legal representative is appointed.
d. A properly appointed legal representative for a deceased named insured but only while carrying out its duties as the legal representative.
Note: The legal representative assumes all of the deceased named insured's rights and duties. This goes beyond the standard insured status and extends to rights to cancellation, conditions, and other elements assigned to only named insureds.
3. Any newly formed or acquired organization qualifies as a named insured if no other similar coverage is available to it. This applies only if the named insured either owns or has a majority interest in the organization. The newly formed or acquired organization cannot be a partnership, joint venture, or limited liability company. This provision is limited to not more than 90 days after the organization is formed or acquired, or until the end of the policy period, whichever comes first. Coverage A does not apply to bodily injury or property damage that occurred before the organization was acquired or formed. Coverage B does not apply to personal and advertising injury that arises out of an offense committed before the organization was acquired or formed.
No party is an insured with respect to conduct of any current or previous partnership, joint venture, or limited liability company that is not on the declarations as an insured.
Note: In addition to the parties included as insureds as outlined above, ISO has developed a number of endorsements used to add a variety of additional insureds under certain circumstances or limited to specific purposes.
Related Article: ISO Commercial General Liability Coverage Forms Available Endorsements and Their Uses
