MARKET SEGMENTS DIVISION–AUTO SERVICE RISKS

(February 2023)

Collapsible Index

Eligibility

MS AS DS–Auto Service Risks Supplemental Schedule

MS AS 01–Auto Service Risks Analysis

I. Modifications To CP 00 10–Building And Personal Property Coverage Form

II. Modifications To CP 10 30–Causes Of Loss–Special Form

III. Changes To The Commercial General Liability Coverage Part

IV. Definitions

Endorsements

Underwriting Considerations

Rating Considerations

 

The Auto Service Risks Program is an enhancement of the Commercial Package Policy available to Auto Service Operations. Any package written under the market segment division must be assembled according to the rules for all Market Segment policies.

Related Article: ISO Market Segment Overview

This article will discuss items specific to the Auto Service Risks Program, including the eligibility, supplemental schedule, MS AS 01–Auto Services Risk, and the special endorsements developed just for this program. In addition, there is a section on Underwriting and Rating.

This article is based on the 07 13 edition of this program. Changes from the prior edition are in bold print.

ELIGIBILITY

The three basic types of risks that are contemplated by the Auto Service Risks Program include:

·         Repair Shops–operations primarily engaged in auto repair. This includes shops that do body, fender, radiator, ignition service and paint work.

·         Service Stations–operations primarily engaged in servicing autos. The sale and installation of auto accessories are a part of this category if major engine or bodywork is not performed. Car wash facilities are eligible.

·         Storage garages and other parking places.

·         The following classifications are specifically listed as eligible: Automobile:

o    Quick Lubrication Services

o    Repair or Service Shops

o    Repair Shops–Self Service

o    Rustproofing

o    Storage

·         Car Washes–self-service and full-service

·         Convenience Food/Gasoline Stores–self-service, full-service and combined

·         Gasoline Stations–self-service, full-service and combined

·         Parking–public-open air and not open air

Automobile, motor home, mobile home, trailer, and motorcycle dealers are NOT eligible for this program.

If a risk has more than one classification and one is an ineligible class, the entire risk becomes ineligible for coverage.

Not all of the above -mentioned operations will qualify for coverage in every case. Individual insurers may apply their own underwriting guidelines and criteria.

MS AS DS–AUTO SERVICE RISKS SUPPLEMENTAL SCHEDULE

What follows is a discussion of the specific information that must appear on a Supplemental Schedule for the Auto Service Risks Program.

Changes in Limits

This section's only purpose is to increase insurance limits. If no limit is entered, the limits shown in the MS AS 01 apply. Any limit changes are effective on a per location basis. This allows protection for one or two locations to be increased without affecting the remaining locations.

Seven specific coverages are listed in this section. An eighth space is available for entering a coverage and limit of insurance. The coverages are:

Note: According to the coverage form, whatever limit is entered is a replacement (not an additional) limit.

 

Example: The limit for Money and Securities in the coverage form is $2,500. Kelly has requested a limit of $5,000. The limit of $5,000 is entered next to Money and Securities coverage on her schedule; it then becomes the applicable amount.

Hired and Non-Owned Auto Liability Insurance

If coverage is desired, endorsement MS AS 06 must be attached. The limits can be entered on this Supplemental Schedule or on the schedule that is included in the MS AS 06 form. Separate insurance limits apply for these two coverages.

Loss or Damage to Customers’ Autos Section

The insured must select one of three options regarding coverage for loss or damage to customers’ autos. The three options and their endorsement are:

Limits are entered by premises. The limits that must be entered are:

·         The per event limit of insurance

·         The per customer auto deductible for theft, vandalism or mischief loss

·         The maximum deductible per occurrence by theft, vandalism or mischief loss

·         The per customer auto deductible for collision loss

Loss or Damage to Lessors’ Property Section

If a premises is leased from another entity, optional endorsement MS AS 05–Auto Service Risks-Loss or Damage to Lessors’ Property can be purchased. Needed information may be added either on this supplemental Dec. or on the MS AS 05 endorsement. The information entered on the schedule includes:

Forms Applicable

The final section of the Supplemental Schedule allows for the specific endorsements to be listed by premises.

MS AS 01–AUTO SERVICE RISKS ANALYSIS

The opening paragraph of the Auto Service Risks endorsement clarifies which of the CPP coverage and property causes of loss forms are modified by this endorsement. They are:

The Auto Service Risks endorsement is not a complete coverage part. It must be attached to a package containing all three of the above named forms in order to become a valid Auto Service Risks Program policy.

 

Example: If a CPP is issued with commercial property coverage, commercial crime, CGL but no commercial inland marine, the Auto Service Risks endorsement can be added.

 

When the Auto Service Risks endorsement is attached, all of the underlying terms, conditions, and provisions of the above three forms apply as they normally would, except those that are modified by the Auto Service Risks endorsement.

Each of the modifications will be reviewed in the following analysis.

I. Modifications to CP 00 10–Building And Personal Property Coverage Form

A. Property Covered Additions

Any reference to a covered building is amended to include both aboveground and belowground fuel storage tanks. The related piping, connections, the pumps, and electrical equipment that go with the pumps are also covered. The Property Not Covered section is revised to eliminate the reference to underground pipes, flues, and drains.

 

Example: Cleaver’s Garage offers three grades of fuel, gasoline, diesel fuel, and kerosene. There are five underground fuel storage tanks. All five of these tanks, plus their component piping, connections, and operating equipment are considered building property.

B. Property Not Covered Modifications

The following property is excluded from coverage.

1. Property that is kept in storage at a location other than the covered premises. However, there is coverage for property in storage under the Coverage Extensions. This should not be considered a reduction in coverage though. The standard policy does not provide coverage for Property Off Premises, so this is just a clarification that protection exists under the policy's Coverage Extensions section.

2. Any computer that has been permanently installed in any of the following types of vehicles is not covered property:

Remember even with this restriction, there is coverage for computers in another section of this endorsement.

Example: Cleaver’s has Ground Positioning Systems (GPS) installed in its tow trucks and service vehicles. These items are not considered to be covered property (unless added back elsewhere by specific endorsement such as inland marine). If they had been hand-held systems, there would be some coverage.

C. Additional Coverages Change – Fire Department Service Charge

The Limit for Fire Department Service Charge is increased from $1,000 to $5,000 and can be further increased in the Supplemental Schedule.

D. Additional Coverages Additions

1. Money and Securities

Coverage is added for direct loss by theft, disappearance, or destruction of money and securities. This additional protection is effective if a loss occurs at a covered premises, a bank or savings institution, living quarters of the named insured, partner or employee and while the property is in transit between any of these locations. Coverage at employee living quarters applies only if that employee was given the covered property to use or hold on behalf of the named insured.

The following three types of loss are excluded:

·         Losses that result from errors or omissions in accounting or arithmetic

·         Losses that occur because the property was voluntarily given out in an exchange or purchase

·         Any loss of covered property that is contained within any money-operated device (such as a vending machine). This exclusion does not apply if the device has a continuous reading instrument that records all amounts that are deposited or stored in that device.

Occurrence is defined under this segment as any loss that involves a single act or a series of related acts by one or more individuals. The named insured is required to keep records of all money and securities to verify any loss.

 

Example: Cleaver’s soft drink vending machine was vandalized and robbed one evening. A claim was turned in based on the cost of the estimated missing cigarettes and cash taken. There was no coverage for this loss because this was an older model machine without a continuous reading instrument to document the actual amount of sales at the time of loss.

 

This coverage requires the insured to keep records of all money and securities so that the insurer can verify the amount of a loss.

The automatic amount of $2,500 can be increased by indicating the new limit on the Supplemental Schedule.

Example: June Cleaver was taking the daily receipts to the bank when she was forced off the road by carjackers who stole the daily receipts. The following week, when she was again taking receipts to the bank, she realized she was later than usual, and the bank was closed. She took the receipts home to deposit them in the morning. Her house was robbed, and the receipts were stolen. The next week, she finally made it to the bank with the receipts but unfortunately, while making her deposit, a bank robbery occurred, and her receipts were once again stolen. In all three of these situations, up to $2,500 of the receipts is covered.

 

2. Fire Extinguisher Systems Expense

Up to $2,500 is available in any one occurrence to pay the cost of recharging or replacing fire extinguishing equipment and systems. Coverage applies only if the discharge is within 100 feet of a described building or within 100 feet of the premises. The greater of the two distances is used to determine if coverage applies.

In addition, if the covered property is damaged due to an accidental discharge, it is covered and subject to the same $2,500 limit.

There is no coverage if the system is discharged during testing or installation.

Example: One hot evening, while a garage was closed, the fire extinguisher discharged, ruining the carpeting in its waiting area. The garage's insurer paid to replace the fire extinguisher and the carpeting (total loss of $650) without a deductible.

 

3. Reward Payment

Rewards are available to assist in solving crimes that result in covered losses. The coverage consists of two categories of rewards. In the first category, up to $5,000 is available for information that leads to the arrest and conviction of any party that commits a crime resulting in a covered property loss. The second category of reward payment applies to the return of stolen property and is for a maximum of $5,000.

The coverage limit is also subject to the actual cash value of the damaged property at the time of the loss or the amount it takes to repair or replace the property or however the value of the property has been determined by policy conditions. In other words, the policy would not pay $3,000 for information related to a crime that caused a $1,500 loss.

Second, rewards up to $5,000 are paid for the return of stolen property. The reward is limited on the same basis as above.

Who is eligible to collect the award? Only one person can receive the reward. The first person, as determined by law enforcement, which voluntarily provides information to the police that leads to a conviction or leads to the stolen property, will receive the reward. However, that person cannot be any of the following:

·         The named insured

·         Family members of the named insured

·         Employees

·         Family members of employees

·         Employees of law enforcement agencies

·         Employees of a business engaged in property protection

·         Any person having custody of the covered property at the time the theft was committed

·         Any person involved in the crime

The reward is not paid until there is a conviction or the property is returned.

4. Money Orders and Counterfeit Money

If the named insured, in good faith, provides services or hands over money or merchandise to another party who pays with unrecoverable money orders or counterfeit money, coverage is provided for the loss to the named insured. The maximum payout is $1,500, but it can be increased on the Supplemental Schedule. There is a limitation that money orders are covered only if they were issued by a post office, express company, or bank.

Counterfeit money is also restricted to only money accepted during the course of business.

5. Forgery and Alteration

A loss that occurs because of the forgery or alteration of checks, drafts, promissory notes, bills of exchange or any similar instruments is covered. Such instruments must be issued by the named insured, the named insured’s agent, or someone impersonating either of these parties. There is no coverage if the loss is for instruments received by the named insured from other sources.

 

Example: Cleaver’s services a vehicle for John, a new customer who pays by check. The check is discovered to be a forgery, John cannot be found, and Cleaver’s cannot recover the amount. There is no coverage.

 

Example: Cleaver’s mails a $1,000 check for auto parts it had received from its new supplier, Haskel and Company. The check amount was $1,000. When reconciling his accounts, Cleaver discovers that $10,000 was charged against his account instead of $1,000. Hugh contacts the bank and finds that the check was altered before it arrived at the bank for processing. Haskel and Company deny having received the check. There would be coverage for the loss, but only up to the $5,000 limit.

 

If the named insured realizes that an instrument has been forged or altered and refuses to honor it, this coverage also pays related and reasonable legal expenses that may ensue. The named insured is given written permission to go ahead with their own defense, and the named insured will be reimbursed for those expenses.

The $5,000 limit is the most that will be paid under this coverage for a single loss. The amount may be exhausted by the loss itself, the defense of a suit or a combination. The limit can be increased on the Supplemental Schedule.

6. Outdoor Signs

Direct damage to outdoor signs owned or under the control of the named insured is covered. This coverage supersedes any other coverage provided for signs elsewhere in the policy.

The any one occurrence limit is $5,000. This limit can be increased in the declarations.

7. Employee Dishonesty (07 13 change)

Coverage of up to $25,000 is provided for employee dishonesty that results in the loss of money, securities, or business personal property. The limit of $25,000 can be increased by entering (and paying for) a higher limit in the declarations.

The employee may be working alone in committing the dishonest act(s), or the employee may collude with other persons. However, if any of those other persons include the named insured or a partner, member or manager of the named insured, there is no coverage.

There is no coverage for indirect loss attributable to employee dishonesty, such as a business income loss, any costs to establish the existence or the amount of a loss or any legal liabilities.

Legal expenses incurred are not covered.

An Inventory computation and/or profit and loss statement cannot be the sole proof that a loss has occurred or be the sole method of establishing the value of the loss. In other words, there must be tangible evidence that a dishonest act occurred, and there must be a way to calculate the amount of that loss accurately.

The $5,000 limit (or higher if purchased) is the total amount available to respond to a single occurrence. The maximum is not affected by the loss involving more than one party or by it involving a series of related acts.

The dishonest act or event must happen during the policy period to be covered. However, the loss can be discovered up to one year after the expiration of the policy period.

Example: On 12/12/2022 Cleaver discovers that Carol, a mechanic, took $5,000 worth of the business’s auto parts on 1/9/2022. Cleaver’s policy had a term from 11/29/2021 to 11/29/2022 and was not renewed because Cleaver placed its business with a different insurer. The loss is covered by the expired policy.

 

The limit of insurance is not cumulative from year to year, so the limit shown is the maximum that will be paid for any one occurrence of a dishonest act or event, regardless of how many years the policy has been in force or how much premium has been paid.

Example: Cleaver’s suffers a loss from a series of thefts. Tony, an employee, cashed a fraudulent payroll check monthly throughout the policy's period. Each month's check was for $2,000, or a total of $24,000 for the policy period. The loss was covered but was limited to $5,000 because it qualified as a single occurrence.

If the named insured, partner, officer, director, trustee, manager or member is aware of an employee’s prior dishonest acts, any loss caused by that employee is not covered unless the employee is acting in collusion with the individual who is aware of the past indiscretions.

If a loss that occurred in a prior policy period is discovered during the current policy period, this policy will pay for the loss provided there was no gap in coverage and the loss would have been covered under this policy if it had been in effect at that time. The maximum payment is the lesser of the current limit of insurance or the prior insurance limit of insurance.

Possible Exclusion Ambiguity - There is an exclusion that may be confusing. It states that loss or damage due to a dishonest act performed by the named insured and any partner, member, officer, manager, director, or trustee is ineligible for coverage. Up to this point, the exclusion is very similar to exclusions in the Commercial Crime Form. However, the exclusion also bars loss for dishonest or criminal acts by authorized representatives and by anyone to whom the named insured has entrusted property. This part of the exclusion may be problematic. Doesn’t the named insured entrust items to employees as part of their duties? Aren’t employees authorized representatives? This wording is not used in the Commercial Crime policy and could cause confusion after a loss.

Related Court Case: Employee Dishonesty Exclusion Superseded Liability for Negligent Supervision

8. Artificially Generated Electrical Current

This coverage is only applicable to an operation's computers.

When artificially generated electrical current damages or destroys the named insured's computers, the company will pay if either of the following occurs:

There is no specific limit for this coverage. However, it is subject to the deductibles in the policy and the limit for the particular equipment.

E. Coverage Extensions Changes

1. Newly Acquired or Constructed Property

The only change is for computers. Coverage at a newly acquired or constructed property in the CP 00 01 ends at the earliest of when the policy expires, thirty days after the property is acquired or when the values are reported to the insurance company.

This coverage extension adds one additional time of coverage ending but it applies only to computers. When ‘specific insurance’ is purchased at the newly acquired premises, coverage ends. The other times also continue to apply to computer.

Note: This extra item is confusing because it doesn’t say that coverage specific to computers is purchased but instead says only ‘specific insurance.’ This confusion could be ambiguous to the benefit of the insured.

2. Personal Effects and Property of Others

The coverage is changed to prevent duplication of coverage with the Employees Tools Extension. There is no coverage in this extension for loss or damage to employees’ tools. All such coverage is found in the Employees Tools Extension.

3. Valuable Papers and Records (Other than Electronic Data)

The valuable papers and records coverage extension is increased from $2,500 to $5,000 for on-premises loss or damage. It also adds coverage when the valuable papers and records are off premises but only for $2,500. These limits can be increased for an additional premium.

Coverage is expanded to include not only the cost to replace or restore the lost information but also any physical loss or damage to the valuable papers and records owned by or in the named insured’s care, custody or control. The coverage extends to the cost of blank material and the labor necessary to transcribe any available records.

The covered cause of loss is more restricted and must be due to a specified cause of loss as defined in the CP 10 30–Causes of Loss - Special Form or due to collapse. Property that is held as samples or that has been sold and is waiting to be delivered is not covered. Any property that is being stored off premises is also not covered.

Note: If higher limits are needed, consider using one of the following forms because of causes of loss and coverage designed just for this exposure.

Related Articles:

ISO Valuable Papers and Records Coverage Form

AAIS Valuable Papers and Records Coverage

4. Property Off-Premises

The Auto Service Risks Program enhances the property off-premises extension by adding protection for computers while in transit.

5. Outdoor Property (07 13 change)

The Auto Service Risks Program provides coverage for outdoor property (unless such property is merchandise) for the following causes of loss:

Applicable limits are based on the type of outdoor property.

·         Fences and retaining walls: $2,500 in a single occurrence. This does not apply to fences and retaining walls attached to the building or structure because they are considered buildings and not outdoor property.

·         Outdoor radio and television, satellite or other antennas: $3,000 in a single occurrence. Masts, towers, and wiring that are part of the antenna are part of this type of outdoor property.

·         Trees, shrubs, and plants: $2,500 in a single occurrence. This limit is subject to a maximum sublimit of $500 for a single tree, shrub, or plant. The expense to remove damaged trees, plants, or shrubs debris is part of this limit.

 

Example: The oak tree on Mac’s Garage’s premises was felled by a lightning strike. The cost to remove it was $1,000. The most the policy will pay is $500.

 

This coverage does not apply to vegetated roof plants, shrubs and plants or to such items held as stock because they are covered as business personal property.

The expense to remove property of others consisting of trees, shrubs and plants debris is covered under this item. No limit is mentioned with this item, although there is a reference to the terms and conditions of the rest of the extension. There could be an ambiguity as to what limit, if any, applies.

6. Employees’ Tools

Damage or loss to tools that belong to the named insured’s employees can be covered but only when the tools are on premises. This extension pays up to $2,500 for a single occurrence at each described premises. There is a cap of $500 for any individual employee's tools. The $2,500 limit may be increased for an additional premium. The higher limit must be entered on the Supplemental Schedule.

7. Accounts Receivable

The limit of insurance for business personal property may be extended to include direct loss or damage caused by a covered cause of loss to accounts receivable. The coverage applies to the following:

·         The amounts owed but unable to collect from tenants

·         Interest charges on loans the named insured has had to obtain to offset revenue uncollected during the claims process

·         Any additional collection expenses that were made necessary by the loss or damage

·         Other reasonable expenses incurred to re-establish accounts receivable records

The amount available is $5,000 for on-premises loss or damage and up to $2,500 for off-premises loss.

Note: If higher limits are needed, consider using one of the following forms because the coverage is designed just for this exposure.

Related Articles:

AAIS Accounts Receivable Coverage

Accounts Receivable Coverage

II. Modifications to the CP 10 30–Causes of Loss-Special Form

Several exclusions and limitations found in the Causes of Loss—Special Form are modified for some of the additional coverages and coverage extensions. The modifications are as follows:

A. Mechanical Breakdown

The mechanical breakdown exclusion does not apply to computers.

B. Dampness, Dryness, Changes in Temperature, Marring or Scratching

The only change in the dampness, dryness, and changes in temperature, marring or scratching exclusion subparts is the dampness or dryness of the atmosphere portion.

An exception is added so that when an air conditioning system used with the computer is damaged by a covered cause of loss, the resulting damage to a computer because of any dampness or dryness is covered.

 

 

 

Example: The summer turns out to be one of the wettest on record. It rains non-stop for weeks. The atmosphere is so humid that one of Cleaver’s diagnostic computers crashes and loses its data. There is no coverage for this loss.

 

Example: Cleaver’s exterior air conditioning unit is struck and destroyed by lightning. The loss of air conditioning causes a diagnostic computer to break down and lose data. This loss would be covered because its proximate cause was the lightning strike (a covered peril) to the air conditioning equipment.

C. Additional Exclusions for Computer Coverage Only:

1. The following exclusions apply to computer coverage, and the prohibitions apply regardless of other concurrently or sequentially occurring causes of loss.

Note: The reason these extra exclusions are needed is because MS AS 01 includes coverage for mechanical breakdown of computers that is not provided by the CP 10 30.

a. Errors or Omission

There is no coverage for damage or loss caused by or resulting from human errors or omissions in the processing, recording, or storing of information on computers. The resulting fire or explosion is covered if caused by a covered cause of loss.

Example: Cleaver’s employee, Ted, enters the wrong codes on a program, causing the system to crash and wipe out Cleaver’s accounting records. There is no coverage.

 

b. Electrical Disturbance

There is no coverage for damage caused by electronic or magnetic injury, disturbance, or erasure of electronic recordings unless it is a result of a direct lightning loss or damage.

Example: Ted, one of Cleaver’s employees, did not realize that magnetized metals placed close to computers could erase data and media. Ted brought his son’s award-winning science project on electronic magnets to work one day to show off to his co-workers. He demonstrated the project in his cubicle by his computer—the only one that held personnel records on it. The science project erased the records. There is no coverage.

 

c. Computer-Related Losses

There is no coverage for any loss or damage due to the failure, malfunction, or inadequacy of any of the following to recognize a date or a time:

Any other products that depend on the items listed immediately above in any manner.

Note: Regarding this exclusion, it does not matter whether these items belong to the named insured or to other parties.

d. Computer Advice or Consultation

Computer advice or consultation that results in loss or injury is not covered. This exclusion extends both to advice given by the named insured or given on its behalf. The activities considered consultation or advice include any of the following when used to determine, rectify, or test for perceived or actual problems:

2. When Electrical Disturbance, Computer-related Losses and Computer Advice or Consultation excluded above result in a specified cause of loss or elevator collision, that resultant loss is covered. However, there is no payment to repair, replace, or modify any item listed in exclusion c. above.

The damage from an elevator collision must involve the elevator experiencing a mechanical breakdown.

D. Employee Dishonesty

Most of the exclusions in the Special Cause of Loss Form do not apply to the Employee Dishonesty Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War and Military Action and the specific exclusions discussed in the Employee Dishonesty Additional Coverage.

Related Article: Basic, Broad and Special Causes Of Loss Forms Analysis

E. Outdoor Signs

Most of the exclusions in the Special Cause of Loss Form do not apply to the Outdoor Sign Coverage provided in this endorsement. The only applicable exclusions are Governmental Action, Nuclear Hazard, War, Military Action Wear and Tear, Rust and Mechanical Breakdown.

Related Article: Basic, Broad and Special Causes Of Loss Forms Analysis

F. Valuable Papers and Records and Accounts Receivable

The only exclusions in CP 10 30–Causes of Loss – Special that apply to Valuable Papers and Records and Accounts Receivable are:

·         Governmental action

·         Nuclear hazard

·         War and military action

·         Computer-related losses

·         Computer advice or consultation

·         Continuous or repeated seepage or leakage of water–14 days or more

·         Water, other liquids, powder or molten material that leak or flow from plumbing, heating, air conditioning or other equipment caused by or resulting from freezing

·         The concurrent causation exclusions

Note: This item is very ambiguous because of the difference between the two coverages. Valuable Papers and Records coverage applies only for specified causes of loss and collapse, while accounts receivable coverage is subject to the CP 10 30 causes of loss. Remember that under the Valuable Papers Coverage Extension only specified causes of loss and collapse are considered covered causes of loss. By combining the two coverages under this same modification would suggest that they, too, are covered for the same causes of loss when they are not.

G. Accounts Receivables

The following exclusions apply in addition to the exclusions described in F. above:

1. Loss involving alteration, falsification, concealment, or destruction of accounts receivable records if these actions were meant to conceal another action such as giving, taking or withholding money, securities or other property.

2. Loss due to errors or omissions in a covered operation's bookkeeping, accounting or billing functions.

3. Loss that is only found due to an audit or inventory. There must be some other outside evidence.

H. Valuable Papers and Records

The following exclusions apply in addition to the exclusions described in F. above:

1. If errors or omissions while processing or copying the Valuable Papers occur and create a loss, there is no coverage unless the error or omission causes an explosion or fire. Only the damage directly attributable to the fire or explosion is covered.

2. The gradual deterioration of Valuable Papers and Records is not covered nor is wear and tear or latent defect. Paper documentation is fragile, and no insurer will cover books and records just falling apart due to age and use.

III. Changes to the Commercial General Liability Coverage Part

The only change in the Commercial General Liability policy is to remove the option for the policy to be audited. If the policy is to be subject to audit, the premium must be labeled as an advance premium.

IV. Definitions

Several definitions are added to the Commercial Package Policy via the Auto Service Risks Program endorsement as follows:

Computer refers to programmable electronic devices used to work with data. While the definition does apply to peripheral equipment and to related air conditioning and fire suppression systems, it doesn’t apply to data or media.

Counterfeit money is a money imitation meant to deceive.

Employee is expanded beyond the full-time employee of a business. There are seven different categories that qualify as employees: (07 13 change)

a.     An actual person (not a corporation) who is paid by the named insured and is under the control of the named insured with respect to performing his or her duties. The person remains an employee for 30 days after termination, but only if termination is not related to dishonest actions.

b.    A person who is a substitute for an employee or is hired for short temporary work is considered an employee while under the control of the named insured except when caring for property off-premises.

c.     A person leased to the named insured that is not a person described in a. or b. above. There must be a contract and a labor-leasing firm involved.

d.    A consultant for the named insured but only if that consultant was formerly an employee, director, partner, member, trustee, or manager.

e.     A guest student or intern but only while acting as a student or providing services for the named insured. There is no coverage for loss of property off premises.

f.      Any employee of an entity that merged with the named insured or was acquired by it prior to the policy effective date.

g.    Managers, directors or trustees when acting as employees or while on a task-oriented board.

An employee does not include independent contractors or similar type individuals unless specifically described in the list above.

Forgery refers to one party signing another person’s name with the intent to deceive. It does not include an unauthorized signing by a person of his or her own name.

Member is one of the owners of a limited liability company (07 13 addition)

Manager is any director in a limited liability company.

Money includes all currency, coins, and bank notes with a face value and in current circulation, plus money orders, travelers’ checks and similar items that are held for sale to the public.

Occurrence applies to only the Crime portions of this form, and the meaning varies by the type of coverage. Under Money and Securities coverage, it means all loss that involves one or more related acts by one or more persons. Under Money Order and Counterfeit Money coverage, it means either one or more related acts or events by one or more persons or one or more related acts or events not involving any person. Under Forgery or Alteration coverage, it means all losses involving one or more instruments caused by any person or in which that person was involved. Under Employee Dishonesty it means all loss that results from a single act or series of acts caused by one or more employees.

Securities are evidence of debt such as stock certificates, bonds, contracts, tokens, stamps, credit card evidence that can be used to collect from the credit card company and other items that represent money but are not money.

ENDORSEMENTS

The forms developed for the Market Segments series of programs carry the designation “MS.” However, it is important to remember that all of the endorsements available under the Property and General Liability Coverage Parts are available under this division.

Related Articles:

Commercial Property Program Available Endorsements and Their Uses

Commercial General Liability Available Endorsements And Their Uses

Six program specific endorsements are available to further amend or tailor the coverage provided under this program.

MS AS 02–Auto Service Risks-Loss or Damage to Customers' Autos (Direct Primary Coverage)

This endorsement provides primary coverage for damage to customers' autos under the Building and Personal Property Coverage without regard to fault, or the availability of the customer's own auto insurance to pay for the loss. The customers’ autos and auto equipment must be in the care, custody or control of the named insured while being attended, serviced, repaired, operated, or stored. It pays only for damage that occurs on the covered premises or while temporarily away from that premises. The perils covered are any cause of loss except for the following:

·         Loss or damage from theft or conversion caused by the named insured, partners, executive officers or employees

·         Defective parts or materials

·         Defective work performed by or for the named insured

MS AS 03–Auto Service Risks-Loss or Damage to Customers' Autos (Legal Liability Coverage)

This endorsement is identical to MS AS 02–Auto Service Risks-Loss or Damage to Customers' Autos (Direct Primary Coverage), except that coverage is limited to only the named insured’s legal liability for the covered property. An exclusion for loss due to contractual obligation is added, and a list of supplementary payments that are outside the limit of insurance is provided.

MS AS 04–Auto Service Risks-Loss or Damage to Customers' Autos and Other Customers' Property (Direct Primary Coverage)

This endorsement is identical to MS AS 02–Auto Service Risks-Loss or Damage to Customers' Autos (Direct Primary Coverage), except that coverage is expanded to include other personal property of the customer, such as a briefcase, computer, or sporting equipment left in the auto.

MS AS 05–Auto Service Risks-Loss or Damage to Lessors' Property

This endorsement extends coverage to the named insured’s lessor. The lessor and premises must be scheduled along with a description of the property along with a limit of insurance.

MS AS 06—Auto Service Risks—Hired Auto and Non-Owned Auto Liability Insurance

This endorsement amends the General Liability Coverage Part to provide coverage on a basis similar to commercial auto coverage. Hired auto coverage applies to bodily injury and property damage that arises from the maintenance or use of a hired auto by the named insured or any employee of the named insured. Non-Owned Auto Liability applies to bodily injury or property damage that arises from any person using a non-owned auto in the course of the named insured’s business.

Note: Non-owned coverage is designed to protect the named insured, not the owner or driver of the vehicle.

MS AS 09–Auto Service Risks – Defective Products Coverages (07 13 addition)

Exclusion k. in CG 00 01–Commercial General Liability Coverage Form excludes any property damage to the named insured’s product when that damage arises from the product or any part of it. This is a concern for auto service stations because it would eliminate all property damage to automobiles they work on. This endorsement provides property damage coverage to the named insured’s product if that damage is the result of a defective product and not the result of the named insured’s work.

UNDERWRITING CONSIDERATIONS

Any program offered by an individual insurer will have its own set of eligibility guidelines. If the program is a generic program, such as ISO’s Market Segments Program, it usually has a set of qualifying criteria. Because there may be differences between the two sources of eligibility criteria, it is important for the insurance professional to be thoroughly familiar with the applicable new business and renewal qualifications. The following review of the underlying and eligibility requirements for the Auto Service Risks Program is for the ISO generic program.

Specific Auto Operations

The three basic risks are contemplated by the Auto Service Risks Program. They are:

·         Repair Shops–operations that are primarily engaged in the repair of autos. This includes shops that do body, fender, radiator, ignition service and paint work.

·         Service Stations–operations primarily engaged in servicing autos. The sale and installation of auto accessories are a part of this category as long as they do not do major engine or body repair work. Car washes are included in this group.

·         Storage garages and other parking places.

The following classifications are specifically listed as eligible:

Automobile:

Car Washes–self-service and full service

Convenience Food/Gasoline Stores–self-service, full-service and combined

Gasoline Stations–self-service, full-service and combined

Parking - public–both open air and not open air

Automobile, motor home, mobile home, trailer, and motorcycle dealers are not eligible for this program. If a risk is a combination of eligible and ineligible classes, the risk is not eligible.

Auto related risks are extremely varied, but they do have some common denominators. Generally, there are flammable liquids and fumes around. The only flammable liquid may be gasoline, but often there are also paints, lubricants, and cleaning solvents. Separation of flammable liquids and potential ignition sources must be the primary loss prevention technique used in property underwriting. Storage of flammable liquids must be in a safe and acceptable manner using National Fire Protection Association (NFPA) containers and techniques. Welding and any other activity that creates sparks and heat should be performed at a location that is remote from any flammable liquids or fumes.

The General Liability losses are often due to slip and fall, with the primary culprit being oily or slick surfaces. Cleaning should occur regularly to prevent slick spots. There should also be a policy preventing the public from any part of the operation's vehicle service areas.

COVERAGE ISSUES

Commercial Property Coverages

Many of the issues related to the underwriting of commercial property insurance, such as construction, occupancy, physical characteristics, types of rates and so forth, are discussed in detail under the commercial property section.

Related Article: Commercial Property Program Underwriting Considerations for this information.

Commercial General Liability Coverages

Many of the issues related to the underwriting of commercial general liability insurance, such as claims-made versus occurrence coverage, limits, deductibles, endorsements, and so forth, are discussed in detail under the commercial general liability section.

Related Article: Commercial General Liability Underwriting Considerations for this information.

Property Enhancements

Several property enhancements are added to the commercial property coverages by the Auto Services Risks endorsement; therefore, any additional exposures should be evaluated to determine if they are compatible with the program's coverage and rating structure. The property enhancements with the most significant underwriting concerns are as follows:

Fuel tanks and fuel pumps, both above and below ground, are included as covered property. The age, condition, and maintenance of the covered tanks and pumps should be determined. Protection around the tanks and pumps should be reviewed for protective barriers, so they are less susceptible to vehicle damage. All tanks and pumps should be installed with automatic shutoff valves and other safety features in case of fire and explosion.

Electronic data processing equipment and electronic media and records have been added via the enhancement endorsement. Theft is one of the highest exposures, along with fire. All media should be backed-up, and copies stored off-premises in a safe location. Mechanical breakdown is included, so the electrical system, including wiring, circuit breakers, and amperage, connecting to the electronic data equipment should be checked to reduce the potential for loss. Surge protection devices should be installed.

Related Court Case - Power Outage Does Cause Business Interruption – illustrates the consequences of not adequately addressing the exposure.

Accounts receivables are covered up to the stated limits. The insured should have adequate back-ups and copies stored off-premises in a safe location. The same is true of valuable papers and records.

Several coverages are granted for property that does not belong to the insured: personal effects and property of others and employees' tools. Information on the level of exposure represented by these classes of property and how the exposure is managed should be developed to determine what kind of property is covered by these enhancements, the average and maximum values of such property, and the frequency in which the insured is exposed to these types of potential property hazards.

Crime and Dishonesty Enhancements

The Auto Service Risks Program endorsements add coverage for money, securities and money orders, so the insured should be evaluated for crime protection devices, including the type of devices used and how they are maintained. The evaluation should include alarms, locks, lighting, fencing, guards, or other security measures.

Sound hiring procedures, background checks, and internal controls are necessary to minimize employee dishonesty losses.

Procedures should be implemented and reviewed regularly to monitor the potential for crime and dishonesty losses.

Related Article: Commercial Crime Coverages Underwriting Considerations.

Liability Enhancements

The only significant coverage change is that the policy can, optionally, be audited. If it is decided to make the policy non-auditable, the operation's actual level of exposure should be verified at each renewal. The policy should not be allowed to “renew as is” since payrolls and receipts do increase, and such changes should be reflected in the premium.

RATING CONSIDERATIONS

The rating for this product is the same as any other package product. All coverages must be rated in accordance with the Commercial Lines Manual for the specific coverage part.

The MS AS 01 has many enhancements and those must be priced. It is rated based on the number of employees and whether Earthquake and/or Flood are covered in the other parts of the policy.