(December 2022)
This endorsement can be used in place of the physical damage part of a traditional commercial automobile coverage form or policy for owned vehicles.
It must be attached to AG 00 01–Agricultural Capital Assets (Output Policy) Coverage Form. Coverage is provided by modifying the coverage form. This article is an analysis of those modifications.
The endorsement schedule is used to list the vehicles covered. A description of each insured vehicle, its vehicle identification number, its limit of insurance, and the deductible that applies are entered in the spaces provided.
Note: Only vehicles listed and described are covered. There is no automatic coverage for newly acquired or replacement vehicles exchanged for one listed. Vehicles that are not listed are not covered.
Only vehicles listed and described on the endorsement schedule are covered. The insurance company pays for direct physical loss or damage to such vehicles caused by or that results from a covered cause of loss.
This section revises parts of the Property Not Covered Section that applies to land-based motorized vehicles.
First, the following items are removed in their entirety from Property Not Covered:
o Manufactures, processes, or warehouses them.
o Holds them for sale, lease, rental, or loan but only those not described in d. above.
Second, the following item is added to Property Not Covered.
Vehicles that meet either of the following criteria are not covered:
Note: Vehicle is defined elsewhere in this endorsement.
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Example: The Yoder Farm is proud to have never traded in a single
purchased vehicle. Their vehicles are kept in a building specifically
designed to maintain and display them. Whenever a car reaches 30 years old,
it is retired to a special part of the barn and brought out only for parades
and other special occasions. They are not interested in the restrictions of
an antique auto or collector specialty policy and prefer to insure the
physical damage on their property policy. Thirty vehicles are specifically
listed with their own limit of insurance. |
In the case of covered loss or damage to an insured vehicle, the insurance company pays only the part of the loss that exceeds its deductible amount on the endorsement schedule.
Note: If two or more covered vehicles are involved in the same loss event, only the highest deductible for the vehicles involved in the loss is applied.
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Example: Three of the Yoder vehicles are driven in the Barclayville parade. A nearby horse spooks when Billy
Yoder honks his unusual horn. The horse damages all three vehicles before it
is brought under control. Each vehicle is subject to a $1,000 deductible, but
the entire loss is adjusted with a single $1,000 deductible. |
In case of loss or damage, the insurance company pays the lesser of the following:
· The actual cash value of the loss or damage to the vehicle at the time of loss
· The cost to repair or replace the damaged property with property of similar quality
However, the most paid will be the limit of insurance on the endorsement schedule for the vehicle or vehicles involved.
Note: Actual cash value of an older vehicle may be difficult to establish especially when it has been well-maintained using only original parts. In order to prevent disputes at the time of loss, it may be a good idea to establish valuation guidelines with the underwriter and claims and have them well documented.
Vehicle is defined as a self-propelled machine used on land. It includes automobiles, motorcycles, motor trucks, motor homes, tractors, and similar vehicles. It does not include mobile equipment.
The physical damage provided in a traditional commercial auto coverage form is much broader and the most appropriate coverage for automobiles.
It was specifically designed to cover and respond to the exact needs of automobile owners. AG 04 03 simply extends a property-based coverage form.
Not every insured wants or necessarily needs the broadest and most comprehensive coverage. Many are not concerned about small losses but instead want to find ways to cover their significant loss exposures economically and efficiently. Some may be willing to absorb the loss of one or two vehicles a year as long as their entire fleet is protected.
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Example: Central State Farm Supply has a fleet of almost 150 various short-haul
vehicles. They are used to deliver merchandise and supplies to hundreds of
customers across nine counties. It has been virtually loss-free for nearly
ten years because of careful driver screening and selection standards. Central considers the premium charged for physical damage coverage excessive. They operate almost entirely during daylight hours and only seven months a year. They park the vehicles together each night and during the off-season. Central sees the vehicles parked together as a potentially catastrophic financial loss if a tornado or severe hailstorm strikes its location. So, it uses the AG 00 01 endorsements to add its vehicles to a fleet with a $25,000 deductible. The rating for physical damage coverage for these vehicles is much more reasonable than the rating under commercial auto physical damage coverage. |
Using this endorsement to provide the equivalent of auto physical damage coverage is not appropriate for most risks. This coverage is not as broad as that in the standard physical damage of the commercial auto coverage form. The named insured must be informed of the differences in coverage in case a vehicle is totaled and coverage does not apply. An additional recommendation is to add coverage for flood and earthquake if the reason to purchase coverage under AG 00 01 is to cover larger risks with high deductibles that are primarily interested in having coverage for catastrophic events.