ISO BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ARCHIVE

(October 2022)

This is a repository of articles and analyses relating to earlier editions of this coverage form. The Business Auto Physical Damage Coverage Form was eliminated with the 10/13 edition of the auto coverage forms. CA 00 01–Business Auto Coverage Form or CA 00 20–Motor Carrier Coverage Form must be used to replace coverage that was written on CA 00 10.

Archive Index
Analysis	CA 00 10–Business Auto Physical Damage Coverage Form Analysis–03 10 Edition
Analysis	CA 00 10–Business Auto Physical Damage Coverage Form Analysis–03 06 Edition
Analysis	CA 00 10–Business Auto Physical Damage Coverage Form Analysis–10 01 Edition
Comparisons	Comparison Of The 02 99 Multi-State Commercial Auto Physical Damage Policy To The 07 97 Edition
Comparisons	Comparison Of The 02 99 Multi-State Commercial Auto Physical Damage Policy To The 07 97 Edition Knowledge Tester Quiz

CA 00 10–BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ANALYSIS 03 10 EDITION

Any commercial operation that owns, rents, leases, borrows or hires automobiles or other motor vehicles is exposed to automobile physical damage losses resulting from owning, maintaining or using them. The Insurance Services Office (ISO) Business Auto Coverage Form is normally used to provide both the liability and physical damage coverages needed to protect the insured against significant financial losses. However, there are times when liability coverage is provided elsewhere, and only physical damage coverage is needed. CA 00 10–Business Auto Physical Damage Coverage Form responds to that need. It insures against physical damage losses to any commercial vehicle, regardless of its use. Three other coverage forms provide liability coverage in addition to physical damage.

Note: This analysis is based on the 03/10 edition of this coverage form. Changes from the 03 06 Edition are in bold print.

CA 00 10–BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ANALYSIS

CA 00 10 opens by defining the terms you or your as the named insured and we, us and our as the insurance company providing the coverage. Named insured is not defined. As a result, it means only the entity or entities on the declarations. All other definitions are found in Section V–Definitions.

SECTION I–COVERED AUTOS

This section uses numerical symbols to indicate the types of autos covered and corresponds to different definitions of covered autos. The declarations has spaces to enter a symbol or symbols for each physical damage coverage desired. The only coverages that apply to loss or damage are those that have a symbol.

A. Description Of Covered Auto Designation Symbols

1. Owned Autos Only

This symbol covers any auto the named insured owns, including any acquired after the inception date.

2. Owned Private Passenger Autos Only

This symbol covers only private passenger autos the named insured owns, including any acquired after the inception date.

3. Owned Autos Other Than Private Passenger Autos Only

This symbol covers all autos other than private passenger autos the named insured owns, including any acquired after the inception date.

4. Specifically Described Autos

This symbol means that the only autos covered are ones the named insured owns that are scheduled and specifically described on the declarations that have a premium charge.

5. Hired Autos Only

This symbol covers only autos the named insured leases, hires, rents or borrows, unless they are leased, hired, rented or borrowed from an employee, partner (if the insured is a partnership), member (if the insured is a limited liability company), or members of their households.

Example: In some cases, more than one symbol may be used. The named insured may want all private passenger vehicles covered, as well as any hired vehicles. In this case, symbols 2 and 5 are in the spaces next to the appropriate coverage on the declarations.

Note: Symbols selected can vary by coverage in the same policy.

Example: Henrietta's Haulers has CA 00 10 providing coverage on 20 autos. The symbols on the declarations are symbols 2 and 4 for comprehensive coverage and symbols 2, 4 and 5 for collision coverage. In this case, the private passenger vehicles are specifically listed, and coverage applies on newly acquired vehicles. The commercial vehicles must be specifically described. Hired coverage applies only for collision coverage.

Manuscript Symbol

CA 00 10–Business Auto Physical Damage Coverage Form does not address this symbol, but it is available by endorsement as an additional manuscript symbol. It may be added by using CA 99 54–Covered Auto Designation Symbol. Symbol 7 is used with the Business Auto Physical Damage Coverage Form. A complete description of covered autos must be entered in the space provided.

Example: Grannery County has a large fleet and wants to use symbol 1 for all owned autos so it does not have to make frequent endorsement requests as well as to be certain that all newly acquired autos are covered. The only problem is the two antique fire trucks that are better covered in a specialty market. Grannery and the insurance company both agree to use CA 99 54 and symbol 7 to state: "All Owned Autos except for the 1922 and 1925 Fire Trucks."

B. Owned Autos You Acquire After The Policy Begins

Coverage applies to vehicles obtained after the inception date, depending on the symbols used.

1. If symbols 1, 2 or 3 are used, autos of the same type the named insured acquires are also covered.

Example: Henrietta's Haulers purchases three new private passenger vehicles. They are covered without notifying the insurance company because symbol 2 is on the declarations.

2. If symbol 4 is used, coverage applies to autos the named insured acquires after the inception date if coverage applies to all owned vehicles or if the new vehicle replaces an existing vehicle, subject to the named insured notifying the insurance company of the vehicle within 30 days after it is acquired.

Example: Henrietta's Haulers purchases three new utility trucks, one to replace an existing vehicle and the other two as new purchases. Since Henrietta's does not cover all its owned commercial vehicles, only the replacement vehicle is covered but only if the insurance company is notified of the acquisition within 30 days of its purchase.

SECTION II–PHYSICAL DAMAGE COVERAGE

A. Coverage

1. The insurance company pays for loss or damage to covered autos or their equipment if a symbol appears.

a. Comprehensive Coverage

This is loss or damage from any cause except the covered auto colliding with another object or overturning.

b. Specified Causes Of Loss

This is loss or damage caused only by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, or sinking, burning, collision, or derailment of any conveyance transporting the covered auto.

Note: Although these are the most common types of losses, they are very specific, and the result may be that many losses are not covered.

c. Collision Coverage

This is loss or damage caused by the covered auto colliding with another object or overturning.

Note: The reference to "another object" means that it could apply to an animal, bird, person, tree, building or sign in addition to another vehicle.

2. Towing

The insurance company pays for towing and labor costs only at the place of disablement involving a covered private passenger auto up to the limit on the declarations.

Note: This means all expenses at the repair shop are excluded.

3. Glass Breakage–Hitting A Bird Or Animal–Falling Objects Or Missiles

The insurance company pays for loss or damage caused by or resulting from glass breakage, striking an animal or bird, and by falling objects or missiles if comprehensive coverage applies to the damaged auto. However, the named insured can choose to cover a glass breakage loss as part of collision when the breakage is due to a collision and avoid paying two deductibles.

Note: This clarifies coverage. The three types of losses indicated could be called collisions because an object struck the vehicle. This is important because the named insured might have a smaller deductible on its comprehensive coverage or only have comprehensive coverage.

4. Coverage Extensions

a. Transportation Expenses

If a covered private passenger auto has comprehensive or specified causes of loss coverage and is stolen, this extension covers temporary transportation costs. It does not apply for partial theft or if items such as tires or rims are the only items taken. Coverage begins 48 hours after the theft and ends when the covered auto is returned, provided it can be used, or the insurance company pays for its loss, regardless of the expiration date. The amount of coverage is up to $20 per day with a maximum amount available of $600.

b. Loss Of Use Expenses

The expenses an insured must pay under a written rental contract or agreement for loss of use of the rental car are covered only if Hired Auto Physical Damage is purchased. Coverage is limited to $20 per day and $600 maximum. Payment is made if the loss of use expenses are caused by:

· Other than collision, only if Symbol 5 is used for Comprehensive coverage

· Specified Causes Of Loss, only if Symbol 5 is used for Specified Causes Of Loss coverage

· Collision, only if Symbol 5 is used for Collision coverage

Note: CA 99 90–Optional Limits–Loss Of Use Expenses can be used to purchase higher limits.

B. Exclusions

Editor’s note: Some exclusions are given titles for analysis purposes. These titles are not a part of the Business Auto Physical Damage Coverage Form.

1. Coverage does not apply to loss or damage caused by or resulting from the following, regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

a. Nuclear Hazard

This is explosion of any weapon using atomic fission or fusion, or nuclear reaction, radiation or radioactive contamination, regardless of how caused.

b. War Or Military Action

This includes declared or undeclared war, civil war, warlike action by a military force, including acts to defend or hinder an expected or actual attack by any government or authority employing military personnel or agents, as well as insurrection, rebellion, revolution, usurped power or any action to hinder or defend against these.

Note: Loss or damage involving nuclear or war-like activities is excluded even if other loss factors contribute to an incident. In other words, these losses are excluded regardless of how caused or whether or not they combine with any other cause of loss.

2. The following types of property are excluded:

a. Tapes, records, discs, and similar property or data electronic devices designed to be used with audio, visual, or data electronic equipment. This exclusion is extremely broad because of changes in media. Tapes and CD’s are excluded as well as DVD’s and equipment that can be attached to any media system within the auto.

Note: ISO uses the term “data electronic” in this exclusion. This term is not defined or commonly used. It is used to describe devices that are excluded and also to describe equipment to which any of these excluded items could be designed for. Although it appears to be an all-inclusive term, its lack of clear meaning could make this exclusion ambiguous.

b. Radar and laser jamming, detecting, eluding or disrupting equipment designed or used to detect speed

c. Any type of electronic equipment used to receive, reproduce or transmit audiovisual or data signals whether or not permanently installed

Note: The exception for solely reproducing sound is eliminated (03 10 change).

d. All accessories used with electronic equipment described in paragraph c

However, paragraphs c. and d. of this exclusion do not apply to:

· Permanently installed sound reproducing equipment and its accessories, subject to it being permanently installed in the covered auto at the time of loss. The same equipment is covered even if it can be removed as long as the auto has a permanently installed housing unit for it. Coverage applies only if the property is designed to operate from the auto’s electrical system.

· Other electrical equipment normal to the operation of the covered auto or that monitors the operating system is covered. Coverage also applies if it is integrated into the items described above and is permanently installed in the area normally used for a radio.

3. Changes to Exclusion 2 (03 10 addition)

Paragraphs c. and d. of Exclusion 2. above do not apply to property designed to operate only from the auto’s electrical system and that meet any of the following criteria:

a. Is permanently installed in or on the covered auto at the time of loss

b. Is not permanently installed but is removable only from a housing unit permanently installed in or on the covered auto

c. Is any item considered integral to items described in a. or b. above

d. Is other electrical equipment normal to the operation of the covered auto or that monitors the operating system

4. Wear And Tear And Tire Damage

Coverage does not apply to loss or damage caused by and confined to wear and tear, freezing, mechanical or electrical breakdown or from blowouts, punctures or other road damage to tires. This exclusion does not apply if the loss is the result of total theft of the vehicle.

Example: John, one of Henrietta's drivers, runs over a piece of aluminum that pierces a tire. There is no coverage because of this exclusion. However, if Henrietta’s vehicle was stolen and the tire was damaged by a piece of aluminum, coverage would apply.

Note: There are no ISO endorsements currently available to buy back or delete this exclusion. The named insured might consider checking into various warranty, labor and replacement programs for tire protection available through many organizations.

5. Racing

There is no coverage for any covered auto while used in or practicing or being prepared for any professional or organized racing, demolition contest or stunting activity.

Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty business auto or trucking situations like racing should refer to the Automobiles, Trucks Or Recreational Vehicles section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

6. Diminution In Value

Loss of a covered auto's value because it was involved in an accident is not covered.

Note: Diminution Of Value is defined in Section V–Definitions.

Example: One of Henrietta's autos is damaged in a collision and is subsequently repaired. The repair shop explains why it is now worth less than before the loss just because people are not willing to pay as much for an auto that was in an accident. The insurance company denies Henrietta's request to recover that perceived loss of value.

C. Limit Of Insurance

1. The most paid for loss or damage in any one accident is the lesser of:

a. The actual cash value of the stolen or damaged property

Note: The value is based on what the property was worth at the time of the loss, not at the time of adjustment or when it was purchased.

b. The cost to repair or replace the stolen or damaged property with property of like kind and quality

2. A $1,000 sub-limit applies to certain types of covered electronic equipment. This equipment must be permanently installed or removable but in a permanently installed housing in a part of the vehicle that is not used by the auto manufacturer for such equipment. Any equipment that is part of such equipment is also subject to the sub-limit (03 10 addition).

3. In case of a total loss, adjustments are made for the auto's depreciation and physical condition to establish the actual cash value.

Example: Henrietta’s tractor-trailer is stolen on 05/16/09. She purchased it used for $118,000 on 04/01/08. Based on the red book, she believes it is worth $106,000. Her insurance company explains that, due to the miles on the vehicle and its condition, and based on mileage records and pictures Henrietta submitted, the value is only $98,000.

4. If repairing or replacing the auto increases its value, the insurance company does not pay for that increase.

Note: CA 99 28–Stated Amount Insurance amends the limit of insurance for physical damage coverages. For vehicles on the endorsement schedule, the limit for physical damage coverage is changed to the least of the actual cash value, the cost to repair or replace, or the limit specified. This endorsement should be used with caution because it could decrease the settlement amount.

D. Deductible

The insurance company pays for repair, return or replacement of damaged or stolen property for each covered auto minus the deductible amount on the declarations. However, no deductible applies to a fire or lightning loss if an auto has comprehensive coverage.

SECTION III–BUSINESS AUTO CONDITIONS

These conditions apply in addition to the conditions in IL 00 17–Common Policy Conditions.

A. Loss Conditions

1. Appraisal

If the insurance company and the named insured fail to agree on the amount of a loss, either may demand an appraisal. When this occurs, each party selects a competent appraiser, both of whom then select a competent and impartial umpire. Each appraiser separately states the actual cash value and amount of loss. If the two appraisers do not agree, they submit their differences to the umpire. When any two of the three agree, that decision is binding on all parties. The company and the named insured each pay the cost of the appraisers and share the expense of the umpire and costs of the appraisal equally.

Note: Even if the insurance company participates in the appraisal process, it still retains the right to deny the claim.

2. Duties In The Event Of Loss

The insurance company has no duty to provide any coverage provided by this coverage form unless the named insured fully complied with the following duties:

a. In case of loss, the named insured must provide either the insurance company or its authorized representative with prompt notice of how, when and where the loss occurred and the names and addresses of any injured persons or of any witnesses, if known.

b. The named insured must not commit the insurance company to any payment, obligation or expense without its consent. However, the named insured can make any commitments it wants at its own expense. The named insured must cooperate with the insurance company in investigating or settling the claim. In addition, the police must be notified promptly if the loss is due to theft. In other loss situations and within reason, the named insured must protect the covered auto from further damage and record the expenses incurred to do so because they can be considered when the claim is settled. The insurance company must be able to inspect the damaged auto and obtain information about the loss before the auto is repaired or disposed of. The named insured must agree to be examined under oath and sign any statement of answers.

Note: Failure to cooperate can have serious consequences. Although it does not involve commercial auto, this case illustrates what can happen to a party who does not comply with such provisions.

3. Legal Action Against Us

No one may bring legal action against the insurance company until all terms of the coverage form have been complied with.

4. Loss Payment

The insurance company determines the method to use to settle a physical damage loss. It can:

a. Pay to repair or replace the damaged or stolen property

b. Return the stolen property at its expense. It also pays any damages the auto incurred due to the theft.

c. Pay the appraised or agreed value of the damaged or stolen property and then take any or all of it

Note: Any payment made includes any required sales tax.

5. Transfer Of Rights Of Recovery Against Others To Us

If the insurance company makes payments to a party under this coverage form, any rights that party may have to recover from another transfer to the company. The party that was paid must do everything necessary to secure the company's rights to recover and do nothing to impair those rights.

B. General Conditions

1. Bankruptcy

Bankruptcy or insolvency of the named insured or its estate does not relieve the insurance company of its obligations under this coverage form.

2. Concealment, Misrepresentation Or Fraud

Coverage is void in any case of fraud by the named insured at any time relating to this coverage form. It is also void if the named insured or any insured at any time intentionally conceals or misrepresents material facts relating to this coverage form, the covered auto, the named insured’s interest in the covered auto, or any claim made under this coverage form.

3. Liberalization

Any broadened or additional coverage the insurance company provides without an additional premium charge automatically applies to this coverage form. It is effective on the date the revision is effective in the named insured’s state.

4. No Benefit To Bailee–Physical Damage Coverages

If a party, such as a bailee, holds or transports property for a fee and requires an assignment of coverage, the insurance company does not recognize that assignment, regardless of any other provision in this coverage form.

5. Other Insurance

a. This insurance is primary if the named insured owns the covered auto. Otherwise, it is excess over any other insurance that can be collected.

b. Under hired auto physical damage coverage, a covered auto the named insured leases, hires, rents or borrows is considered an owned covered auto. The one exception is when such autos come with a driver.

Note: CA 20 54–Employee Hired Autos is available to add coverage when an employee hires an auto in his or her own name as an individual intending to perform business-related duties and activities for the named insured.

c. The insurance company pays only its share when any other insurance covers the loss on the same basis, regardless of whether that coverage is on a primary or excess basis. Its share is the proportion that this limit of insurance bears to the total of the limits of all coverage forms and policies that apply on the same basis.

Note: Ratios are determined based on each insurance company’s limits as a percentage of all limits available. Losses are proportioned among the companies accordingly.

6. Premium Audit

a. The initial premium payment is an estimated premium based on the exposures the named insured stated at inception. The insurance company calculates the final premium based on the actual exposures. Once that is done, the estimated premium is subtracted, and the first named insured is either billed for the additional amount owed or receives a refund if it overpaid. The billing statement indicates the date additional premium is due.

b. When coverage is issued for longer than a one-year term, the premium is calculated annually based on the insurance company's rates in effect at the beginning of each annual period.

7. Policy Period, Coverage Territory

Only accidents and losses that occur during the policy period on the declarations and in the coverage territory are covered. The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. Worldwide coverage is provided if a covered private passenger auto is leased, rented or hired for a period of less than 30 days and the responsibility to pay is determined in the territories stated above. Coverage also applies to covered autos being moved between points in the coverage territory.

Note: CA 01 21–Limited Mexico Coverage is available to minimally broaden the coverage territory. However, it should be read carefully and evaluated completely before being used because of its very limited nature.

SECTION IV–DEFINITIONS

A. Auto is a land motor vehicle, trailer or semitrailer designed for travel on public roads. It also includes land vehicles subject to a state's financial responsibility or vehicle registration laws. It does not include mobile equipment as defined below.

B. Loss is direct and accidental loss or damage.

C. Diminution in value is the loss of market value solely due an accident. It can be actual or perceived.

D. Employee includes leased workers but not temporary workers.

E. Leased worker is a person the named insured leases from a labor-leasing firm to work in its business. It requires an agreement between the leasing firm and the named insured. Temporary workers are not considered leased workers.

F. Mobile equipment is defined the same way in the Business Auto Physical Damage Coverage Form as it is in the Commercial General Liability (CGL) Coverage Form. The goal is to eliminate gaps in coverage as well as duplicate coverage by defining it the same way in both forms. This works only if an insurance company uses only the latest editions of these ISO forms.

Mobile equipment is defined as any of the following types of land vehicles, including machinery or equipment attached to it:

1. Vehicles designed principally for use off public roads. This includes bulldozers, farm machinery and forklifts.

2. Vehicles kept solely for use on or next to premises the named insured owns or rents

3. Any vehicle that travels on crawler treads

4. Any vehicle used primarily to provide mobility to power cranes, shovels, loaders, diggers, drill or road construction or resurfacing equipment. These items must be permanently mounted on the vehicle.

5. Similar to 4 above but not described in 1, 2, 3 or 4, these vehicles provide mobility to air compressors, pumps and generators, spraying, welding, building cleaning, geophysical exploration, lighting and well servicing equipment along with cherry pickers and similar devices used to raise or lower workers. These items must be permanently installed on the vehicle and cannot be self-propelled.

6. Vehicles not used to transport people or cargo and not described in paragraphs 1, 2, 3 or 4 above but there are exceptions. Any self-propelled vehicle with the following equipment permanently installed is considered an auto and not mobile equipment:

a. Snow removal, road maintenance (excluding construction or resurfacing equipment) or street cleaning equipment

b. Cherry pickers and similar devices used to raise and lower workers but only if the equipment is mounted on an automobile or truck chassis

c. Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting or well servicing equipment

Note: Land vehicles subject to a given state's financial responsibility or vehicle registration laws are not mobile equipment.

It is difficult to distinguish between autos and mobile equipment at times. That difficulty is the subject of the following court case.

G. Temporary worker is neither a leased worker nor an employee. These are persons used as substitutes for permanent employees on temporary leave or to help out in seasonal or short-term situations or workload conditions.

CA 00 10–BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ANALYSIS–03 06 EDITION

Any commercial operation that owns, rents, leases, borrows or hires an automobile or other motor vehicle is exposed to automobile physical damage losses resulting from owning, maintaining or using them. The Insurance Services Office (ISO) Business Auto Coverage Form is normally used to provide both the liability and physical damage coverages needed to protect the insured against significant financial losses. However, there are times when liability coverage is provided elsewhere, and only physical damage coverage is needed. CA 00 10–Business Auto Physical Damage Coverage Form responds to that need. It insures against physical damage losses to any commercial vehicle, regardless of its use. Four other coverage forms provide liability coverage in addition to physical damage.

Note: This analysis is based the 03 06 edition of this coverage form. Changes from the 10 01 Edition are in bold print.

CA 00 10–BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ANALYSIS

SECTION I–COVERED AUTOS

This section uses numerical symbols to indicate the types of autos covered and corresponds to different definitions of covered autos. The declarations has spaces in which to enter a symbol or symbols for each physical damage coverage desired. The only coverages that apply to loss or damage are those for which a symbol is indicated.

A. Description Of Covered Auto Designation Symbols

1. Owned Autos Only

This symbol covers any auto the named insured owns, including any acquired after the inception date.

2. Owned Private Passenger Autos Only

This symbol covers only private passenger autos the named insured owns, including any acquired after the inception date.

3. Owned Autos Other Than Private Passenger Autos Only

This symbol covers all autos other than private passenger autos the named insured owns, including any acquired after the inception date.

4. Specifically Described Autos

This symbol means that the only autos covered are ones the named insured owns that are scheduled and specifically described on the declarations and for which a premium charge is made.

5. Hired Autos Only

Example: In some cases, more than one symbol may be used. The named insured may want all private passenger vehicles covered, as well as any hired vehicles. In this case, symbols 2 and 5 are indicated in the spaces next to the appropriate coverage on the declarations.

Note: Symbols selected can vary by coverage in the same policy.

Example: Henrietta's Haulers has CA 00 10 providing coverage on 20 autos. The symbols indicated on the declarations are symbols 2 and 4 for comprehensive coverage and symbols 2, 4 and 5 for collision coverage. In this case, the private passenger vehicles are specifically listed, and coverage applies on newly acquired vehicles. The commercial vehicles must be specifically described. Hired coverage applies only for collision coverage.

Manuscript Symbol

CA 00 10–Business Auto Physical Damage Coverage Form does not address this symbol but it is available by endorsement as an additional manuscript symbol. It may be added by using CA 99 54–Covered Auto Designation Symbol. Symbol 7 is used with the Business Auto Physical Damage Coverage Form. A complete description of covered autos must be entered in the space provided.

B. Owned Autos You Acquire After The Policy Begins

Coverage applies to vehicles obtained after the inception date, depending on the symbols used.

1. If symbols 1, 2 or 3 are used, autos of the same type the named insured acquires are also covered.

Example: Henrietta's Haulers purchases three new private passenger vehicles. They are covered without notifying the insurance company because symbol 2 is indicated on the declarations.

SECTION II–PHYSICAL DAMAGE COVERAGE

A. Coverage

1. The insurance company pays for loss or damage to covered autos or their equipment if a symbol is indicated.

a. Comprehensive Coverage

This is loss or damage from any cause except the covered auto colliding with another object or overturning.

b. Specified Causes Of Loss

This is loss or damage caused only by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, or sinking, burning, collision or derailment of any conveyance transporting the covered auto.

Note: Although these are the most common types of losses, they are very specific, resulting in many losses being not covered.

c. Collision Coverage

This is loss or damage caused by the covered auto colliding with another object or overturning.

Note: The reference to "another object" means that it could apply to an animal, bird, person, tree, building or sign in addition to another vehicle.

2. Towing

The insurance company pays for towing and labor costs only at the place of disablement involving a covered private passenger auto up to the limit indicated on the declarations.

Note: This means all expenses at the repair shop are excluded.

3. Glass Breakage–Hitting A Bird Or Animal–Falling Objects Or Missiles

4. Coverage Extensions

a. Transportation Expenses

b. Loss Of Use Expenses

· Other than collision, only if Symbol 5 is indicated for Comprehensive Coverage

· Specified Causes Of Loss, only if Symbol 5 is indicated for Specified Causes Of Loss Coverage

· Collision, only if Symbol 5 is indicated for Collision coverage

Note: CA 99 90–Optional Limits–Loss Of Use Expenses can be used to purchase higher limits.

B. Exclusions

Editor’s note: Some exclusions are given titles for analysis purposes. These titles are not a part of the Business Auto Physical Damage Coverage Form.

1. Coverage does not apply to loss or damage caused by or resulting from the following, regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

a. Nuclear Hazard

This is explosion of any weapon using atomic fission or fusion, or nuclear reaction, radiation or radioactive contamination, regardless of how caused.

b. War Or Military Action

Note: Damage or loss involving nuclear or war-like activities is excluded even if other loss factors contribute to an incident. In other words, these losses are excluded regardless of how caused or whether or not they combine with any other cause of loss.

2. The following types of property are excluded:

a. Tapes, records, discs and similar property or data electronic devices designed to be used with audio, visual, or data electronic equipment. This exclusion is extremely broad because of changes in media. Tapes and CD’s are excluded as well as DVD’s and equipment that can be attached to any media system within the auto.

b. Radar and laser jamming, detecting, eluding or disrupting equipment designed or used to detect speed

c. Any type of electronic equipment used to receive or transmit audiovisual or data signals that is not designed only to reproduce sound, whether or not permanently installed

Note: CA 99 60—Audio, Visual, and Data Electronic Equipment Coverage is available. It is a buyback endorsement for physical damage coverage to audio, visual and data electronic equipment excluded in the coverage form. Coverage applies only to equipment that is permanently installed or that can be removed from permanently installed housing units. Autos covered by this endorsement must be scheduled and a $100 deductible applies.

d. All accessories used with electronic equipment described in paragraph c

However, paragraphs c. and d. of this exclusion do not apply to:

Note: Two endorsements are available to provide coverage for items excluded above.

· CA 99 30–Tapes, Records And Discs Coverage extends physical damage coverage for tapes, records and discs in covered autos for up to $200 for an additional premium charge.

· CA 99 60–Audio, Visual And Data Electronic Equipment Coverage is a buyback endorsement for physical damage coverage to audio, visual and data electronic equipment that the coverage form excludes. Coverage applies only to permanently installed equipment or equipment that can be removed from permanently installed housing units. Covered autos must be scheduled, and a $100 deductible applies.

3. Wear And Tear And Tire Damage

Coverage does not apply to loss or damage caused by or resulting from wear and tear, freezing, mechanical or electrical breakdown, blowouts, punctures or other road damage to tires. This exclusion does not apply if such losses are caused by a loss otherwise covered by the Business Auto Physical Damage Coverage Form.

Example: One of Henrietta's drivers runs over a piece of aluminum that pierces a tire. There is no coverage because of this exclusion. However, if the piece of aluminum came off a vehicle that just struck the driver's auto, coverage applies for the tire as part of the overall collision loss.

Note: There are no ISO endorsements currently available to buy back or delete this exclusion. The named insured might consider checking into various warranty, labor and replacement programs available through many organizations for tire protection.

4. Racing

There is no coverage for any covered auto while used in or practicing or being prepared for any professional or organized racing, demolition contest or stunting activity.

Insurers and brokers having to provide coverage on a variety of difficult, unusual or specialty business auto or trucking situations like racing should refer to the Automobiles, Trucks Or Recreational Vehicles section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

5. Diminution In Value

Loss of a covered auto's value because it was involved in an accident is not covered.

Note: Diminution Of Value is defined in Section V–Definitions.

C. Limit Of Insurance

1. The most paid for loss or damage in any one accident is the lesser of:

a. The actual cash value of the stolen or damaged property

Note: The value is based on what the property was worth at the time of the loss, not at the time of adjustment or when it was purchased.

b. The cost to repair or replace the stolen or damaged property with property of like kind and quality

2. In case of a total loss, adjustments are made for the auto's depreciation and physical condition to establish the actual cash value.

3. If repairing or replacing the auto increases its value, the insurance company does not pay for that increase.

Note: CA 99 28–Stated Amount Insurance amends the limit of insurance for physical damage coverages. For vehicles indicated on the endorsement schedule, the limit for physical damage coverage is changed to the least of the actual cash value, the cost to repair or replace, or the limit specified. This endorsement should be used with caution because it could decrease the settlement amount.

D. Deductible

The insurance company pays for repair, return or replacement of damaged or stolen property for each covered auto minus the deductible amount indicated on the declarations. However, no deductible applies to a fire or lightning loss if an auto has comprehensive coverage.

SECTION III–BUSINESS AUTO CONDITIONS

These conditions apply in addition to the conditions in IL 00 17–Common Policy Conditions.

A. Loss Conditions

1. Appraisal

If the insurance company and the named insured fail to agree to the amount of a loss, either may demand an appraisal. When this occurs, each party selects a competent appraiser, both of whom then select a competent and impartial umpire. Each appraiser separately states the actual cash value and amount of loss. If the two appraisers do not agree, they submit their differences to the umpire. When any two of the three agree, that decision is binding on all parties. The company and the named insured each pay the cost of the appraisers and share the expense of the umpire and costs of the appraisal equally.

Note: Even if the insurance company participates in the appraisal process, it still retains the right to deny the claim.

2. Duties In The Event Of Loss

The insurance company has no duty to provide any coverage provided by this coverage form unless the named insured fully complied with the following duties:

Note: Failure to cooperate can have serious consequences. Although it does not involve commercial auto, this case illustrates what can happen to a party who does not comply with such provisions.

3. Legal Action Against Us

No one may bring legal action against the insurance company until all coverage form terms have been complied with.

4. Loss Payment

The insurance company determines the method to use to settle a physical damage loss. It can:

a. Pay to repair or replace the damaged or stolen property

b. Return the stolen property at its expense. It also pays any damages the auto incurred due to the theft.

c. Pay the appraised or agreed value of the damaged or stolen property and then take any or all of it

Note: Any payment made includes any required sales tax.

5. Transfer Of Rights Of Recovery Against Others To Us

B. General Conditions

1. Bankruptcy

Bankruptcy or insolvency of the named insured or its estate does not relieve the insurance company of its obligations under this coverage form.

2. Concealment, Misrepresentation Or Fraud

3. Liberalization

4. No Benefit To Bailee–Physical Damage Coverages

5. Other Insurance

a. This insurance is primary if the named insured owns the covered auto. Otherwise, it is excess over any other insurance that can be collected.

c. The insurance company pays only its share when any other insurance covers the loss on the same basis, regardless of whether that coverage is on a primary or excess basis. The insurer’s share is the proportion that this limit of insurance bears to the total of the limits of all coverage forms and policies that apply on the same basis.

Note: Ratios are determined based on each insurance company’s limits as a percentage of all limits available. Losses are proportioned among the companies accordingly.

6. Premium Audit

a. The initial premium payment is an estimated premium based on the exposures the named insured indicated at inception. The insurance company calculates the final premium based on the actual exposures. Once that is done, the estimated premium is subtracted, and the first named insured is either billed for the additional amount owed or receives a refund if it overpaid. The billing statement indicates the date additional premium is due.

b. When coverage is issued for longer than a one-year term, the premium is calculated annually based on the insurance company's rates in effect at the beginning of each annual period.

7. Policy Period, Coverage Territory

Only accidents and losses that occur during the policy period indicated on the declarations and in the coverage territory are covered. The coverage territory is the United States of America, its territories and possessions, Puerto Rico, and Canada. Worldwide coverage is provided if a covered private passenger auto is leased, rented or hired for a period of less than 30 days and the responsibility to pay is determined in the territories listed above. Coverage also applies to covered autos being moved between points in the coverage territory.

SECTION IV–DEFINITIONS

A. Auto is a land motor vehicle, trailer or semitrailer designed for travel on public roads It includes land vehicles subject to a state's financial responsibility or vehicle registration laws. It does not include mobile equipment as defined below.

B. Loss is direct and accidental loss or damage.

C. Diminution in value is the loss of market value solely due an accident. It can be actual or perceived.

D. Employee includes leased workers but not temporary workers.

F. Mobile equipment is defined the same way in the Business Auto Physical Damage Coverage Form as it is in the Commercial General Liability Coverage Form. The goal is to eliminate gaps in coverage as well as duplicate coverage by defining it the same way in both forms. This works only if an insurance company uses only the latest editions of these ISO forms.

Mobile equipment is defined as any of the following types of land vehicles, including machinery or equipment attached to it:

1. Vehicles designed principally for use off public roads. This includes bulldozers, farm machinery and forklifts.

2. Vehicles kept solely for use on or next to premises the named insured owns or rents

3. Any vehicle that travels on crawler treads

a. Snow removal, road maintenance (excluding construction or resurfacing equipment) or street cleaning equipment

b. Cherry pickers and similar devices used to raise and lower workers but only if the equipment is mounted on an automobile or truck chassis

c. Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting or well servicing equipment

Note: Land vehicles subject to a given state's financial responsibility or vehicle registration laws are not mobile equipment.

It is difficult to distinguish between autos and mobile equipment at times. That difficulty is the subject of the following court case.

CA 00 10–BUSINESS AUTO PHYSICAL DAMAGE COVERAGE FORM ANALYSIS–10 01 EDITION

When a business operation owns, rents, leases, borrows or hires any automobile or other vehicle, they have exposure to automobile physical damage losses as a result of the use, maintenance or ownership of that vehicle. Most often, the Business Auto Coverage Form is used to provide both the liability coverages needed, as well as the physical damage coverages needed to protect the insured against significant financial losses. There are times, however, when the liability coverages are provided elsewhere and just the physical damage coverages are desired. In response to that need, the Insurance Services Office (ISO) developed the Business Auto Physical Damage Coverage Form. This Coverage Form provides only for the physical damage losses to commercial vehicles and is available for any commercial or business vehicle, regardless of its use.

Section V—DEFINITIONS contains defined words. Defined words are in quotation marks in this analysis.

Note: Changes that have occurred over prior versions are in bold.

10 01 Changes:

Incorporate the changes from the mandatory CA 00 22. These endorsements have been mandatory since 1999 so there is no impact on coverage. The good news is that instead of an endorsement, the words are incorporated into the policy. The CA 00 22 changes and their placement in the policy are as follows:

Loss of Use – Rental Vehicle Coverage. This is added to the policy in Section III – Physical Damage – A. Coverage - 4. Coverage Extension – b. Loss of Use Expenses This provides payment of up to $20 per day or a maximum of $600 to a rental operation due to damage incurred by the insured.
Limited Worldwide Coverage for Hired Autos. This is added to the policy in Section IV- Business Auto Conditions – B. General Conditions – 7. Policy Period, Coverage Territory – paragraph e. This provides liability coverage for private passenger autos that are leased or rented for less than 30 days anywhere in the world. The suit must be adjudicated in the standard territory.
Insured Contract definition change. This is accomplished in Section V- Definitions – H. Insured Contract – paragraph 6.a. The term ‘any person or organization’ is replaced by the term ‘a railroad.’ By doing this, an insured contract only excludes contracts with railroads for damages arising out of construction or demolition operation within 50 feet of railroad property.

Exclude payment for diminution of value because of the subjective nature of the claim. A diminution claim states that an auto loses value merely because it has been in an accident. The auto policy is not designed to deal with subjective issues and therefore will deny any such claim.

Revise the Limit of Insurance section to clarify how the actual cash value is determined so that the insured will not receive any payment beyond like kind or quality.

Four definitions are added due to the extension of coverage section.

SECTION I—COVERED AUTOS

In order to determine which "autos" are considered covered "autos" for each of the coverages provided in the business auto physical damage policy, numerical symbols are used. These symbols correspond to a definition to specify what is a covered "auto."

In the Declarations of the business auto physical damage policy, there is a place to show a symbol or symbols next to each of the coverages. Only those coverages that have a symbol(s) shown in the Declarations are covered, and only those "autos" as designated by the symbol(s) are covered "autos" for that coverage.

A. DESCRIPTION OF COVERED AUTO DESIGNATION SYMBOLS

1 = OWNED "AUTOS" ONLY. This symbol covers any "auto" owned by the insured, including any "auto" that is acquired after the policy begins.

2 = OWNED PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers only private passenger type "autos" owned by the insured, including any private passenger type that may be acquired after the policy begins.

3 = OWNED "AUTOS" OTHER THAN PRIVATE PASSENGER "AUTOS" ONLY. This symbol covers all "autos" other than private passenger type "autos" owned by the insured, including any "autos" other than private passenger types that may be acquired after the policy begins.

4 = SPECIFICALLY DESCRIBED "AUTOS". Only those "autos" that are specifically scheduled and for which there is a premium charge shown, are covered.

5 = HIRED "AUTOS" ONLY. This symbol covers only those "autos" that the insured leases, hires, rents or borrows, unless the "auto" is leased, hired, rented or borrowed from an employee, partner (if the insured is a partnership), member (if the insured is a limited liability company) or member of the insured’s household. (07-97 Changes: Note that wording was added to Symbol 9 to include a new type of business entity, the limited liability company.)

In some cases, more than one symbol may be used. For example, the insured may wish to have all private passenger vehicles covered, as well as any hired vehicles, so symbols 2 and 5 would be shown next to the appropriate coverage on the declarations page.

Symbols can be different by coverage within the same policy. Symbol 1 may be used for comprehensive coverage, but symbol 2 used for collision coverage.

Manuscript Symbol. Not mentioned in the Business Auto Physical Damage Coverage Form itself, but available by endorsement is an additional manuscript symbol. This symbol may be added by the use of endorsement CA 99 54—Covered Auto Designation Symbol. For the Business Auto Coverage Form, manuscript symbol 7 is available. A complete description of the "autos" that are to be considered covered "autos" must be shown in the endorsement.

Example: An insured wants coverage for all of their owned "autos" except one very high value antique car. For physical damage purposes, the antique car is placed in a specialty market and has its own policy on that coverage. Symbol 7 is used to designate the covered autos for comprehensive and collision coverages. The definition used for symbol 7 is: All Owned Autos except for the 1922 Classic Model A Ford.

For insurers and brokers that have access to coverage for a variety of difficult business "auto" or trucking situations, refer to the section for Automobiles, Trucks or Recreational Vehicles in The Insurance Marketplace, published by The Rough Notes Company, Inc.

B. OWNED AUTOS YOU ACQUIRE AFTER THE POLICY BEGINS

1. If the symbols 1 = Owned Autos Only, 2 = Owned Private Passenger Autos Only, or 3 = Owned Autos Other Than Private Passenger Autos Only are used for coverages as shown in the Declarations, then "autos" acquired by the insured during the policy period, of the type described by the symbol, are also covered.

Example: If symbol 2 (Owned Private Passenger Autos Only) is used and the insured purchases a new private passenger vehicle for sales purposes during the policy period, coverage is automatic. However, if symbol 3 (Owned Autos Other Than Private Passenger Autos Only) is used and the insured purchases the same private passenger vehicle for sales purposes, there is no automatic coverage. The insured would have to specifically request coverage for this vehicle to be added and change the policy symbol.

2. When symbol 4 = Specifically Described Autos is used, coverage for newly acquired "autos" within the policy period may be covered if the insurer either covers all the vehicles that the insured already owns or the new vehicle is a replacement for a vehicle already scheduled and if the insured notifies the insurer within 30 days of the acquisition of new vehicle regarding the coverages or changes desired.

SECTION II—PHYSICAL DAMAGE COVERAGE

A. COVERAGE

1. The insurer will pay for "loss" to a covered "auto" and its equipment for the following coverages if they have been selected in the Declarations and a symbol has been inserted showing the covered "autos":

a. Comprehensive Coverage: any cause except collision by the covered "auto" with another object or overturn of the covered "auto."

This coverage is similar in response to the special cause of loss or direct risk of physical damage coverages provided in property or inland marine policies and covers all types of physical damage losses unless excluded.

b. Specified Causes of Loss Coverage: caused by

1. fire, lightning or explosion

2. theft

3. windstorm, hail or earthquake

4. flood

5. mischief or vandalism

6. sinking, burning, collision or derailment of any conveyance transporting the covered "auto"

This coverage is a limited physical damage coverage in that only those causes of loss that are specified are covered, unlike the comprehensive which covers all causes of loss unless excluded.

c. Collision Coverage: caused by the covered "auto's" collision with another object or overturn of the covered "auto.”

Another object is not limited to just another vehicle, but could be an animal, bird, person, tree, building, sign or so forth.

2. Towing: The insurer will pay up to the limit shown in the Declarations for towing and labor costs incurred as a result of the disablement of a covered private passenger type "auto"; however, the labor must be performed at the place of disablement.

An endorsement available for additional or broader protection is CA 99 23—Rental Reimbursement Coverage. When a covered "auto" has suffered a physical damage loss from a covered cause of "loss,” rental reimbursement is provided for that "auto." Payment is subject to the maximum daily limit, the number of days indicated, and the total amount shown for any one period. Several limitations or exclusions apply. For instance, if other spare or reserve "autos" are available, the coverage does not apply. The formula or components for the computation of the increase in premium are found in the ISO Business Auto Rating Program.

3. Glass Breakage—Hitting a Bird or Animal—Falling Objects or Missiles: When comprehensive coverage is carried by the insured, the insurer will pay for glass breakage, "loss" caused by hitting a bird or animal, and "loss" caused by falling objects or missiles, under the comprehensive coverage. If a glass "loss" occurs as a result of the covered "auto’s" collision or overturn, the insured has the option of covering the glass "loss" under the collision coverage.

4. Coverage Extension: There are now two extensions. Loss of Use Expenses is added with the 10 01 edition.

a. Transportation: If a covered private passenger type "auto" carries comprehensive or specified causes of loss coverage and a theft occurs to that covered "auto," this extension provides coverage for temporary transportation costs when the theft is a total theft of the covered vehicle. If items such as tires are the only things taken, this extension is not available. Coverage is available for the period that begins 48 hours after the theft and ends when the covered "auto" is returned to use or the insurer pays for its "loss," regardless of when the policy expires. The amount of coverage is up to $20 per day with a maximum amount available of $600. Note that the rates have gone from $15 to $20 per day and the maximum amount increased from $450 to $600.

b. Loss of Use Expenses: If Hired Auto Physical Damage has been purchased then this policy will pay the expenses an insured must pay under a written rental contract or agreement. The coverage depends on the coverage selected for any covered "auto" on the policy declarations. This is limited to $20 per day and $600 maximum.

Note: Higher limits may be purchased with endorsement CA 99 90.

B. EXCLUSIONS

1. Excluded is any coverage for, caused by or resulting from the following event that contributes concurrently or in any sequence to the "loss," regardless of any other cause:

a. Nuclear Hazard: the explosion of any weapon using atomic fission or fusion or nuclear reaction, or any radiation or radioactive contamination, no matter how caused.

b. War or Military Action: war, whether declared or undeclared, civil war, warlike action by a military force which includes acts of defense, or to hinder any such, insurrection, rebellion, revolution, usurped power or any action to hinder or defend against such.

The wording in the first sentence of this exclusion is intended to clarify that the doctrines of concurrent causation and proximate cause do not apply to the Nuclear Hazards and War or Military Action Exclusions. These types of "losses" are excluded no matter how caused or whether or not in combination with any other cause of "loss."

2. The following property is not covered:

a. tapes, records, discs or other similar type audio, visual or data electronic devices designed for use with such type of equipment

b. equipment designed or used to detect, locate, jam or disrupt any type of speed measurement devices including but not limited to radar or laser devices. (07-97 Changes: Wording is added to make clear that any type of detection, location, jamming or other devices of any type that disrupt speed measurement are not covered.)

c. any electronic equipment, whether or not permanently installed, that receives or transmits audio, visual or data signals and that is not designed solely for sound reproduction

d. any accessories used with the electronic equipment described in the paragraph c

However, paragraphs c and d of this exclusion do not apply to:

· equipment and its accessories, designed only for sound reproduction, that is permanently installed in the covered "auto" at the time of "loss" or if that equipment is removable from a permanently installed housing unit and which the equipment is designed to operate only of the power off the "auto’s" electrical system; or

· any other electrical equipment that is normal to the operation of the covered "auto," that monitors the operating system, or that is an integral part of the same unit housing any sound reproduction equipment and permanently installed in the opening of the dash or console normally used by the manufacturer for installation of a radio.

3. Excluded is coverage for "loss" caused by or that results from the following: wear and tear, freezing, mechanical or electrical breakdown; or from blowouts, punctures or other road damage to tires. However, if any of the previous are caused by a "loss" that is covered by this coverage form, then the exclusion does not apply.

There are no current ISO endorsements available to buy back or delete this exclusion. The insured should consider checking into the special warranty, labor and replacement programs that are available through many dealerships for this protection.

4. No coverage exists under the business auto policy for any covered "auto" while it is used in, practicing for, or being prepared for any professional or organized racing, demolition contest, or stunting activity.

Example: Joe and Geri are friends who also are tow truck drivers for competing towing firms. Their trucks are covered by their respective companies’ business auto policies. After having lunch together, they get into a friendly argument over who has the best truck and towing gear. They decide to have a towing contest. They go to a junkyard, pick out a junked van that has no wheels and bet to see how far each can tow the van for five seconds. When Joe guns his truck, the dead weight of the van snaps his towing boom off. The boom slingshots over the van and buries itself into the hood of Geri’s truck. Since the damages were the result of a contest, neither business auto policy will provide coverage.

For insurers and brokers that have access to coverage for a variety of difficult business "auto" or trucking situations such as racing activities, refer to the section for Automobiles, Trucks or Recreational Vehicles in The Insurance Marketplace, published by The Rough Notes Company, Inc.

5. The diminution of value does not add to the loss. The term diminution of value is defined in Section V Definitions.

Example: The insured has a collision loss and the vehicle is repaired. The repair shop explains to the insured that their car is now worth less than before the loss just because people will not pay as much for a car that has been in an accident. The insured presents that perceived loss of value to the company and is denied.

An endorsement available to provide this coverage is CA 99 30—Tapes, Records, and Discs Coverage. For the additional premium, this endorsement extends physical damage coverage for tapes, records and discs in covered autos for up to $200. The formula or components for the computation of the increase in premium are found in the ISO Business Auto Rating Program.

An option to the above is CA 99 60—Audio, Visual, and Data Electronic Equipment Coverage. This is a buyback endorsement for physical damage coverage to audio, visual and data electronic equipment that is excluded in the coverage form. This buyback applies only to the equipment that is permanently installed or is removable from the housing units that are permanently installed. Those autos that are covered by this endorsement must be scheduled and a $100 deductible applies. The formula or components for the computation of the increase in premium are found in the ISO Business Auto Rating Program.

C. LIMIT OF INSURANCE

This section has been revised significantly as an attempt to clarify. Two new sentences are added to make sure the insured is only brought back to the condition the car was in prior to any accident.

1. The maximum amount that the insurer will pay for "loss" in any one "accident" is the lesser of the following:

a. the actual cash value of the damaged or stolen property, at the time of the "loss"

b. the cost to repair or replace the damaged or stolen property with other property of like kind and quality.

2. Adjustments must be made for physical condition and depreciation to determine the actual cash value.

3. If fixing the auto increases the value, the company does not pay for that betterment.

One endorsement, CA 99 28—Stated Amount Insurance, is available to amend the limit of liability for physical damage coverages. For those vehicles that are scheduled in the endorsement, the limit for the physical damage coverages is changed to the least of the actual cash value, the cost to repair or replace, or the limit that is specified in the endorsement schedule. The formula or components for the computation of the increase in premium are found in the ISO Business Auto Rating Program.

D. DEDUCTIBLE

The insurer will pay for repair, return or replacement of damaged or stolen property for each covered "auto," minus the deductible shown in the declarations. The comprehensive coverage deductible shown in the declarations does not apply to "loss" caused by fire or lightning.

SECTION III—BUSINESS AUTO CONDITIONS

All of the conditions listed in Section IV are in addition to the conditions found in the Common Policy Conditions—IL 00 17.

A. LOSS CONDITIONS

1. Appraisal: If the insurer and the insured do not agree to the amount of the "loss," either party may demand an appraisal. When this occurs, each party selects a competent appraiser, both of which will select together a competent and impartial umpire. Each appraiser will separately state the actual cash value and amount of "loss." If the two appraisers do not agree, they will submit their differences to the umpire. When any two of the three agree, that decision is binding on all parties. The insurer and the insured will each pay the cost of the appraiser that they selected but will bear the expense of the umpire and costs of the appraisal equally.

Even though the insurer has submitted to an appraisal, the insurer retains the right to deny the claim.

2. Duties In the Event Of Accident, Claim, Suit or Loss: The insurer has no duty to provide any coverage under this coverage form unless the insured has complied fully with the following duties: (07-97 Changes: Wording has been added to make clear that coverage is not owed unless all duties have been complied with.)

a. When any of the following events occur, the insured must give either the insurer or an authorized representative of the insurer prompt notice of such which must include:

1) how, when and where the "accident" or "loss" occurred

2) the insured’s name and address

3) if known, the names and addresses of any injured persons or of any witnesses

b. Any involved "insured" must:

1) under no circumstances make any obligation, payment or incur any expense without the insurer’s consent. To do so is at the insured’s expense.

2) immediately send the insurer copies of any request, demand order, notice, summons or legal paper received regarding the claim or "suit"

3) cooperate with the insurer in the investigation, settlement of the claim or defense of the "suit"

4) provide the insurer with authorization to obtain all medical records or other pertinent information

5) as often as the insurer reasonably requires, the insured must submit to examination by a physician of the insurer’s choice and at the insurer’s expense

c. For physical damage "losses" to a covered "auto" or its equipment, the insured must also do the following items:

1) notify the police promptly of any theft of a covered "auto" or its equipment

2) take all reasonable steps to protect the covered "auto" from further damage and keep a record of any expenses to be considered in the settlement of the claim

3) before the insurer repairs or provides disposition of the claim, the insured must allow the insurer to inspect the covered "auto" and necessary records to prove "loss"

4) agree to examination under oath, if requested by the insurer and provide the insurer with a signed statement of those answers

3. Legal Action Against Us: No one may bring legal action against the insurer under this coverage form until:

a. there has been full compliance with all terms of this coverage form

b. with respect to any liability coverage provided in this insurance, the insurer agrees in writing that the insured has an obligation to pay, or the amount of that obligation has been determined by judgment after trail. No one has the right under this policy to bring the insurer into any action to determine the insured’s liability.

4. Loss Payment: The insurer has the option to determine which of the following methods will be used for payment of "loss":

a. to pay for, repair or replace the damaged or stolen property

b. return the stolen property, at the insurer’s expense; the insurer will also pay for any damages that result to the "auto" from the theft

c. take all or any part of the damaged or stolen property at an agreed or appraised value

Any payment made will include sales tax, where applicable.

5. Transfer Of Rights Of Recovery Against Others To Us: If the insurer has made payments to a party under this coverage form, any rights that party may have to recover from another are transferred to the insurer and that party receiving payment must do everything necessary to secure the rights of the insurer to recover, doing nothing to impair those rights.

B. GENERAL CONDITIONS

1. Bankruptcy: Even if the insured or the estate of the insured becomes bankrupt or insolvent, the insurer is still obligated under this coverage form and not relieved of any responsibilities.

2. Concealment, Misrepresentation or Fraud: This coverage form is void in any case of fraud by the insured at any time as it relates to this coverage form. It is also void if the insured or any other insured, at any time intentionally conceals or misrepresents material facts concerning:

a. this coverage form

b. the covered "auto"

c. the insured’s interest in the covered "auto"

d. a claim under this coverage form

3. Liberalization: If the insurer revises this coverage form by providing broader or more coverage without an additional premium charge, the insured’s policy will automatically provide the additional coverage as of the day the revision is effective in the insured’s state.

4. No Benefit To Bailee—Physical Damage Coverages: The insurer does not recognize any assignment or grant any coverage for the benefit of any party while holding, storing or transporting property for a fee regardless of any other provision of this coverage form.

5. Other Insurance:

a. For covered "autos" owned by the insured, this insurance is primary. For covered "autos" not owned by the insured, this insurance is excess over any other collectible insurance.

b. If hired auto physical damage coverage applies, then any covered "auto" the insured leases, hires, rents or borrows is considered an owned, covered "auto," unless that "auto" is leased, hired, rented or borrowed with a driver.

An endorsement is available to add coverage should an employee hire an auto in their own name as an individual to perform business-related duties and activities for his/her employer. The endorsement is CA 20 54—Employee Hired Autos.

c. When any other insurance covers the "loss" on the same basis, regardless of whether primary or excess, the insurer will only pay their share. The insurer’s share is the proportion that the limit of insurance of this coverage form bears to the total of the limits of all coverage forms and policies that apply on the same basis.

6. Premium Audit:

a. The deposit or estimated premium charged for this coverage form has been based on the exposures the insured conveyed to the insurer at policy inception. The insurer will compute the final premium based on the actual exposures of the insured. The estimated premium will be credited against the actual final premium, and the first named insured will be billed for any balance. If the estimated premium exceeds the actual final premium, the first named insured will receive any refund.

b. If the policy is issued for more than one year, the premium charged will be computed annually based on the rates of the insurer that are in effect at the beginning of each year of the policy.

7. Policy Period, Coverage Territory: The insurer will cover "accidents" and "losses" under this coverage form involving a covered "auto" that occur:

a. during the policy period shown in the declarations

b. within the coverage territory

The coverage territory, including while being transported between any of these places, is:

a. the United States of America

b. the territories and possessions of the USA

c. Puerto Rico

d. Canada

e. Worldwide coverage is provided if:

1) The covered auto is leased, rented or hired for a period of less than 30 days

2) The responsibility to pay is determined in the territories listed in a., b., c. or d. above

One endorsement is available to minimally expand the coverage territory. The endorsement is CA 01 21—Limited Mexico Coverage. However, because of the very limited nature of this endorsement, it should be read and evaluated carefully before use.

SECTION V—DEFINITIONS

The following definitions come directly from the coverage form itself and apply specifically to the business auto physical damage policy.

A. "Auto": a land motor vehicle, trailer or semitrailer designed for travel on public roads; this definition does not include "mobile equipment."

B. "Loss": direct and accidental loss or damage.

C. "Diminution in value" is the loss of market value solely due an accident. This loss of value can be actual or perceived.

D. "Employee": a leased worker is considered as an employee, but a temporary worker is not.

E. "Leased Worker": a person leased to the insured employer by a labor leasing firm in which there is an agreement between the insured and that labor leasing firm for that employee to perform specified duties relevant to the conduct of the insured’s business operations. Not included as a leased worker is a “temporary worker."

F. "Temporary Worker": a person furnished or used by the insured to substitute for a permanent employee or to meet short-term situations.

Comparison Of The 02 99 Multi-State Commercial Auto Physical Damage Policy To The 07 97 Edition

Background

The 02/99 program revisions contain three new mandatory coverages, a limited number of new optional coverages, as well as editorial corrections. The mandatory changes broaden the coverage offered. While the revisions are not extensive; they are beneficial.

Mandatory Coverage Changes

A new mandatory multi-state endorsement, CA 00 22—Changes in Commercial Auto Coverage Forms, has been developed and must be attached to all five commercial auto coverage forms including the Business Auto Coverage Form, the Business Auto Physical Damage Coverage Form, the Garage Coverage Form, the Motor Carrier Coverage Form and the Truckers Coverage Form.

Two coverage grants are added along with a change in the definition of Insured Contract, all of which broaden the protection offered.

Loss of Use—Rental Vehicle Coverage has been added. If an insured rents or leases a private passenger type vehicle and that vehicle is damaged, the lease or rental agreement usually obligates the insured to reimburse the rental or lease operation for the loss of use that operation experiences while the vehicle is out of service being repaired. This coverage adds payment for expenses an insured may be legally obligated to pay to the rental or lease operation—up to $15 per day with a maximum of $450.

Again, the vehicle must be a private passenger type only and must be hired without a driver.

Limited Worldwide Coverage for Hired Autos is a second new coverage added for private passenger type vehicles that are hired without a driver. If an insured rents or leases a private passenger type auto for 30 days or less, anywhere in the world, there is coverage for damages that an insured incurs and is legally obligated to pay based upon a suit brought within the United States, its territories, possessions, Puerto Rico or Canada. There is also coverage for any settlement that the insurer agrees to.

Definition of Insured Contract has been amended in all of the commercial auto programs to make it consistent and compatible with the similar definition found in the commercial general liability policy.

The area of change revolves around the exception for demolition and construction operations within 50 feet of railroad property. Previously in commercial auto, any person or organization involved in a demolition and construction operation that an insured was obligated to indemnify was excluded. The general liability definition and now the new business auto definition exclude only indemnity for railroads.

New Endorsements Now Available with Commercial Auto Programs

The endorsements listed below are new optional coverages that may be purchased and apply to all five of the commercial auto programs except the Fellow Employee Coverages, which do not apply to the Business Auto Physical Damage Coverage Form as it does not provide liability coverage.

CA 01 21—Limited Mexico Coverage

If the insured travels into Mexico on a trip that is 10 days or less and not more than 25 miles from the United States border, this endorsement is available to limited coverage. The intent of this endorsement is to extend the coverage territory to the border towns of Mexico.

Liability insurance must be purchased separately through a licensed Mexican insurance company. To be covered by this policy, any suit must be brought in the United States. The insurance provided by the endorsement is excess over the Mexican insurance and other collectible insurance.

CA 20 54—Employee Hired Autos

Should an employee hire an auto in their own name as an individual to perform business-related duties and activities for his/her employer, there would be liability coverage via this endorsement if the hire was done with the permission and approval of the employer.

Comparison Of The 02/99 Multi-State Commercial Auto Physical Damage Policy To The 07/97 Edition Knowledge Tester Quiz

Questions

1. How have the 02/99 updates been accomplished?

2. Explain the change regarding Loss of Use on rental vehicles.

3. Explain the limited worldwide coverage provided for autos.

4. How has the definition of Insured Contract been changed?

5. Discuss the Limited Mexico Coverage.

6. Discuss the Employee Hired Autos.

Answers

1. A new mandatory multi-state endorsement, CA 00 22—Changes in Commercial Auto Coverage Forms, has been developed and must be attached to all five commercial auto coverage forms including the Business Auto Coverage Form, the Business Auto Physical Damage Coverage Form, the Garage Coverage Form, the Motor Carrier Coverage Form and the Truckers Coverage Form.

Two coverage grants are added along with a change in the definition of Insured Contract, all of which broaden the protection offered.

2. Loss of Use—Rental Vehicle Coverage has been added. If an insured rents or leases a private passenger type vehicle and that vehicle is damaged, the lease or rental agreement usually obligates the insured to reimburse the rental or lease operation for the loss of use that operation experiences while the vehicle is out of service being repaired. This coverage adds payment for expenses an insured may be legally obligated to pay to the rental or lease operation—up to $15 per day with a maximum of $450.

Again, the vehicle must be a private passenger type only and must be hired without a driver.

3. Limited Worldwide Coverage for Hired Autos is a second new coverage added for private passenger type vehicles that are hired without a driver. If an insured rents or leases a private passenger type auto for 30 days or less, anywhere in the world, there is coverage for damages that an insured incurs and is legally obligated to pay based upon a suit brought within the United States, its territories, possessions, Puerto Rico or Canada. There is also coverage for any settlement that the insurer agrees to.

4. Definition of Insured Contract has been amended in all of the commercial auto programs to make it consistent and compatible with the similar definition found in the commercial general liability policy.

5. CA 01 21—Limited Mexico Coverage

If the insured travels into Mexico on a trip that is 10 days or less and not more than 25 miles from the United States border, this endorsement is available to limited coverage. The intent of this endorsement is to extend the coverage territory to the border towns of Mexico.

6. CA 20 54—Employee Hired Autos

Should an employee hire an auto in his/her own name as an individual to perform business-related duties and activities for his/her employer, there would be liability coverage via this endorsement if the hire was done with the permission and approval of the employer.