CA 00 01–BUSINESS AUTO COVERAGE FORM ANALYSIS

(October 2019)

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INTRODUCTION

Almost every commercial venture has an automobile liability and physical damage exposure. The Insurance Services Office (ISO) provides three different approaches to covering those exposures. The CA 00 01–Business Auto Coverage Form can be used by any type of commercial entity to cover its owned and nonowned exposures. The Auto Dealers Coverage Form and the Motor Carrier Coverage Forms are available to auto dealer and motor carrier business entities.

CA 00 25–Auto Dealers Coverage Form Analysis

CA 00 20–Motor Carrier Coverage Form Analysis

This analysis is based the 10 13 edition CA 00 01–Business Auto Coverage Form. Changes from the previous edition are in bold print.

CA 00 01 opens by defining the terms you or your as the named insured and we, us and our as the insurance company that is providing the coverage. Named insured is not defined so it means only the entities listed on the declarations. All other definitions are found in Section V–Definitions.

SECTION I–COVERED AUTOS

Numbers are used to describe which autos are covered and for what coverages. These symbols are defined in the Description of Covered Auto Designation Symbols.

The Business Auto Declarations contains spaces next to each of the business auto coverages in which symbols can be entered. The entry of a symbol means that the coverage applies. The entered symbol explains what types of vehicle have that coverage.

A. Description of Covered Auto Designation Symbols

1–Any Auto

This is the broadest symbol designation and it has no limitations or restrictions. If the vehicle is an auto as defined by this coverage form, it is covered, subject to certain exclusions and conditions. Because of the broad scope of the coverage provided, many insurance companies use this symbol very cautiously. Even if a given company uses it for liability, it may not allow its use for physical damage. When Symbol 1 is used, no other symbol should appear in the same box.

Note: See Section V–Definitions for the definition of auto.

Example: Acme Limited files a claim after one of its salespeople’s car is involved in an intersection collision and other parties are injured. The claims handling is delayed because Acme’s policy shows Symbol 1, 8 and 9 next to that vehicle. Everyone is confused.

2–Owned Autos Only

This symbol means that any auto the named insured owns is covered, including those acquired after the inception date. In addition, when this symbol is used with covered autos liability coverage, any owned or non-owned trailer pulled by an owned vehicle is also covered but only for covered auto liability.

Note: See Section V–Definitions for the definition of trailer.

3–Owned Private Passenger Autos Only

This symbol means that all private passenger type autos that the named insured owns are covered. This includes any private passenger type vehicle acquired after the inception date.

Note: The term private passenger auto is not defined in the coverage form. However, according to ISO rules, pickups, panel trucks and vans are considered private passenger for rating purposes as long as they are not used in business. This lack of definition could result in disputes.

4–Owned Autos Other Than Private Passenger Autos Only

This symbol means that all autos that are not considered to be private passenger types are covered if they are owned by the named insured. Those that are acquired after the inception date are also covered. Similar to Symbol 2 above, the covered autos liability coverage provided is extended to non-owned trailers pulled by this type of owned vehicle.

5–Owned Autos Subject To No-Fault

An owned auto that is licensed or garaged in a state where no fault coverage is available is covered for no-fault coverages but only if the particular auto is required to have such coverage. Coverage also extends to such autos acquired after the inception date.

6–Owned Autos Subject To A Compulsory Uninsured Motorists Law

This symbol means that any auto the named insured owns that is garaged or licensed in a state that mandates uninsured motorists coverage is covered. It also applies to any auto acquired after the inception date.

This symbol does not apply to vehicles licensed or operated in states that allow the named insured to formally reject Uninsured Motorists coverage.

7–Specifically Described Autos

Only autos specifically scheduled and for which a premium charge is made are covered. Similar to Symbol 2 above, the covered autos liability coverage provided is extended to any non-owned trailer pulled by this type of owned vehicle.

8–Hired Autos Only

This symbol means that autos the named insured leases, hires, rents or borrows are covered. This symbol has a significant limitation. It does not include leased, hired, rented, or borrowed vehicles that are owned by an employee, partner, LLC member, or members of any of the preceding groups’ households.

Example: Perry drives a vehicle owned by his company, First-Up, Inc. First-Up’s declarations has symbols 2, 8 and 9 for liability and physical damage coverages. One snowy morning, Perry's wife’s car is behind his in the driveway and, being late for work, he takes her vehicle. In his rush, he slides off the roadway. First-Up’s insurance company does not respond to this loss to Perry’s wife’s car because, although it was borrowed, the car was owned by a member of Perry’s household.

9–Non-Owned Autos Only

This symbol means that autos the named insured uses in its business but that it does not own, lease, hire, rent, or borrow are covered. These autos may be owned by employees, partners in the case of a partnership, members in the case of limited liability companies or members of the preceding group’s households. However, they are covered only while they are being used in either the named insured’s business or personal affairs.

Example: In the example above, First Up's insurance company would have responded if Perry had used his wife’s car to drive to his first appointment instead of just to work.

19–Mobile Equipment Subject To Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only

This symbol means that land vehicles that meet the definition of mobile equipment except that they are subject to state-mandated registration and/or licensing are covered. This symbol is needed because of recent state laws that are mandating that certain types of mobile equipment be registered and/or licensed. The symbol applies only in those states where the mobile equipment must comply with motor vehicle laws.

Example: Best Kept Secrets, Inc. provides security services to an exclusive gated beachfront property. It uses an ATV to patrol the beachfront areas and to keep unauthorized boats from landing. Because ATVs must be registered in the state, using Symbol 19 on its auto policy provides coverage on the ATV.

Note: In some cases, more than one symbol may be used.

Example: Mega Lumber Supply insures its vehicles using the Business Auto Coverage Form. Mega wants to have liability insurance for all of its private passenger vehicles, as well as for any hired or non-owned vehicles. For this reason, Symbols 3, 8 and 9 appear in the space next to covered autos liability coverage on Mega's declarations.

Manuscript Symbol

An additional manuscript symbol not mentioned in the Business Auto Coverage Form is available by adding endorsement CA 99 54–Covered Auto Designation Symbol. Symbol 10 is available for the Business Auto Coverage Form and applies based on what is listed and described on the endorsement.

Example: Great One, Inc. wants covered autos liability coverage for all owned vehicles and physical damage coverage on all owned vehicles except one because it owns a high-valued antique automobile. Physical damage coverage on the antique automobile is written on a separate policy in a specialty market. Symbol 2 is used for liability coverage. However, Symbol 10 is used for comprehensive and collision coverages. Symbol 10 is defined on CA 99 54 as All Owned Autos except the 1959 Classic Rolls Royce.

Note: There is no reference to symbol 10 in this item. Because of this, Paragraph B. below does not apply to any coverage that has only symbol 10. This means that when symbol 10 is used, no coverage applies for any newly acquired vehicle that would match the symbol 10 criteria.

Insurers and brokers that are looking for a market to provide coverage on difficult business auto or trucking situations, such as racing activities, should refer to the Automobiles, Trucks, or Recreational Vehicles section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

B. Owned Autos You Acquire After the Policy Begins

1. If Symbols 1–Any Auto, 2–Owned Autos Only, 3–Owned Private Passenger Autos Only, 4–Owned Autos Other Than Private Passenger Autos Only, 5–Owned Autos Subject to No-Fault, 6–Owned Autos Subject to a Compulsory Uninsured Motorists Law or 19–Mobile Equipment Subject to Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only are entered on the declarations, autos of the type described by such symbols that the named insured acquires during the policy period are also covered.

Example: If Symbol 3–Owned Private Passenger Autos Only is used, coverage automatically applies to a new private passenger vehicle the named insured acquires to use to make sales calls during the policy period. However, there is no automatic coverage if symbol 4–Owned Autos Other Than Private Passenger Autos Only is used and the insured purchases the same private passenger vehicle for sales purposes. The insured must specifically request that coverage for this vehicle be added and change the symbol.

2. When symbol 7–Specifically Described Autos is used, new autos acquired during the policy period are covered only if one of the following applies:

The insurance company covers all vehicles the named insured already owns
The new vehicle replaces a vehicle already scheduled.

In either case, the named insured must inform the insurance company of the acquisition within 30 days of the date it was acquired.

C. Certain Trailers, Mobile Equipment and Temporary Substitute Autos

When covered autos liability coverage is selected based upon entries on the declarations, several additional categories of vehicles are added as covered vehicles.

1. Utility trailers having a load capacity of 2,000 pounds or less and designed for travel on public roads are covered but only while being pulled by a covered auto. This load capacity will eliminate coverage for semitrailers.

Example: A marketing rep for Gr8teHealth Supplements Inc. is traveling to a convention, towing a small trailer that is used to store and transport the company’s convention booth. Symbols 3, 8 and 9 are entered for liability. The rep switches lanes too aggressively and the trailer slams into the front of a car that the rep attempted to pass.

Scenario 1: The marketing rep is using her personal pickup truck to pull the trailer because her company vehicle is too small. The loss is covered by Gr8teHealth’s BAP because the towing vehicle is a nonowned vehicle (9) which is a covered auto.

Scenario 2: The marketing rep is using her personal pickup truck to pull the trailer in order to use the company’s convention booth to assist her son on his science fair project. The loss is not covered by Gr8teHealth’s BAP. Because the towing vehicle was not being used on company business at the time of the loss, it would not qualify as covered under symbol 9.

2. Mobile Equipment is covered while being carried or pulled by a covered auto.

Example: A bulldozer Real Landscaping owns is transported on a flatbed towed by a pickup Real Landscaping owns. The driver turns suddenly and the bulldozer overturns onto another vehicle. Real Landscaping’s Business Auto Coverage Form responds to the damage caused by the bulldozer.

3. If the named insured's covered, owned auto is temporarily out of service for repair or service or due to breakdown, loss or destruction, a non-owned, temporary substitute for it is covered but only if the named insured uses it with the owner's permission.

Example: Refer to the Symbol 8 example above. Instead of Perry using his wife’s car out of convenience, he uses it because his car would not start, and he needed to get to work. In that case, First-Up’s Business Auto Coverage Form responds to the accident because the vehicle was used as a temporary substitute vehicle.

SECTION II– COVERED AUTOS LIABILITY COVERAGE

A. Coverage

The insurance company pays claims and lawsuits related to bodily injury, property damage and certain types of pollution events (see definition of covered pollution cost or expense). However, the obligation to pay is triggered only by accidental occurrences involving vehicles covered under the Business Auto Coverage Form. An eligible pollution event is covered only if it is connected to a covered bodily injury or property damage loss.

Example: Big Belly Bakeries has a fleet of delivery trucks insured on a Business Auto Coverage Form. One of its delivery trucks is involved in an accident.

Scenario 1: Chuck, Belly's newest driver, is in a hurry to make a delivery. When he rounds a corner, he hits a slick spot, swerves out of control and crashes into a large, parked truck. Part of the damage to the other vehicle is a punctured gas tank that completely discharges on the front lawn of the home where the parked truck was pushed. The Business Auto Coverage Form should respond to some of the costs related to the lawn and soil damage.

Scenario 2: Chuck, Belly's newest driver, is in a hurry to make a delivery. He rounds a corner, hits a slick spot, swerves out of control, but somehow manages to safely stop the truck. Chuck rushes to the back of the vehicle to check his cargo and, in a panic, grabs a 5-gallon gas can kept in the back of the truck and throws it out on a nearby lawn because he was afraid that the tank might leak and contaminate the load of bread and pastries. However, the can's dispenser pops off when it lands and the entire contents discharge on the lawn. The Business Auto Coverage Form does not respond to any costs related to the lawn and soil damage.

Besides responding to valid claims, the insurance company has an obligation and a right to provide a legal defense related to a claim. The insurance company has sole responsibility as to which claims are denied, settled, investigated, or defended. All defense-related obligations end once an action is resolved. Resolution can be a settlement, a court award, or at the time when the applicable limit of insurance has been exhausted. This is true even if additional claims, losses, or suits are filed against the insured.

Example: Due to Harried Supermarket's negligence in maintaining its large tractor-trailer rig, the brakes failed and caused an accident involving four vehicles and multiple claimants. The insurance company determined that Harried's driver was at fault and settled with three of the claimants out of court, exhausting the limits in the process. At that point, because the limits of insurance had been paid out, the company informed Harried that it was no longer obligated to provide a defense against the remaining claimants.

Related Court Cases:

Automobile Liability Insurance, Not General Liability, Covered Loading

Ordinary Negligence in Ambulance Maintenance Resulting In Breakdown And Delay Did Not Establish Coverage for Claim

1. Who Is an Insured

a. The named insured is an insured for any covered auto.

Note: Naturally, the party listed is an insured according to the auto symbols that apply.

b. Anyone else using a covered auto that the named insured owns, hires or borrows is an insured as long as the use is with the named insured’s permission. There are some exceptions though.

Related Court Cases:

Driver Met “Required Vehicle” Exception to The “Going And Coming” Rule

Driver Was Not Acting In the Scope Of His Employment

Vehicle's Fire Loss in Repair Shop Not Covered Under Auto Policy

(1) The owner of the covered auto and any of that owner’s employees, drivers or agents are not insureds. Any other party from whom the insured hired or borrowed a covered auto is also not an insured.

Example: Polly, the named insured, rents an import car from Jalopy Motors, Inc. Polly is covered during her use of the rented car, but Jalopy Motors is not.

An exception to this is any trailer connected to an auto that is both owned by the named insured and covered under this policy.

(2) Employees of the named insured are not covered if they or members of their household own the auto that is being used.

Example: Mavis is vice president of Karla Consultants. On Karla's behalf, she borrows her son’s car to impress a client. If an accident occurs, Karla Consultants is covered but Mavis is not.

(3) Anyone while working in the business of selling, servicing, repairing, parking, or storing autos that uses a covered auto is not covered. The only exception is when that business is the named insured’s business.

Example: James works for Heffernan International and takes his company vehicle to A-1 Garage for repairs. John, the garage mechanic, takes the vehicle for a test drive. The brakes fail, resulting in a serious accident. Neither John nor A-1 Garage is covered under Heffernan’s BAP but both Heffernan International and James are covered if they are named in a suit.

(4) Anyone moving property to or from a covered auto is not an insured but there are numerous exceptions. The named insured’s partners, employees, and LLC members are covered, as well as lessees and borrowers of autos, including their employees.

Example: John is a carpenter with a business-use pickup truck. He lets George use it to move his household items to a new home. While unloading a dishwasher, George loses his grip; the dishwasher falls and seriously injures a young child who was watching. The accident is not covered under John’s BAP because George is not an insured.

(5) Partners and members of an LLC are not insureds for any auto owned by the partner or member or for any auto owned by a member of their households. This means that a partner that borrows his or her spouse’s car for company business is not an insured under the company’s Business Auto Coverage Form.

c. Anyone held liable for the conduct of an insured is also considered an insured, but only to the degree that the insured is responsible (legally accountable) for that insured’s actions.

Note: CA 20 54–Employee Hired Autos is available to add coverage if an employee hires an auto in his or her own name as an individual to perform business-related duties and activities on behalf of his or her employer. When this endorsement is added, the definition of Who Is an Insured is amended to also include the employee while operating the vehicle owned or rented in his or her name.

2. Coverage Extensions

a. Supplementary Payments

The Business Auto Coverage Form provides six supplementary payments. Any payments made from this section do not reduce the limits available to pay for any loss.

The insurance company pays on the insured’s behalf:

(1) All expenses the insurance company incurs.

(2) If a bail bond related to a covered accident is required, up to $2,000 is available to pay its cost. The bond could be for a traffic law violation but only if it is related to the covered accident.

The insurance company is not required to furnish the bond.

3) The cost of bonds needed to release attachments in a suit filed against the insured is covered if the insurance company defends the suit. However, only the costs of bonds that are within the limit of insurance are covered.

The insurance company is not required to furnish such bonds.

(4) The insurance company pays reasonable expenses the insured incurs while participating in any loss-related investigation or defense. However, the amount of lost earnings is no more than the actual loss of earning capped at $250 a day. Expenses are paid only when the insurance company requests the insured to assist.

(5) All costs taxed against the insured in a suit filed against it that the insurance company defends. This item does not include any attorney’s fees or expenses taxed against the insured.

(6) Interest on the full amount of any judgment that accrues after the judgment is entered. This applies only if the insurance company defended the action. Once the insurance company pays, offers to pay, or provides the court with its share of a judgment, the insurance company no longer pays any interest.

Example: Clever, Inc. is defended by Major Insurance Company. The plaintiff is awarded $600,000. Clever, Inc.’s limit is only $250,000. Major is responsible for interest on the $600,000 award until it pays its $250,000. After that, Clever, Inc. is responsible for the interest on the remaining $350,000.

b. Out-Of-State Coverage Extensions

This section provides two important coverage extensions when an insured is away from the state where the auto is licensed or garaged. They essentially make the insurance provided comply with any state financial responsibility law, no-fault or other compulsory coverage. The two extensions are:

(1) The limit of insurance provided is automatically increased as needed to meet the limits required by a compulsory or financial responsibility law in the jurisdiction where the covered auto is operated. An important note to this extension is that it does not apply to any law governing motor carriers, passengers or property.

Example: The Business Auto Coverage Form's covered auto liability limit is $50,000. This limit complies with the financial responsibility laws of the state where the vehicle is licensed and garaged. However, that limit is inadequate when the auto crosses the state line into the next state because that state's minimum limit requirement is $75,000. This extension automatically increases the limit to $75,000 for the period during which the covered auto operates in that state.

(2) The Business Auto Coverage Form provides the minimum amounts and types of other coverages required of out-of-state autos by the jurisdiction where the covered auto is operated. One such coverage is no-fault.

Example: The state where the covered auto is garaged and licensed does not require no-fault coverage, but another state where the covered auto operates does. This extension provides the coverage required by that state during the period the auto operates there.

A statement here clarifies that the insurance company does not pay anyone more than once for the same elements of loss because of these extensions. In other words, they do not duplicate any coverage or allow damages to be collected more than once.

B. Exclusions

The insurance provided by this coverage form does not apply to the following:

1. Expected or Intended Injury

Any bodily injury or property damage the insured expects or intends to cause is excluded.

Note: This exclusion is intended to protect insurance companies from responding to damages or injuries the insured intentionally causes. It is in the public interest to prevent insurance from being used for gain, to injure competitors, to be used as an instrument of revenge, or to cause any other deliberate harm. There is no ISO endorsement available to buy coverage for intentional acts or to delete this exclusion at the present time.

Example: Mary is driving her company’s auto when she sees her ex-boyfriend drive past in her vehicle that he had taken from her. She speeds up and attempts to get him to pull over. He refuses so she nudges his vehicle with hers, causing his vehicle to spin out of control and over an embankment. No damages associated with this claim are covered because Mary’s actions were intentional.

The denial may be disputed on the basis that Mary’s intent was for her boyfriend to stop and return the vehicle, not the resulting damage or injury.

2. Contractual

Damages for bodily injury or property damage that result from liability the insured assumed in a contract or agreement are excluded with two exceptions. Coverage applies if the liability would have existed even without the contract. Coverage also applies if the contract meets the definition of an insured contract. When a contract is an insured contract, coverage exists only if the loss occurred after the agreement had been made.

Note: There is no ISO endorsement available to buy back or delete this exclusion at the present time.

3. Workers Compensation

Coverage does not apply to any requirement or obligation the insured or its insurance company must assume due to any workers compensation, disability benefits, unemployment compensation, or similar law.

Note: This exclusion prevents double indemnification for an injury that should be covered under workers compensation or employers liability coverage.

Insurers and brokers having to provide coverage on a variety of difficult, unusual or specialty workers compensation situations should refer to the Workers Compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

4. Employee Indemnification and Employers Liability

Any bodily injury to the insured's employee or the spouse, child, parent, brother or sister of that employee is excluded when due to:

the employment of that employee
that employee performing duties of the insured’s business operations

This exclusion applies whether the insured is liable as an employer or in any other capacity or is obligated to share damages with or repay someone else who must pay damages because of the injury. This clarification is important because of the widespread use of contractors, subcontractors, independent contractors, or leased employees, and much of the uncertainty with respect to who is responsible.

This exclusion has two exceptions. Coverage applies to bodily injury to domestic employees who are not entitled to workers compensation benefits. Domestic employees are persons who perform household or domestic work primarily for a residence premises.

The second exception is for liability the insured assumes in an insured contract. The insured contract must be entered into prior to the loss.

Note: This exclusion prevents double indemnification for an injury that should be covered under workers compensation or employers liability coverage.

5. Fellow Employee

Employees are insureds. As a result, exclusions 3 and 4 could be circumvented if the injured employee could sue the fellow employee who actually caused the accident. This exclusion prevents this policy from responding to such lawsuits. Bodily injury to a fellow employee of the insured that occurs as a result of or in the course of that employee’s employment is excluded. Further, there is no coverage for any relative of a fellow employee for consequential damages that arise from such an injury.

There are two ways to modify this exclusion. The fellow employee exclusion is deleted for all employees when CA 20 55–Fellow Employee Coverage is attached. CA 20 56—Fellow Employee Exclusions for Designated Employees/Positions is a modified version of the CA 20 55 that deletes the exclusion for only specific employees or specific positions.

6. Care, Custody or Control

Property damage to or covered pollution cost or expense to property the insured owns or transports or that is in its care, custody or control is excluded unless such liability was assumed in a sidetrack agreement.

Notes:

The Business Auto Coverage Form protects the insured for its negligence and tort liability to others and does not apply to damages or injury to the insured. As such, it reinforces the need for the insured to maintain its premises and properties in good condition and to use reasonable care to prevent damage or injury, including damage to property in its care, custody, or control.
A sidetrack agreement involves the owners of a premises and a railroad with respect to a railroad sidetrack (transfer or access track) on the insured's premises. The railroad allows the premises owner to use the sidetrack as long as it guarantees the railroad access to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the owner and the railroad.
The Business Auto Program does not supply any endorsements to cover property that is in the insured’s care, custody, control, or transported by the insured. However, varieties of inland marine coverages are available to address these exposures.

AAIS Motor Truck Cargo Legal Liability Forms

ISO Motor Truck Cargo Carriers Coverage Forms

7. Handling of Property

This exclusion works in conjunction with the ISO Commercial General Liability (CGL) Coverage Form so that no duplication of coverage applies. This BAP exclusion states that no coverage is in place for bodily injury or property damage resulting from the handling of property until that property has been physically moved to the point or place where the insured accepts it to be moved into or on the covered auto. The CGL Coverage Form provides coverage until the property is moved to that point and after the property has been delivered. This exclusion states that BAP coverage ends once the property is moved from the covered auto at the point where the insured makes the final delivery.

8. Movement of Property By Mechanical Device

Exclusion 7. above and the ISO CGL definition of loading and unloading work in conjunction with this exclusion. It excludes bodily injury or property damage from movement of any property by any mechanical device that is not attached to the covered auto. Hand trucks are not considered mechanical devices. In other words, loading or unloading by conveyors, mobile carts, forklifts or any other mechanical device other than a handcart is excluded but may be covered by the CGL Coverage Form.

Example: Kris works for Office Store and he is delivering a desk from Office Store to Fuss and Stuff Industries. Kris uses a hand truck to move the desk down a ramp and into Fuss and Stuff Industries’ front door. Kris trips going down the ramp and loses his grip on the hand truck, resulting in it running into a bystander. The Business Auto Coverage Form covers the injury to the bystander because the hand truck is an exception to the Movement Of Property by Mechanical Device exclusion.

9. Operations

Any bodily injury or property damage that results from the operation of mobile equipment listed in paragraphs 6.b. and 6.c. of the definition of mobile equipment is excluded. Cherry pickers, air compressors, pumps, generators, sprayers, welding equipment, building-cleaning equipment, geophysical exploration devices, lighting or well servicing equipment are examples of such excluded equipment.

Bodily injury and property damage losses that are due to the operation of mobile equipment that is attached to equipment considered a Symbol 19 type vehicle are also excluded.

Example: Larry drove his bucket truck to the job site. He positioned the truck, hopped into the bucket, and started to raise himself up in order to begin cleaning the building.

Scenario 1: The truck’s parking brake malfunctioned throwing Larry and the bucket into the building. The damage caused by the bucket is covered because the loss is due to the operation of the truck, not the mobile equipment operation.

Scenario 2: Larry hits the stop button, but the bucket continues to move. The bucket strikes an awning and a sign before Larry can deactivate it. The damage is not covered because it was due to the operation of the mobile equipment.

Note: Coverage for such situations is available in the ISO CGL Coverage Form.

10. Completed Operations

Coverage does not apply to any bodily injury or property damage due to the insured’s work after it is completed or abandoned. Work is defined as any work or operations the insured performs or has performed for it by others and includes materials, parts, or equipment furnished in connection with the work or operations. Work also includes any warranty or representation made with respect to the fitness, quality, durability, or performance of any item defined in the work.

The insured's work is considered completed whenever the first of any one of the following occurs:

All work called for in the insured’s contract is completed
All work to be done at a job site is completed if the contract calls for work at more than one job site
When the work performed at a job site is put to its intended use by any party. There is an exception to this item. Work that is being used only by other contractors or subcontractors working on the same project is not to be considered completed.

If the insured's work requires service, maintenance, correction, repair, or replacement but is otherwise complete, it is considered complete.

Example: Corrie’s Concrete pours the concrete from its truck for a driveway at Kimberly’s home that will be finished by Sidewalk, Inc., but Sidewalk, Inc. never shows up and the job is never completed. Kimberly sues Corrie’s and Sidewalk because of the unfinished concrete that has solidified in her driveway. Corrie’s BAP will not respond because Corrie’s contract was completed once the concrete was poured.

Note: Coverage for this exclusion is available in the ISO CGL Coverage Form.

11. Pollution

The term “pollutants” is defined later in this coverage form and is very important to this exclusion.

There is no coverage for any bodily injury or property damage that is due to a pollutant discharge, dispersal, seepage, migration, release, or escape. This exclusion applies if the event actually happens but also applies if the bodily injury or property damage is because of a threat of an event or an allegation that the event happened.

This paragraph would exclude any and all auto-related pollutant events. However, the following three paragraphs modify this exclusion considerably which means that they must be carefully reviewed.

a. This paragraph explains that this exclusion applies when the pollutants are in between the place they were and the place they are going to be. The pollutants or the property that contains the pollutants must be in one of the following circumstances:

The handling or movement into, onto or out of the covered auto
The actual transport by a covered auto
The towing of the covered auto
In the course or transit. The insured may be providing the transit, or the transit may be provided by others on behalf of the insured
In or upon the covered auto while being treated, processed, stored, or disposed of.

This portion of the exclusion has an exception. The exclusion does not apply if the pollutants are fuels, lubricants, fluids, exhaust gases, etc., that are part of the normal electrical, hydraulic or chemical function of the covered auto. In order for the exception to apply, the pollutants must have been within the part of the auto which is designed by the manufacturer to hold, store, receive, or dispose of the pollutants prior to the accident.

Example: Kenny is transporting hot tar from one job site to another. He makes a sudden stop to avoid hitting a bunny and the chain holding the hot tar breaks causing the tar to fly into the nearby pond. The property damage to the pond due to the introduction of the tar pollutant is not covered.

Example: Joe's truck hits a slick spot and flips over.

Scenario 1: The truck’s oil and gasoline leak out and cause a pollution loss. This pollution loss is covered.

Scenario 2: Joe’s cargo is fuel oil. The pollution due to the fuel oil spill is not covered.

Mobile equipment that is considered auto because of paragraphs 6.b. or 6.c. in the definition of mobile equipment does not qualify for this exception if the event occurs during that equipment’s operations.

Example: Justin’s truck has a permanently installed generator that he uses on various job sites.

Scenario 1: Justin’s truck flips and the fuel from the truck and the generator create a pollution event. The loss due to the pollution generated by both the truck and the generator is covered.

Scenario 2: The generator is operating and begins to spew out its fuel. This pollution is not covered because it occurred during the generator’s operations.

b. This paragraph explains that the pollution exclusion applies prior to the pollutant generating property being moved to where the insured will move it either into or onto a covered auto. This paragraph does not have the same exceptions that apply to paragraph a.

c. This paragraph explains that the pollution exclusion applies after the pollutant generating property has moved from the covered auto to its final delivery. This paragraph does not have the same exceptions that apply to paragraph a.

Paragraphs b. and c. of this exclusion do contain an important exception. The pollution exclusion does not apply if an accident occurs away from any owned or rented premises and the pollutants are not in or on a covered auto. This applies only if the property that generates the pollutant is upset, overturned, or damaged as a result of maintenance or use of a covered auto and the polluting event is caused directly by an upset, overturn, or damage.

Example: Oliver completes the delivery of the fuel oil. Unfortunately, instead of moving away from the tank, he crashes into the tank, releasing all of the fuel. This is covered because the pollution event occurred off premises after the delivery was complete and the use of the auto caused the accident.

Note: It is important to point out that this exclusion DOES NOT apply when a covered auto strikes another vehicle and the damages to that other vehicle result in a pollutant event.

CA 99 48–Pollution Liability–Broadened Coverage for Covered Autos–Business Auto and Motor Carrier Coverage Forms is available to provide a buyback for pollution coverage under a business auto policy. It changes the pollution exclusion in the Business Auto Coverage Form by excluding only liability the insured assumes under a contract or agreement.

Insurers and brokers that provide coverage on a variety of difficult, unusual or specialty pollution situations should refer to the Environmental Risks section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

12. War

This exclusion unequivocally bars coverage for either bodily injury or property damage related to war and similar military events. It is not affected by circumstances such as a formal declaration of war, that it is a civil uprising, or whether it involves government or civilian participants. The bottom line is that there is no coverage for loss related either directly or indirectly to war or warlike activity.

Note: Currently, there is no ISO endorsement available to buy back or delete this exclusion.

13. Racing

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

Note: Vehicles, even under the best of conditions, are troublesome, heavy, difficult to control, and can cause an incredible amount of damage. For these reasons, insurance companies are not interested in providing coverage in cases where vehicle owners deliberately operate their property in a reckless or dangerous manner.

Example: Pam and Gayle are highly competitive. They seem to meet at the same traffic light every day. On a day when traffic is light, Pam yells to Gayle, “Wanna race?” Gayle guns her engine in response and they take off at the green light. They race for over a mile before Pam loses control and hits an oncoming vehicle. Even though it was reckless, this event is covered because the race was not an organized event.

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.

C. Limit of Insurance (10 13 change)

The most the insurance company pays for the total of all damages, including any covered pollution cost or expense resulting from any one covered accident, is the Covered Auto liability limit of insurance on the declarations. This limit applies regardless of the number of insureds, autos covered, vehicles involved in an accident, premium paid, or number of claims made.

Example: The two named insureds on a business auto policy are Smith, Inc. and the individual who owns Smith, Inc., John Smith. Smith, Inc. owns several private passenger vehicles that John uses for both business and pleasure. One evening while using a vehicle on a personal errand, John crashes into another automobile. The injured party sues John as an individual for $500,000 and Smith, Inc. as the vehicle owner, also for $500,000. The Business Auto Coverage Form Covered Auto Liability limit of insurance is $500,000. When the claimant is awarded $1,000,000 ($500,000 from each of the named insureds) the $500,000 limit of insurance is all this policy pays.

Bodily injury, property damage and covered pollution cost or expenses that arise from exposure to or continuation of similar conditions are considered to be resulting from a single accident and therefore subject to a single limit of insurance.

Example: Betty made a horrible mistake by stepping hard on her accelerator when she thought she was stepping on her brake. Her car plunged through a building storefront and injured two persons. The bodily injury for the two persons and the property damage to the building are considered a single accident. One of the injured persons subsequently dies. Her death is considered a continuation of that same accident. That person’s family sues for their trauma and the loss of their mother. This is also part of the same accident. The damage to the building causes a leak to the fuel tank in the basement of the building which isn’t uncovered until a year after the accident. That cleanup is a continuation of the same accident.

The final paragraph of the section applying to the limit of insurance states that no one is entitled to receive duplicate payments for the same elements of loss under the Business Auto Coverage Form, any coverage endorsement or any endorsement attached to the Business Auto Coverage Form.

SECTION III–PHYSICAL DAMAGE COVERAGE

A. Coverage

1. The insurance company pays for loss to a covered auto and its equipment based on the coverages on the declarations and the symbols the insured selects. When selected, the Business Auto Coverage Form provides:

a. Comprehensive Coverage

Coverage applies to any source of damage to a covered auto except collision and overturns; this broad coverage is subject to certain exclusions.

b. Specified Causes of Loss Coverage

This coverage applies only to loss or damage that is caused by the following causes of loss:

Fire	Lightning	Explosion
Theft	Windstorm	Hail
Earthquake	Flood	Mischief
Vandalism	Sinking, burning, collision or derailment of any conveyance (such as a ferry, train, truck) transporting the covered auto

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

c. Collision Coverage

This coverage is very specific. The only covered loss or damage is that caused by the covered auto's collision with another object or by the covered auto’s overturn.

Note: Another object could be another vehicle as well as an animal, bird, person, a tree, building, or sign.

2. Towing

This coverage is for private passenger autos only.

The insurance company pays up to the limit on the declarations for towing and labor costs incurred as a result of a covered private passenger auto becoming disabled. It also pays for labor costs that are incurred at the place where the auto is disabled. Expenses that are incurred after the vehicle has been towed to the repair shop are not covered.

3. Glass Breakage–Hitting a Bird or Animal–Falling Objects or Missiles

This item applies only if Comprehensive Coverage applies to the damaged covered auto.

The insurer pays the following losses under Comprehensive coverage:

Glass breakage
A loss that occurs when an animal or bird is hit
A loss that occurs because of falling object or missile

When glass breakage is part of a collision loss, the insured has the option to have the loss paid as either collision or comprehensive.

Note: This item clarifies coverage. The three types of losses discussed could be called collisions because an object struck the vehicle. This is important because of the differences in deductibles and in coverage. When collision coverage is provided, its deductible is often significantly higher than the comprehensive deductible. In addition, there may be times when comprehensive is the only physical damage coverage carried on the auto.

4. Coverage Extensions

a. Transportation Expenses

This is a conditional extension. It applies only if all of the following conditions are met.

The covered auto is a private passenger type
Comprehensive or specified perils coverage is provided for the covered auto
The entire covered auto is stolen.

When all of the above conditions are met, temporary transportation costs of up to $20 per day are covered. The time period for coverage begins 48 hours after the theft and ends at the earliest of the following:

The covered auto is returned and can be used
The insurance company pays for the loss of the covered auto
The cost of the transportation expense equals $600

b. Loss of Use Expenses

This is a conditional extension. It applies only if all of the following conditions are met:

Hired Auto Physical Damage coverage applies
An insured rented or hired a vehicle using a written contract or agreement
The contract makes the insured legally liable for damage to the rented vehicle
The vehicle rental does not include a driver

A payment of no more than $20 per day is provided for the loss of use of a rented vehicle but only if the loss was caused by Comprehensive, Specified Cause of Loss or Collision coverage for which a symbol 8 is entered on the declarations. This loss is capped at $600.

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

B. Exclusions

Editor’s note: We have titled the exclusions in this section for analysis purposes. These titles are not a part of the Business Auto Coverage Form.

1. Anti-concurrent Causation Exclusions

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

a. Nuclear Hazard

This is an 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 is declared or undeclared war, civil war, a warlike action by a military force. It includes acts to defend or hinder an expected or actual attack by any government or authority employing military personnel or agents. Insurrection, rebellion, revolution, usurped power or any action to hinder or defend against these are also considered 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. Racing

There is no coverage when any covered auto that is being used in or practicing or being prepared for any racing, demolition or stunt activity that is professional or organized is damaged.

Note: Racing, demolition, or stunt activities that are spontaneous and totally unprofessional would be covered.

3. Wear and Tear and Tire Damage

Coverage does not apply to loss or damage when it is caused by and confined to wear and tear, freezing, mechanical, or electrical breakdown. There is also no coverage for blowouts, punctures, or other road damage to tires. This exclusion does not apply if the loss is the result of a total theft of the vehicle.

Example: Aaron runs over a piece of aluminum that pierces his tire. There is no coverage because of this exclusion. However, the tire damage is covered if the car was stolen and was driven over a piece of aluminum piercing the tire, causing the thief to abandon the vehicle.

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

4. Excluded Property

The following types of property are excluded:

a. Tapes, records, discs, and similar property or data electronic devices that are designed to be used with audio, visual, or data electronic equipment. This exclusion is fairly open ended in order to keep up with changing technology. Tapes and CDs are excluded as well as DVD’s and equipment that can be attached to any media system within the auto.

Note: As more vehicles become more like traveling offices, this exclusion is becoming more open-ended in order to exclude as much of this property as possible. This property should be insured under the commercial property or inland marine coverage forms.

Note: CA 99 30—Tapes, Records and Discs Coverage is available to provide this coverage. It extends physical damage coverage for tapes, records, and discs in covered autos for up to $200 for an additional premium charge.

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

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

d. All accessories used with the electronic equipment described in c. above.

5. Paragraphs c. and d. of exclusion 4. do not apply to property that is designed to operate only from the auto’s electrical system and at the time of loss meet any of the following criteria:

a. Is permanently installed in or on the covered auto

b. Is not permanently installed but can be removed only from a housing unit permanently installed in or on the covered auto

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

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

Example: The following items in Citytowne Limos were destroyed in accidents. The CA 00 01 will only pay for one:

Covered	Not Covered

6. Diminution of Value

Loss of a covered auto's value because it was involved in an accident is not covered. Diminution of Value is defined in Section V–Definitions.

Example: Paula has a major collision loss, but the vehicle is satisfactorily repaired. Two months later, Paula sells the car. Because Paula had shared info on the accident and repairs, all offers were nearly a thousand dollars less than what she had hoped (based on blue book value). She calls off the sale and files a claim for the loss in sales value. The insurance company denies the request to recover that perceived loss of value.

C. Limit of Insurance

Note: Item 1 is a reformatted version of the prior edition’s items 1 and 2. There is no intentional change in coverage. (10 13 change)

1. The most paid for:

a. All loss or damage to a single covered auto that is damaged or stolen is the lesser of:

(1) The actual cash value of that property. This value is established as of the date of the loss and not as of the date of adjustment.

(2) The cost to repair or replace with items that are considered similar in kind and quality

b. Reproducing, receiving, or transmitting electronic equipment in a vehicle is subject to a sublimit of $1,000. Equipment subject to this sublimit is permanently installed but in a place within or upon the auto that is not where the manufacturer normally installs such equipment. It is also subject to this sublimit if it is removable equipment and its permanently installed housing is in a place that is not where the manufacturer normally installs it. Any other items that are integral to the other equipment described in this paragraph are also subject to the sublimit.

Example: Moxie decided to embellish his SUV to enhance his stereo. He installed speakers that took up most of the cargo space and added a mixing unit. The total cost was $20,000 and was permanently installed. If a loss occurs, payment for the embellishments is limited to $1,000.

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

Example: Renny’s truck is stolen on 05/16/19. He purchased it used for $32,000 on 04/01/018. Based on the Blue Book, he believes it is worth $25,000. His insurance company explains that, due to the mileage and its condition, and based on pictures Renny submitted, the value is only $21,500.

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 may appear to be a way around this limitation. However, 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 on the endorsement schedule. Therefore, CA 99 28 should be used with caution because it could actually 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 IV–BUSINESS AUTO CONDITIONS

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

A. Loss Conditions

1. Appraisal for Physical Damage Loss

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 insurer and the named insured must pay the cost of their own appraiser and then split the expense for the umpire and any other appraisal expenses.

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 Accident, Claim, Suit or Loss

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

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

b. The named insured and the involved insured must not commit the insurance company to any payment, obligation, or expense except for obligations the insured is willing to personally handle without insurance company assistance. The named insured and the insured involved must cooperate with the insurer while it is investigating or settling the claim or defending the suit. They must also provide copies of all documents the insurer requests, as well as provide it with all necessary authorizations so that it can obtain medical records or other pertinent information. They must also agree to allow a physician selected by the insurer to examine them as often as requested. The requests must be reasonable, and the insurer must pay all exam expense.

c. The named insured has additional duties in case of a physical damage loss to a covered auto or its equipment. 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. These expenses will be taken into consideration when the claim is settled. The insurance company must be able to inspect the damaged auto and obtain information about the loss before it is repaired or disposed of. The named insured must agree to be examined under oath and sign any statement of answers if the company requests.

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

It is important to be aware that legal action can be brought against the insurance company, but it is subject to the following:

All terms of the contract that are the obligation of the named insured must be satisfied. This applies to all coverages

Example: Phillip is upset that he has not yet received payment for his stolen BMW, so he files suit against his insurance company. The insurance company informs him that he has no standing to do so because he has not yet submitted to the requested examination by the insurance company.

No legal action can be brought against the insurance company by any party to determine the insured’s liability. This is applicable to only the covered autos liability coverage.
Legal action, under the covered autos liability coverage, can be brought against the insurance company only after the insurer has stated in writing that the insured has an obligation to pay OR following a trial judgment that determines the insured’s obligation amount.

4. Loss Payment–Physical Damage Coverages

The insurance company determines the method it will use to settle a physical damage loss. It can do any of the following:

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

b. Return any recovered stolen property and bear the expense of returning it. The insurer must also pay any damages the auto incurred because of the theft.

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

Note: The insurer has the right to take the property for salvage but is not obligated to do so. This means that the insured may be left with the expense of discarding a damaged vehicle.

Example: Perez Motors sustained a substantial loss when a tractor-trailer overturns and tumbles down a steep ravine it is operating within a national park. The unit is a total loss. An agreement is reached on the value of the loss and the insurance company pays. However, the insurance company refuses to accept the salvage. Perez is ordered to remove the unit in an environmentally safe manner. All incurred costs are Perez’s responsibility, but Perez does get to keep the salvage.

Any payment made includes any required sales tax.

Note: An agreement to handle applicable sales taxes under the policy is keeping with the intent to indemnify those who experience a loss. The financial burden of taxes would represent inadequate compensation if not paid by the insurance company.

5. Transfer of Rights of Recovery Against Others to Us

When the insurance company makes payments to or for any party under this coverage form, any rights that party may have to recover from another transfer to the insurer. That party must take all necessary steps to secure the insurer’s rights to recover. That party is also obligated to not compromise those rights.

Example: Cory picked up rolled steel from Frank’s Steel. Frank’s employees secured the steel to the trailer. The steel shifts when Cory is turning and causes the trailer and semi to flip. Cory’s insurer investigates and settles all claims related to the incident. Afterward, it sues Frank’s Steel for its employees’ error in loading the steel. Cory objects because Frank’s Steel is an important customer. If Cory impairs the action the insurer can claim breach of contract and demand restitution from Cory.

B. General Conditions

1. Bankruptcy

The insurance company is not relieved of its obligations under this insurance coverage because of the bankruptcy of the insured or his or her estate.

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 under a revised version of this coverage form provided by this insurance company that is available without an additional premium charge automatically applies to this policy. It is effective on the date that the coverage 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 from the insured, the insurance company does not recognize that assignment, regardless of any other provision in this coverage form.

5. Other Insurance (10 13 change)

a. This insurance is primary if the named insured owns the covered auto. When the named insured does not own the covered auto, this insurance is considered excess over any other insurance that can be collected. Trailer coverage is similar. If the covered trailer is attached to the named insured's covered auto, liability coverage for the trailer is primary. However, coverage for the trailer is excess when the trailer is attached to a motor vehicle that the named insured does not own.

Related Court Cases:

Court Considers Primary-Excess Dispute

Who is Primary Insurer in Pizza Delivery Accident

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. This covered autos liability coverage is always primary when liability is assumed in an insured contract.

Note: This supersedes the provisions of paragraph 5.a above.

d. 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 company’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 company’s limits as a percentage of all limits available. Losses are proportioned among the companies accordingly.

Example: Policy A has a $50,000 limit, Policy B has a $100,000 limit, and Policy C has a $1,000,000 limit. The total of all limits available to pay claims is $1,150,000. Company A has $50,000/$1,150,000 of the obligation or roughly 4%. Company B has $100,000/$1,150,000 of the obligation or about 9%. Company C has the remaining 87% with $1,000,000/$1,150,000. The insured is judged liable for a total of $500,000. Company A pays $20,000, Company B pays $45,000, and Company C pays the remaining $435,000.

6. Premium Audit

a. The initial premium paid 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 calculation is complete, the estimated premium is subtracted and the first named insured either is billed for the additional amount owed or receives a refund if it had overpaid. The billing statement will state the date the 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 and its territories and possessions, Puerto Rico and Canada.

Example: Southwest Office's Business Auto Coverage Form has symbol 1 for liability and symbol 7 for comprehensive and collision coverages. While staying in a hotel in Phoenix, Sara, a salesperson for Southwest, has her company-owned auto stolen. The theft is covered. The thief drove the vehicle into Mexico where he caused a major collision. One of the parties injured in the accident in Mexico makes a claim against Southwest’s auto coverage; alleging Southwest was negligent in not properly preventing the theft from occurring because the vehicle had no anti-theft devices or alarms. Even if the insured is found liable, the Business Auto Coverage Form does not respond because the accident occurred in Mexico, which is outside the coverage territory. The insurance company denies the liability claim on that basis but pays for the theft of the vehicle.

Worldwide coverage is provided for only private passenger type autos, applies only when the auto is leased, rented, or hired for a period of less than 30 days and the arrangement does not include a driver.

Any coverage grant depends upon the responsibility to pay being determined in the territories listed in the first paragraph of this condition.

Note: The requirement that determination of responsibility to pay must be made in the first paragraph countries applies to accidents wherever they may happen. (10 13 change) Under prior editions, this requirement applied only for accidents taking place outside of the covered territory.

Example: Referring to the previous example, Sara now travels to England on a three-week business trip. Since she doesn’t want to be limited to traveling by bus or train, she rents a car. As she drives through the Lake Country, she comes on a flock of sheep crossing the road. Totally mesmerized, she forgets where the brake pedal is located. She runs into the flock and its shepherd. She provides all of the information required so is allowed to return to the United States. The shepherd decides to sue and forwards the legal papers to Southwest Offices. The insurance company defends and pays the eventual award.

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

Related Article: Excess Mexican Coverage for a Personal Auto Policy – is similar to the CA 01 21 but with commercial based distinctions. These are both very limited and should be supplemented by a Mexican Auto Policy.

8. Two or More Coverage Forms or Policies Issued By Us

Except for coverage forms or policies issued specifically as excess, if this coverage form and any other coverage form or policy issued to the insured by the insurance company or any of its affiliates apply to the same accident, the most paid for the total limit of insurance under all the coverage forms or policies does not exceed the highest applicable limit of insurance under any one coverage form or policy.

Example: Perry Manufacturing has three Business Auto Coverage Forms with A-1 Insurance Company. The first covers the sales fleet. The second covers all delivery vehicles and the third covers only executive vehicles. Policy one's liability limit is $500,000; policy two's is $1,000,000 and policy three's is $750,000. A heavy fog on the highway during the morning rush hour causes a 59-car accident and an auto from each of the three policies is involved. The total amount available to pay losses from any one accident is the highest limit of any of the three policies or $1,000,000, not the cumulative limits of all policies of $2,250,000.

SECTION V–DEFINITIONS

A. Accident

The term accident, when used in this coverage form, includes continuous or repeated exposure to the same condition which results in bodily injury or property damage.

Note: The word accident is never actually defined. Therefore, the definition of accident is that which is found in a commonly used dictionary. That agreed upon definition is then expanded to include continuous and repeated exposure to the same condition causing the injury or damage.

B. Auto

An auto is a land motor vehicle, trailer, or semitrailer that is designed to be used on public roads. While it does not include mobile equipment (review its definitions later in this section) it does include land vehicles that are subject to a state's financial responsibility or vehicle registration laws. The applicable state law is based on the state in which the vehicle is either licensed or most commonly garaged.

C. Bodily injury

The term bodily injury, when used in this coverage form, is expanded to be not only injury to the body but also sickness or disease that a person sustains. Death that results from bodily injury, sickness, or disease is also considered bodily injury.

Note: The term bodily injury is not actually defined but instead is expanded.

D. Covered pollution cost or expense

This short phrase covers all costs or expenses that result from the following:

1. A response to or assessment of the effects of pollutants by the insured or others. It must be done because of a request, demand, order or statutory or regulatory requirements. Examples of such responses and assessments are testing for, monitoring, cleaning up, removal, containing, treating, detoxifying, or neutralizing.

2. A claim or suit that is brought by or for a government entity relating to damages from a response to or assessment of the effects of pollutants. Examples of such responses and assessments are testing for, monitoring, cleaning up, removal, containing, treating, detoxifying, or neutralizing.

This term then reproduces the entire Pollution Exclusion but substitutes the words “cost or expense” for “bodily injury or property damage.” In this way, the covered cost or expense tracks with the type of limited pollution coverage provided.

Refer to the Covered Auto Liability Section II Pollution exclusion for the wording.

E. Diminution in value

This is the loss of market value that is solely due to an accident. This loss of value can be actual or perceived.

F. Employee

The term employee is not actually defined but it is expanded. When the term employee is used in this coverage form it means not just individuals who are employed directly but also includes those workers under a leasing contract. The term employee is not expanded to include temporary workers.

G. Insured

Any party qualifying as an insured under Who Is An Insured meets the definition of insured. Coverage applies to each insured as though that insured is the only insured when a suit is brought against them or a claim is made against them. The only exception to this is that the limit of insurance does not apply per insured.

H. Insured contract

All of the following are considered insured contracts:

1. Leases of premises

2. Sidetrack agreements

3. Easement or license agreements except those that involve construction or demolition operations that are on or within 50 feet of a railroad

4. Obligations that are required by ordinance when the purpose of the contract is to indemnify a municipality. However, this does not pertain to work contracts for the requesting municipality.

5. The portion of a contract or agreement that relates to the named insured’s business, including any municipal indemnification in connection with work being done for the municipality, where the named insured assumes the tort liability of another party. The tort liability must be to pay for bodily injury or property damage to a third party or organization. Tort liability is a liability the named insured would have had without a contract or agreement.

6. The portion of an auto rental or lease contract or agreement the named insured or its employee enters into that relates to the named insured’s business. Any obligation the named insured or its employee has to pay for property damage to the auto is not considered an insured contract.

The following contracts, agreements, or parts of contracts are not considered insured contracts:

a. Indemnification of a railroad for bodily injury or property damage when it arises from construction or demolition operations that are within 50 feet of railroad property and impacts any railroad bridge, trestle, track, road bed, tunnel, underpass or crossing

b. Any loan, lease or rental contract or agreement for the rental, leasing or borrowing of an auto with a driver. This pertains to such contracts made by the named insured or its employees.

c. A hold harmless agreement given to a party that transports property by auto for hire. This applies only when it is provided by the named insured that will use a covered auto on a route or territory for which that party is authorized to serve by public authority.

I. Leased worker

A worker 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 but does not require that it be in writing. Temporary workers are not considered leased workers.

J. Loss

Only direct and accidental loss or damage is considered a loss.

K. Mobile equipment

Mobile equipment is defined the same way in the Business Auto Coverage Form as it is in the Commercial General Liability Form. The goal is to eliminate gaps in coverage as well as to eliminate duplicate coverage by defining it the same way in both forms. This works if an insurance company uses only the latest editions of these ISO forms but when a current edition of the CGL is used with an older edition of the BAP, conflicts may occur. The latest potential coverage gap relates to mobile equipment that is subject to license or registration. Mobile equipment is any of the following types of land vehicles, including any machinery or equipment attached to it:

1. Vehicles designed principally to be used off the public roads. Examples are 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 that is 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

Land vehicles that are subject to a given state's financial responsibility or vehicle registration laws are not mobile equipment. They are considered autos and can be covered using Symbol 19 or as part of Symbol 1.

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

L. Pollutants

A pollutant is any solid, liquid, gaseous, or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste. Waste includes materials to be recycled, reconditioned, or reclaimed.

Note: This definition is consistent in all ISO coverage forms.

M. Property damage

Damage to tangible property is property damage. Loss of use of tangible property is also property damage. There is no requirement that damage to the tangible property must be the reason for the loss of use.

N. Suit

The term suit is not limited to only civil proceedings alleging damages. It also includes any arbitration or alternative resolution proceedings but only if the insurance company consents to these proceedings. All allegations must be due to covered bodily injury, property damage, or covered pollution costs or expenses.

O. Temporary worker

A temporary worker is not a leased worker or an employee. A temporary worker is someone the named insured hires to substitute for a permanent employee or to help out in a short-term situation.

Note: This definition is very important because temporary workers are NOT employees. Therefore, any exclusion(s) that apply to employees do not apply to temporary workers and temporary workers are not considered insureds unless using an automobile with the named insured’s permission.

P. Trailer

The term trailer appears to be very inclusive because it includes semitrailers.