Classifying Risk-Parking Lots

CLASSIFYING RISK–PARKING LOTS

(April 2019)

 

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INTRODUCTION

A young woman left a department store in a suburban shopping center on a beautiful spring morning. She could almost see her childhood home as she walked through the parking lot. Her body was discovered in the trunk of a car in a different suburban parking lot a few days after her family reported her missing.

A father took his young son shopping with him. The boy pulled away from his father's grasp as they walked across the parking lot and ran right into the path of an oncoming car! Fortunately, he survived the impact with the car and completely recovered from his injuries.

A mother was upset after being treated badly in a store and took out her frustration on her young daughter when she reached her parked car. The parking lot's security cameras recorded the beating incident and the local news media coverage of the event was quickly broadcast across the country.

Each of these events had something in common. Each occurred in a private parking lot.

There are many liability exposures in parking lots. The parking lot owners are responsible for the safety of their customers so when bodily injury or property damage occurs on premises, they must have adequate liability coverage to protect them.

RISKS THAT MUST PAY ADDITIONAL PREMIUM FOR THEIR PARKING LOTS

In most cases, a premium charge is made to cover a loss exposure but there are exceptions. Insurance Services Office (ISO) General Liability Rule 26. B.1 (i)explains that parking lots which are operated in conjunction with the insured's business are not subject to a separate premium charge. There are two exceptions:

 

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Examples:

  • Stonehuge Office Tower is rated on a square foot area basis. Its parking lot is available to its clients and customers without a charge. This parking lot is not subject to an additional premium charge.
  • Kapitol Business Complex is rated on a square foot area basis. It charges its tenants a monthly fee to park in its lot next to the complex. The insurance company that writes Kapitol's commercial general liability coverage makes an additional premium charge for this parking lot.
  • Les Paul is a French restaurant and is rated on a gross receipts basis. It has a large parking lot used by its numerous loyal customers. To maximize both its snob appeal and its income, Les Paul charges its customers for the privilege of parking in the lot. No additional premium charge is made because the parking receipts are added to the restaurant receipts and rated using the restaurant code and classification.
  • Main Street Shopping Center is rated using class code 67635. There is a large parking lot that, according the 67635 notes must be separately rated.

CLASSIFICATIONS USED TO DEVELOP PARKING LOT PREMIUMS

Three classifications are used when a classification states that parking exposures are to be rated separately or when the parking operation is the only business.

This classification is rated based on square foot area. It applies to off-street parking facilities used by only the business' clients and customers and is not available to the general public. Parking fees may or may not be charged, parking attendants may or may not be provided, and gates may be used to restrict access. Because the parking lot may be next to the business premises or some distance away, this classification does not have any requirements with respect to proximity of the lot to the business premises.

This classification is rated based on gross sales and applies to parking lots available to the general public. Parking fees are usually charged. A separate charge is applied for services provided to customers other than parking. Examples of such services are car washing or detailing, oil changes, and other automotive maintenance activities.

This classification is the same as Class Code 46604 except that parking is inside a building and Class Code 46604 is not.

EXCEPTIONS

ISO General Liability Rule 26 explains that classification notes that require a separate charge for parking overrule and replace other general comments in the rules. That means that although ISO General Liability Rule 26. B.1(i) states that the premium for the parking lot is included, a premium charge can be made for a parking lot when a specific classification's notes state that a separate charge is required.

Class Code 67635: Shopping Centers–Buildings or Premises Not Occupied by the Insured (Lessor's Risk Only) has a note that states that parking areas must be separately classified and rated.

The proper classification is then determined based on whether the shopping center owner or the tenant is responsible for the parking area.

Class Code 46607: Parking–Public–Shopping Centers–Maintained by the Insured (Lessor's Risk Only) is used if the shopping center's owner is responsible for the parking area.

Class Code 46606: Parking–Public–Shopping Centers–Maintained by Lessee (Lessor's Risk Only) is used if a shopping center’s tenant is responsible for the parking area.

The notes for shopping center class codes state that the rating is based on the total parking area, including access roads but excluding areas restricted to pickup and delivery vehicles. This distinction is logical and makes sense because accidents can and do occur in virtually every part of a parking lot that both pedestrians and vehicles can access.

SUMMARY

Parking lots are convenient but potentially dangerous. When large numbers of pedestrians and motor vehicles occupy the same space, the injuries that result can be serious. In order to minimize problems, the parking lot's owner must at least consider implementing effective loss prevention measures and techniques, such as security cameras, adequate nighttime illumination, proactive traffic control, appropriate lane markings, and security guard service as needed.