12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability (Section II)

The insuring agreement states the insurer "will pay all sums an insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto."

The insurer also has the right and duty to defend any insured against a suit, even if groundless. Defense ends once the limit is exhausted by payment of judgments or settlements.

Supplementary Payments (paid in addition to the limit)

• All defense costs and expenses the insurer incurs
• Up to $2,000 for bail bonds
• Cost of appeal bonds and bonds to release attached property
• Up to $250 per day for the insured's loss of earnings while attending hearings or trials
• Post-judgment interest

Because these are outside the limit, a $1,000,000 CSL policy with $80,000 in defense costs still pays the full $1,000,000 toward the judgment.

Limit Formats: CSL vs. Split Limits

Most commercial auto policies use a Combined Single Limit (CSL) — one number, such as $1,000,000, applying to bodily injury and property damage combined per accident. This is simpler and avoids the gaps a split limit can create.

Split limits appear as three numbers, e.g., 100/300/50:

Worked example

A covered truck injures three people — claims of $90,000, $90,000, and $90,000 — under a 100/300/50 policy. The per-person cap is $100,000 (none reached), but the per-accident BI cap is $300,000. Total claims = $270,000, which is under $300,000, so all three are paid in full. If instead each claim were $120,000, each would be capped at $100,000 (the per-person limit) for $300,000 total — exactly the per-accident cap. A $1,000,000 CSL would have paid the full $360,000.

Physical Damage (Section III)

Physical Damage offers three coverages, each requiring a Symbol 7, 8, or 2 and a deductible:

• Comprehensive — all direct loss EXCEPT collision and overturn (fire, theft, vandalism, glass, hail, flood, animal strike).
• Specified Causes of Loss — narrower and cheaper: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief or vandalism, and certain transport perils. Animal strike and falling objects are NOT covered.
• Collision — impact with another object or overturn of the auto.

ACV and Deductible Math

Physical Damage pays the lesser of ACV or cost to repair, minus the deductible. Commercial auto rarely uses coinsurance.

Example: A scheduled box truck with an ACV of $42,000 is totaled. Collision deductible is $1,000. Payment = $42,000 − $1,000 = $41,000. If the same truck suffered $6,500 in repairable hail damage under Comprehensive ($500 deductible), payment = $6,500 − $500 = $6,000, because repair cost is less than ACV.

Towing/labor: The form pays up to a stated amount (often $75) for towing and labor when a covered auto is disabled, but only if Comprehensive or Collision applies to that auto.

Worked Example: CSL vs. Split Limits

A delivery van strikes another vehicle, injuring two people ($60,000 and $90,000) and causing $40,000 in property damage — $190,000 total.

• With a $100,000 combined single limit (CSL): the policy pays a single pool of $100,000 for all bodily injury and property damage combined; the insured owes the remaining $90,000.
• With split limits of 50/100/50 ($50,000 per person / $100,000 per accident BI / $50,000 PD): BI is capped at $50,000 per person ($50,000 + $50,000 = $100,000 at the per-accident cap) and PD pays $40,000, for $140,000.

The CSL is more flexible because it can devote the entire limit to one severe injury. Trap: under split limits, the per-person cap can leave a badly hurt claimant short even when the per-accident limit is not reached.

Physical Damage Coverages on the BAP

Business Auto physical damage mirrors the personal auto structure but uses commercial terminology:

• Comprehensive — all causes of loss except collision and overturn (fire, theft, hail, glass, animal strike).
• Specified Causes of Loss — a narrower, cheaper named-peril alternative: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, and vehicle sinking/derailment. It does not cover, e.g., falling objects or contact with a bird/animal beyond the named list.
• Collision — impact with another object or overturn.

Towing, and the transportation expense (rental reimbursement after a theft) provisions, parallel the PAP. A fleet may schedule physical damage on some autos (e.g., new trucks) and carry liability only on older units — controlled by the covered-auto symbols on the declarations.

Newly Acquired Autos and Coverage Extensions

The Business Auto Coverage Form automatically covers newly acquired autos if the symbol shown includes the new auto's category, but the rules differ by coverage. For liability, broad symbols (1, 2) pick up newly acquired autos automatically. For physical damage, if symbol 7 (scheduled) is used, a newly acquired auto is covered only if the insurer already covers all the insured's autos for that coverage or the insured reports the new auto within 30 days.

The form also provides a transportation expenses coverage (up to $20/day, $600 max) after a covered theft of a private-passenger auto, and loss-of-use/loss-of-income is generally excluded for trucks unless endorsed. Worked example: a fleet operator under symbol 7 buys a new box truck and wrecks it on day 20 without reporting it; whether physical damage applies depends on whether the insurer already insured all owned autos — otherwise the 30-day reporting rule controls. Trap: physical-damage automatic coverage for newly acquired units carries reporting conditions that liability does not.