17.2 Selecting Business Auto Coverage

Selecting Business Auto Coverage

Quick Answer: Commercial vehicle exposures are insured mainly under the ISO business auto coverage form. Coverage is tailored with covered auto designation symbols: 1 (any auto) through 9 (nonowned autos), plus 19 for certain mobile equipment. Liability coverage pays for bodily injury and property damage from covered autos, with defense costs in addition to limits. Physical damage coverage is written as comprehensive, specified causes of loss, or collision. Trucking operations need specialized forms and federal filings.

Why Business Auto Deserves Its Own Analysis

Commercial general liability policies exclude autos. Business auto losses are frequent, and severe verdicts in auto cases have pushed up commercial auto loss costs. Common gaps arise from hired and nonowned autos, such as employees driving their own cars on errands or rented vehicles.

Covered Auto Designation Symbols

Symbols are shown next to each coverage in the declarations. For example, liability might show symbol 1, while collision shows symbol 7 so that only scheduled vehicles are covered.

Newly acquired autos: With symbols 1–6 or 19, newly acquired autos of the type described are covered automatically. With symbol 7, coverage applies only if the insurer already covers all autos the insured owns (or the coverage is for a replacement auto) and the insured asks for coverage within 30 days of acquisition.

Who Is an Insured (Liability)

• The named insured for any covered auto
• Anyone using a covered auto the named insured owns, hires, or borrows, with permission. Exceptions include the owner of a hired or borrowed auto, employees using their own autos, and people in the auto business using the covered auto
• Anyone liable for the conduct of an insured, to the extent of that liability

Liability Coverage

The insurer pays sums the insured is legally obligated to pay because of bodily injury or property damage caused by an accident resulting from the ownership, maintenance, or use of a covered auto. It also pays covered pollution cost or expense arising from the auto's operations, such as fuel spilled in a crash, subject to exclusions. The insurer has the right and duty to defend, and defense costs are paid in addition to the limit. Supplementary payments include bail bonds, first aid, and reasonable expenses at the insurer's request.

Key Liability Exclusions

• Expected or intended injury
• Contractual liability, except liability assumed in an "insured contract" or liability that would exist without the contract
• Workers compensation and employee injury, which is covered by the workers compensation and employers liability policy
• Care, custody, or control: property owned by, transported by, or in the insured's care
• Handling of property before it is moved from where accepted or after it is moved to where delivered
• Operations of mobile equipment (covered under general liability)
• Pollution, except covered pollution cost or expense and certain fuel exceptions
• War and racing

Physical Damage Coverage

The form also includes towing and labor for private passenger autos (if shown), transportation expenses after theft, and loss of use expenses for rented autos, subject to daily and aggregate limits in the form.

Hired and Nonowned Autos

• Hired autos (symbol 8): Autos the insured leases, hires, rents, or borrows, other than autos owned by employees or partners.
• Nonowned autos (symbol 9): Autos the insured does not own, lease, hire, rent, or borrow that are used in the insured's business. This includes employees' personal cars used on business errands.

A business with no owned vehicles still faces vicarious liability when employees drive their own cars for work. Hired and nonowned auto liability is often added to the general liability policy or business owners policy for exactly this reason.

Trucking and Motor Carriers

For-hire trucking operations typically use the motor carrier coverage form, which addresses trailer interchange and other trucking exposures. Interstate motor carriers regulated by federal law must show financial responsibility. Many do so with the MCS-90 endorsement, which guarantees payment to the public up to the required amount even if the policy would not otherwise cover the loss. The insured must then reimburse the insurer. Motor truck cargo coverage for goods hauled is an inland marine coverage.

Worked Scenario: A Plumbing Contractor

A contractor owns eight service vans. Employees sometimes use their own trucks to fetch parts, and the company rents vans during peak season.

• Liability: symbol 1 (any auto), which covers owned vans, rented vans, and employees' vehicles used on company business
• Physical damage: comprehensive and collision on symbol 7 (the eight scheduled vans). Hired auto physical damage is added for rentals
• Employee injuries while driving go to workers compensation, not the auto policy
• Tools in vans are covered by an inland marine contractors' equipment or tools floater, not business auto