3.5 Business Auto Liability, Physical Damage, Garage Coverage & Garagekeepers

3.5 Business Auto Liability, Physical Damage, Garage Coverage & Garagekeepers

Section 3.4 introduced the personal auto policy and the Business Auto Coverage Form (BACF) covered auto symbols. The Hawaii adjuster outline also lists, for both personal and business auto: who is an insured, types of auto (owned, non-owned, temporary substitute), and the Garage Coverage Form, including garagekeepers. Hawaii-specific requirements — PIP, required limits, and UM/UIM offers — layer on top of these forms (Chapter 8).

Who Is an Insured Under the Business Auto Coverage Form

The BACF liability section makes these persons insureds:

1. You (the named insured) for any covered auto.
2. Anyone else while using with your permission a covered auto you own, hire or borrow, except:
   • the owner (or anyone the owner hires or borrows from) of a covered auto you hire or borrow — the rental company is not your insured;
   • your employee, if the covered auto is owned by that employee or a member of the employee's household;
   • someone using a covered auto while working in a business of selling, servicing, repairing, parking or storing autos, unless that business is yours;
   • anyone other than your employees, partners, members, a lessee or borrower or their employees, while moving property to or from a covered auto;
   • a partner or member for a covered auto owned by that partner or member or a member of their household.
3. Anyone liable for the conduct of an insured described above, but only to the extent of that liability — for example, an employer of a permissive driver.

Applying the Exceptions

A Hilo landscaping company (named insured) rents a pickup from a rental agency for a job, and an employee causes a collision while driving it. The company and the employee are insureds for this hired auto, but the rental agency is not. A different employee drives his own car on a company errand and injures a pedestrian. The company is covered for its vicarious liability if symbol 1 or 9 applies (non-owned autos). The employee is not an insured under the company's policy for his own car, so his personal auto policy is primary for him.

Types of Covered Autos

• Owned autos — autos the named insured owns, shown by symbols 2 through 7 (see 3.4). For liability, the owned-auto symbols also include trailers the named insured does not own while attached to power units it owns.
• Hired autos (symbol 8) — autos the named insured leases, hires, rents or borrows, not including autos borrowed from employees, partners, members or their households.
• Non-owned autos (symbol 9) — autos the named insured does not own, lease, hire, rent or borrow that are used in connection with its business, including employees' and partners' personal autos used for the business.
• Temporary substitute autos — an auto the named insured does not own, used with the owner's permission while a covered auto is out of service because of breakdown, repair, servicing, loss or destruction. It is treated as a covered auto for liability.

Hawaii adjusters see many hired-auto claims because of the large rental fleet serving visitors. Liability on a rental is determined by who is an insured and whose policy is primary: the rental company's policy, the renter's personal auto policy, or the renter's employer's hired auto coverage.

Business Auto Supplementary Payments

In addition to the limit, the BACF pays:

• all expenses the insurer incurs (defense);
• up to $2,000 for the cost of bail bonds (including bonds for related traffic law violations) required because of a covered accident;
• the cost of bonds to release attachments, within the limit;
• reasonable expenses incurred by the insured at the insurer's request, including actual loss of earnings up to $250 a day;
• costs taxed against the insured; and
• interest on a judgment that accrues after entry of the judgment.

Compare the CGL ($250 bail, $250 a day; see 3.3) and the current personal auto policy ($250 bail, $250 a day; see 3.4).

Business Auto Physical Damage

Physical damage coverages mirror the personal auto policy but use commercial labels:

• Comprehensive — loss from any cause except collision or overturn.
• Specified causes of loss — a named-perils alternative: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief or vandalism, and the sinking, burning, collision or derailment of a conveyance transporting the auto.
• Collision — collision with another object or overturn.

The policy also covers towing for private passenger autos (if shown) and pays transportation expenses after the theft of a covered private passenger auto. Glass breakage and damage from hitting a bird or animal are paid under comprehensive, but the insured may choose to have glass breakage from a collision paid under collision.

Garage Exposures: The Garage Coverage Form

A business that sells, services, repairs, parks or stores autos has three exposures at once:

1. Garage operations liability — premises and operations, products and completed operations (for example, a brake job that fails and causes an accident a week later).
2. Auto liability — owned autos, dealer plates, test drives, customer loaners.
3. Damage to customers' autos in the business's care, custody or control — excluded from both the liability section (care, custody or control exclusion) and the auto physical damage section (not the insured's auto).

The ISO Garage Coverage Form (CA 00 05) combines garage operations liability and auto liability in one form, with optional physical damage on the insured's own autos and optional garagekeepers coverage. In 2013, ISO introduced a separate Auto Dealers Coverage Form (CA 00 25) for franchised and nonfranchised auto dealers. Non-dealer garages, such as repair shops, service stations and parking facilities, may be written with a CGL, a business auto policy, and garagekeepers coverage. The Hawaii adjuster outline still lists the Garage Coverage Form and garagekeepers by name.

Garagekeepers Coverage

Garagekeepers coverage insures customers' autos (and their equipment) left in the insured's care while the insured is attending, servicing, repairing, parking or storing them. Covered causes of loss are chosen as comprehensive, specified causes of loss, and collision. It is written on one of three bases:

Garagekeepers commonly excludes the cost of redoing faulty work or replacing defective parts, theft or conversion by the insured or its employees, and certain electronic equipment that is not permanently installed in the customer's auto.

Garage Claim Example

A Kahului repair shop carries garagekeepers on a direct primary basis with comprehensive and collision. A wind-driven tree limb falls on a customer's car parked overnight in the shop's lot, and an employee test-driving another customer's car rear-ends a truck. The tree damage is paid under garagekeepers comprehensive even though the shop was not negligent, because direct primary pays without regard to legal liability. The damage to the customer's car in the test-drive collision is paid under garagekeepers collision. The truck's damage is a third-party claim under the shop's auto liability coverage. Any bodily injury claims from the truck driver follow Hawaii's PIP and tort threshold rules (8.2).