12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability

Covered Autos Liability pays sums an insured becomes legally obligated to pay as damages for bodily injury (BI) or property damage (PD) caused by an accident and resulting from the ownership, maintenance, or use of a covered auto. It includes loading and unloading. The insurer also has the right and duty to defend the insured.

Limit Structures

Commercial auto liability is most often written as a Combined Single Limit (CSL) — one dollar amount for BI and PD combined per accident. The alternative is a split limit such as 100/300/50:

Exam trap: under split limits, no single injured person can collect more than the per-person figure even if the per-accident limit is unexhausted. A CSL has no per-person cap, so it is more flexible.

Supplementary Payments

These are paid in addition to the liability limit and do not erode it:

• All defense costs and attorney fees.
• Up to $2,000 for bail bonds.
• Up to $250 per day for the insured's actual loss of earnings to attend trial at the insurer's request.
• Post-judgment interest and the cost of appeal bonds.
• Reasonable expenses the insured incurs at the insurer's request.

Worked Example: CSL vs. Split Limit

An accident injures two people ($150,000 and $80,000) and damages a fence ($20,000).

• Under a $300,000 CSL: the insurer pays the full $250,000 BI + $20,000 PD = $270,000, all within one limit.
• Under 100/300/50: the first person is capped at $100,000 (not $150,000), the second collects $80,000, and PD pays $20,000. The insured pays the $50,000 excess on the first claimant out of pocket.

This illustrates why the CSL is favored on commercial risks.

Physical Damage Coverages

Physical damage insures the insured's own covered autos. Three options exist:

Exam trap: an insured cannot buy both Comprehensive and Specified Causes of Loss on the same auto — Specified Causes is the cheaper, narrower substitute. Hitting an animal is Comprehensive, not Collision.

Loss Settlement

Physical damage pays the lesser of the Actual Cash Value (ACV) or the cost to repair/replace, minus the deductible. There is no coinsurance on auto physical damage.

Worked example: A truck with an ACV of $30,000 is totaled; the Collision deductible is $1,000. Payment = $30,000 - $1,000 = $29,000. If a windshield (glass) is broken, that is a Comprehensive loss, often with full-glass coverage and no deductible if endorsed.

Liability Exclusions to Know

The Covered Autos Liability section carries exclusions that the exam tests repeatedly:

• Expected or intended injury — intentional acts are not accidents.
• Workers compensation / employer's liability — bodily injury to an employee in the course of employment (the WC policy responds).
• Care, custody, or control — damage to property the insured owns, rents, or transports (cargo needs separate inland-marine motor-truck cargo coverage).
• Pollution — most pollution liability is excluded unless the CA 99 48 endorsement is added.
• Racing or speed contests.

Exam trap: the completed-operations and products exposures of an auto-related business are NOT in the auto form's liability — they sit in the garage or general liability part.

Medical Payments and UM/UIM

Beyond third-party liability, the form can activate first-party coverages when a limit is entered:

Med-pay is a small, no-fault first-party benefit and is separate from the liability limit and from supplementary payments.

Total Loss, Salvage, and Betterment

When repair cost approaches or exceeds ACV, the auto is a total loss (constructive total loss). The insurer pays ACV, takes salvage title, and the deductible still applies. Betterment can reduce a payment when a worn part is replaced with new, though most commercial settlements pay full repair without betterment for crash parts.

ACV equals replacement cost minus depreciation; for a 5-year-old delivery van costing $40,000 new, depreciated 60%, ACV is about $16,000. Exam trap: physical damage never uses coinsurance — that is a property-form concept; auto pays the lesser of ACV or repair cost minus deductible.

Collision vs. Other-Than-Collision

Commercial auto physical damage, like the PAP, splits into two perils:

A deer strike is other-than-collision (a frequent trap — it is not collision even though there is impact), and the Specified Causes of Loss option is a named-peril alternative to full comprehensive that fleets choose to cut premium.

Worked Total-Loss Settlement

A delivery van with ACV $16,000 is hit and the repair estimate is $18,000 against a $1,000 collision deductible. Because repair cost exceeds ACV, the insurer declares a total loss and pays ACV minus deductible = $15,000, takes the salvage, and the insured keeps the salvage only if it buys it back. Now suppose the repair were $9,000 instead: the insurer pays $9,000 − $1,000 = $8,000 to repair. The insurer always pays the lesser of repair cost or ACV, minus the deductible — never both, and never with a coinsurance penalty.

Symbols Drive Physical Damage Too

Physical damage on the Business Auto form attaches by covered-auto symbol (commonly Symbol 7 for owned autos, or 8 for hired and 9 for non-owned on the liability side). Physical damage cannot apply to autos the insured does not own unless the hired-auto physical damage option is added — a point that catches candidates who assume comprehensive automatically follows rented vehicles.