12.2 Commercial Auto Liability and Physical Damage

Section II — Covered Autos Liability

The liability insuring agreement promises to pay sums the insured legally must pay as damages because of bodily injury or property damage caused by an accident and resulting from ownership, maintenance, or use of a covered auto. Like CGL, defense costs are paid in addition to the limit of insurance — defense is outside the limit until the limit is exhausted by payment of judgments or settlements.

Who Is an Insured

• The named insured for any covered auto.
• Anyone using a covered auto the named insured owns, hires, or borrows, with permission (the omnibus clause).
• Anyone liable for the conduct of an insured, but only to the extent of that liability.

Exclusions to memorize: employee injury (covered by workers comp), care/custody/control of property, pollution from transported cargo (the pollution exclusion has carve-backs for fuel-system discharge), and expected/intended injury.

Combined Single Limit vs. Split Limits

Commercial auto liability is usually written on a Combined Single Limit (CSL) — a single dollar amount available for any combination of BI and PD per accident. Personal lines and some commercial accounts use split limits shown as 100/300/50 (per-person BI / per-accident BI / per-accident PD).

Worked example — split limits. A truck driver causes an accident injuring three people ($90,000, $120,000, and $40,000 in BI) and $60,000 in property damage. With 100/300/50 limits:

• Person 1: $90,000 (under the $100k per-person cap) → pay $90,000
• Person 2: $120,000, capped at $100,000 per person → pay $100,000
• Person 3: $40,000 → pay $40,000
• BI subtotal = $230,000, under the $300,000 per-accident cap → all paid
• Property damage $60,000, capped at $50,000 → pay $50,000
• Insurer pays $280,000; the insured owes $20,000 (excess BI on Person 2) + $10,000 (excess PD) = $30,000 out of pocket.

With a $300,000 CSL, the same accident ($230,000 BI + $60,000 PD = $290,000) is fully covered because the single pool absorbs any mix.

Section III — Physical Damage Coverage

Three coverages activate by symbol on the Declarations:

The loss settlement basis is actual cash value (ACV) or cost to repair, whichever is less, minus the deductible. There is no coinsurance on auto physical damage.

Worked example — ACV. A box truck with a replacement cost of $80,000 and 40% depreciation is totaled. ACV = $80,000 × (1 − 0.40) = $48,000. With a $1,000 collision deductible, the insurer pays $48,000 − $1,000 = $47,000. A glass-only loss of $900 under Comprehensive with a $250 deductible pays $650.

Covered Autos Liability Coverage

Section II of the Business Auto form pays all sums the insured legally must pay as damages because of bodily injury or property damage caused by an accident and resulting from the ownership, maintenance, or use of a covered auto, and it includes the duty to defend with defense costs outside the limit. It also covers pollution from fuel or fluids that are part of the auto's operation in limited circumstances, and certain covered-pollution-cost exposures. The single combined-single-limit structure is the norm for commercial auto, simplifying claims compared with personal auto split limits.

Who Is an Insured for Commercial Auto Liability

The named insured is covered for any covered auto; anyone else is an insured while using, with permission, a covered auto the named insured owns, hires, or borrows (with exceptions, such as the owner of a hired or borrowed auto, employees using their own or family-owned autos, and someone in the auto business). Anyone vicariously liable for a covered person's use of a covered auto is also an insured. The permission requirement and the exclusion of the owner of a borrowed auto are recurring exam points, because they determine whether a particular driver is protected.

Combined Single Limit vs. Split Limits

Commercial auto liability is almost always written with a combined single limit (CSL), a single amount per accident covering both bodily injury and property damage, rather than the 25/50/25-style split limits common in personal auto. A 1,000,000-dollar CSL pays up to 1,000,000 dollars total for all bodily injury and property damage in one accident, giving the insured maximum flexibility because there is no separate per-person sublimit. The exam contrasts CSL with split limits and tests how each caps a multi-claimant accident.

Physical Damage Coverage

Section III physical damage mirrors personal auto Part D: Comprehensive (other than collision), Specified Causes of Loss (a narrower named-peril alternative covering fire, theft, windstorm, hail, flood, vandalism, and similar perils but not collision), and Collision. Coverage is provided only for autos shown with a physical-damage symbol, since you cannot insure damage to vehicles you do not own. The form pays the lesser of actual cash value or cost to repair, less the deductible, and offers towing, rental reimbursement, and other extensions.

A scenario distinguishing Specified Causes of Loss from full Comprehensive is testing that Specified Causes is the cheaper, named-peril option that excludes, for example, falling-object and animal-strike losses outside its list.