12.2 Commercial Auto Liability and Physical Damage
Key Takeaways
- Covered Autos Liability pays sums the insured is legally obligated to pay for BI or PD caused by an accident arising out of the ownership, maintenance, or USE of a covered auto, including loading and unloading.
- Supplementary payments — defense costs, $2,000 bail bonds, post-judgment interest, and $250/day loss of earnings — are paid IN ADDITION to the liability limit.
- Physical Damage offers three perils: Comprehensive (all causes except collision), Specified Causes of Loss (named perils, cheaper), and Collision; only one of Comprehensive or Specified is chosen.
- Physical damage loss is settled at the LESSER of actual cash value (ACV) or cost to repair/replace, minus the deductible; there is no coinsurance on auto physical damage.
- Liability is most often written as a single Combined Single Limit (CSL); split limits show per-person BI / per-accident BI / per-accident PD.
Covered Autos Liability (Section II)
The insuring agreement pays "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 word use is broad and expressly includes loading and unloading — protection extends beyond driving to the goods coming on and off the vehicle.
The insurer also has the right and duty to defend, and defense costs are paid outside the limit. Liability ends when the limit is exhausted by judgments or settlements.
Combined Single Limit vs. Split Limits
| Limit Structure | How It Reads | Example |
|---|---|---|
| Combined Single Limit (CSL) | One number for all BI and PD per accident | $1,000,000 CSL |
| Split Limits | Per-person BI / per-accident BI / per-accident PD | 250/500/100 ($250k / $500k / $100k) |
Worked example (split limits 100/300/50): An at-fault BAP driver injures three people — $80,000, $120,000, and $60,000 — and damages property worth $70,000. Per-person caps each BI payment at $100,000, so the $120,000 claimant collects only $100,000 and the others collect $80,000 and $60,000 (total BI $240,000, within the $300,000 per-accident cap). PD pays $50,000 of the $70,000, leaving $20,000 of property damage uninsured. A $1,000,000 CSL would have paid all of it.
Supplementary Payments — Above the Limit
These are paid IN ADDITION to the liability limit:
- All defense costs and investigation expense
- Up to $2,000 for bail bonds
- The cost of appeal bonds and bonds to release attachments
- Post-judgment interest on the entire judgment
- Up to $250 per day for the insured's actual loss of earnings to attend a trial at the insurer's request
Trap: Medical payments and physical damage deductibles are separate coverages, not supplementary payments.
Physical Damage (Section III)
Physical damage insures the insured's OWN covered autos. The insured selects perils:
| Peril | What It Covers | Notes |
|---|---|---|
| Comprehensive | All direct loss EXCEPT collision/overturn (fire, theft, glass, flood, hail, vandalism, animal strike) | Broadest non-collision peril |
| Specified Causes of Loss | NAMED perils only: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism | Cheaper named-peril alternative |
| Collision | Impact with another object or overturn | Always carries a deductible |
The insured chooses Comprehensive OR Specified Causes of Loss — never both — plus Collision separately. Hitting an animal is comprehensive, not collision (a classic trap).
How Physical Damage Losses Are Paid
The insurer pays the LESSER of: (1) the actual cash value (ACV) of the damaged property at the time of loss, or (2) the cost to repair or replace it with like kind and quality — then subtracts the deductible. There is no coinsurance on auto physical damage (coinsurance lives in commercial property forms, not auto).
Worked example (ACV vs. repair): A box truck with an ACV of $28,000 is damaged. Repair estimate is $19,500. Comprehensive deductible is $1,000. The insurer pays the lesser amount (repair $19,500) minus $1,000 = $18,500. If repair had been $31,000, the truck is a total loss; the insurer pays ACV $28,000 minus $1,000 = $27,000.
Transportation Expense and Towing
After a covered comprehensive theft loss, the form pays temporary transportation expense (commonly up to $20/day, $600 maximum), beginning 48 hours after the theft is reported. Towing and labor is a separate option for private-passenger types only, paid at the disablement site.
The Use / Loading-and-Unloading Trigger
Because the trigger is "ownership, maintenance, or use" of a covered auto, commercial-auto liability reaches beyond the act of driving. The form's loading and unloading language extends coverage to bodily injury or property damage occurring while goods are moved onto or off the vehicle.
The line where auto coverage stops and general liability begins is a classic exam theme. Under the complete operations view used in the auto forms, coverage runs from the moment goods leave their original resting place until they are deposited at their destination. A worker injured by a load sliding off a flatbed during delivery is within the auto trigger; a slip on the warehouse floor before the goods ever reach the truck is a premises/CGL matter.
Key Liability Exclusions
| Exclusion | Why It Exists |
|---|---|
| Expected or intended injury | Insurance covers accidents, not deliberate harm |
| Workers compensation / employer's liability | Covered under the WC policy, not auto |
| Fellow employee | Co-worker injury claims belong with WC |
| Care, custody, or control | Property of the insured in the insured's charge is not third-party PD |
| Pollution | Heavily restricted; restored only by endorsement (CA 99 48) |
| Racing / speed contests | Not an ordinary business use |
Physical Damage Exclusions and Deductibles
Physical damage excludes wear and tear, freezing, mechanical/electrical breakdown, and road damage to tires (unless coincident with other covered loss). Comprehensive typically carries a smaller deductible (or none for glass) than collision, because collision losses are more frequent and more severe. Each peril's deductible applies per occurrence per auto, so a single hailstorm damaging five owned vehicles triggers five separate comprehensive deductibles.
Trap to remember: hitting an animal (a deer) is comprehensive, but swerving to avoid the deer and striking a guardrail is collision — the cause of loss, not the underlying hazard, controls.
A BAP carries split limits of 100/300/50. An at-fault insured injures one person for $140,000. How much does the policy pay for that injury?
A covered auto with an ACV of $22,000 is damaged; the repair estimate is $14,000 and the collision deductible is $500. How much does physical damage pay?