12.2 Commercial Auto Liability and Physical Damage

The Liability Insuring Agreement

Under Section II - Covered Autos Liability, the insurer pays sums an insured is legally liable 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. The insurer also has the duty to defend, and defense ends once the limit is exhausted by payment of judgments or settlements.

The ownership-maintenance-use trigger is broad. It reaches loading and unloading, and it covers pollution only in narrow circumstances (fuel, lubricants, or fluids needed for the auto, not cargo pollutants).

Combined Single Limit vs. Split Limit

Worked example (split limit 100/300/50): A covered truck injures three people ($90,000, $120,000, $40,000) and damages a storefront ($60,000). Bodily injury is capped at $100,000 per person, so the $120,000 claim is paid only $100,000; the per-accident BI cap of $300,000 is not breached ($90,000 + $100,000 + $40,000 = $230,000). Property damage is capped at $50,000, so $10,000 of the $60,000 storefront loss is uninsured.

Same facts under a $1,000,000 CSL: every dollar of BI and PD shares one pool, so all claims are paid in full ($290,000 total) - illustrating why CSL is generally more favorable.

Supplementary Payments

Paid in addition to the liability limit:

• All defense costs and post-judgment interest
• Bail bonds up to $2,000 per accident
• Actual loss of earnings up to $250 per day to attend trial at the insurer's request
• Reasonable expenses the insured incurs at the insurer's request

Physical Damage Coverages

Section III - Physical Damage offers three options:

Specified Causes of Loss is a cheaper, narrower alternative to comprehensive - it omits glass breakage, falling objects, and animal collisions.

Settlement and Deductibles

Physical damage is settled at the lesser of actual cash value (ACV) or the cost to repair or replace, minus the deductible. There is no coinsurance on auto physical damage.

Worked example: A delivery van has an ACV of $24,000 and a $1,000 collision deductible. After a covered collision the repair estimate is $9,500. The insurer pays $9,500 - $1,000 = $8,500. If repair exceeded $24,000 the van is a total loss and the insurer pays $24,000 - $1,000 = $23,000.

Exam Traps

• A collision with a deer is paid under comprehensive, not collision - it is other than collision.
• Glass breakage may be paid under comprehensive without a deductible if the insured elects no-deductible glass.
• Towing and labor coverage applies only at the place of disablement and is limited (often $25-$75 per disablement).

The Liability Exclusions

Section II excludes several exposures the exam tests:

Trap: the care, custody, or control exclusion is why a hauler's liability form will not pay for damaged cargo - that needs motor truck cargo insurance, and a garage's customer cars need garagekeepers.

Stated Amount and Total-Loss Settlement

Most auto physical damage settles at ACV (replacement cost less depreciation). Some commercial vehicles are insured on a stated amount basis, where the insurer pays the lesser of the stated amount, ACV, or cost to repair - the stated amount is a ceiling, not a guaranteed payout.

Worked example: A box truck is insured on a $30,000 stated amount but its ACV at the time of a total loss is only $26,000. The insurer pays $26,000 (the ACV), not the stated amount, less any deductible. Stated amount prevents over-insurance; it does not turn ACV settlement into agreed value.

Two or More Coverage Forms Condition

When two auto policies issued by the same insurer apply to one loss, the two-or-more-coverage-forms condition prevents the insured from collecting twice - the insurer pays no more than the highest applicable limit, not the sum of both.

Other-Than-Collision vs. Collision - The Classic Distinction

Exam writers love forcing a candidate to classify a loss. Collision means impact with another object or overturn. Everything else - even some impacts - is comprehensive (other than collision).

The practical reason matters: many fleets carry a lower comprehensive deductible than collision, so misclassifying an animal strike as collision costs the insured money. A loss caused while avoiding an animal that ends in an overturn is collision, but striking the animal is comprehensive - a frequently tested nuance.