12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability (Section II)

Under Section II, the insurer pays all sums an insured legally must pay as damages for bodily injury (BI) or property damage (PD) caused by an accident arising from the ownership, maintenance, or use of a covered auto. The insurer also has the duty to defend, and — importantly — defense costs are paid in addition to the limit of insurance, so a large legal bill does not erode the policy limit available to pay the claimant.

Most commercial auto liability is written with a Combined Single Limit (CSL) — one number (e.g., $1,000,000) covering BI and PD per accident, regardless of the number of vehicles, claimants, or injuries. CSL avoids the rigid per-person and per-accident splits of personal lines and gives the insured maximum flexibility to allocate the limit across mixed BI and PD damages.

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 (permissive user).
• Exception: the owner of a hired or borrowed auto is not an insured (the rental company doesn't get your coverage), nor is an employee using their own car unless Symbol 9 (or the Employees as Insureds endorsement) is in force.
• The Fellow Employee Exclusion bars one employee from collecting under the policy for injury to a co-worker, pushing that loss to workers compensation.

Coverage Extensions and Supplementary Payments

Paid in addition to the liability limit:

• Up to $2,000 for bail bonds.
• All defense costs and court costs taxed against the insured.
• Pre-judgment and post-judgment interest.
• Up to $250 per day for the insured's loss of earnings while attending hearings or trials at the insurer's request.

The BAP also extends out-of-state coverage: if a covered auto travels to a state with a higher compulsory limit than the policy shows, coverage is automatically raised to meet that state's minimum financial-responsibility requirement.

Split-Limit Worked Example

If a policy uses split limits of 25/50/25 ($25,000 per person / $50,000 per accident BI / $25,000 PD): two injured claimants seek $30,000 and $40,000. The per-person cap pays $25,000 + $25,000 = $50,000, exactly at the $50,000 per-accident BI cap — the higher individual claim is trimmed to the per-person figure. A CSL of $100,000 would instead pay the full $70,000 BI plus any PD up to the single $100,000 pool, illustrating why CSL is far more flexible for commercial risks.

Physical Damage (Section III)

Physical Damage is first-party coverage that pays for direct and accidental loss to the insured's own covered auto, regardless of fault. Each coverage carries a deductible that the insured self-insures on every claim.

Key rule: hitting an animal is comprehensive (a darting deer is not a "collision" with an object). Glass breakage and theft are also comprehensive. Loss is settled at Actual Cash Value (ACV) or cost to repair or replace, whichever is less, minus the deductible. ACV equals replacement cost minus depreciation.

ACV Worked Example

A covered truck has a replacement cost of $40,000 and has depreciated 45%. ACV = $40,000 × (1 − 0.45) = $22,000. With a $1,000 collision deductible, the insurer pays $21,000 — never the full replacement cost, because physical damage is an indemnity (not replacement-cost) coverage unless an endorsement says otherwise. Separately, Transportation Expense coverage adds up to $20 per day / $600 maximum for a stolen private passenger auto, beginning 48 hours after the theft is reported and ending when the auto is returned or the loss is paid.

Commercial Auto Liability

Business Auto liability pays sums the insured becomes legally obligated to pay for bodily injury or property damage caused by an accident and resulting from the ownership, maintenance, or use of a covered auto, plus a duty to defend. Like the PAP, defense and supplementary payments are provided outside the limit. Insureds include the named insured for any covered auto, anyone using an owned/hired/borrowed covered auto with permission, and persons or organizations vicariously liable - though employees using their own cars are insureds only if Symbol 9 (non-owned) is in force.

A single combined limit per accident is typical, unlike the personal split-limit format.

Physical Damage: Comprehensive, Collision, and Specified Causes

Commercial auto physical damage mirrors the personal Part D. Collision pays for impact with another object or overturn; Comprehensive (other than collision) pays for nearly everything else - theft, fire, hail, vandalism, animal strikes, glass breakage, falling objects; and a cheaper Specified Causes of Loss option covers only a named list (fire, lightning, explosion, theft, windstorm, hail, flood, mischief, and vehicle collision with the insured auto while it is being transported) without the open-perils breadth of comprehensive.

Each is subject to a deductible and applies only to the symbols selected for physical damage (usually 7 and/or 8).

Towing, Loss-Settlement, and a Worked Example

The Business Auto form settles physical-damage losses at ACV or cost of repair, whichever is less, minus the deductible, and offers an optional towing and labor coverage. Worked example: a covered truck with an ACV of $40,000 is destroyed in a covered collision; the policy carries a $1,000 collision deductible. The insurer pays $40,000 - $1,000 = $39,000. If the same truck were only damaged with a $12,000 repair estimate, the insurer pays $12,000 - $1,000 = $11,000. Comprehensive losses such as theft use the comprehensive deductible, which is often lower than the collision deductible.