12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability Coverage

Section II of the BAP promises to pay all sums an insured must legally 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. Unlike the Personal Auto Policy, which uses split limits, commercial auto liability is almost always written as a single Combined Single Limit (CSL) — one dollar figure per accident that responds to all bodily injury and property damage combined. A $1,000,000 CSL can pay $1,000,000 of bodily injury, or $600,000 BI plus $400,000 PD, or any mix, up to the single number per accident.

The insurer also has the right and duty to defend any covered suit, and that defense is provided even when the allegations are groundless, false, or fraudulent. The duty to defend ends only when the limit of insurance is exhausted by payment of judgments or settlements.

Supplementary Payments — Paid Above the Limit

A frequently tested point: supplementary payments are paid in addition to the limit of insurance, so they do not erode the CSL. The package includes:

• All defense costs the insurer incurs (attorney fees, investigation).
• Up to $2,000 for the cost of bail bonds, including bonds for traffic-law violations arising out of a covered accident.
• Premiums on appeal bonds and bonds to release attached property (the insurer need not furnish the bond, only pay the premium).
• All post-judgment interest on the entire judgment.
• Up to $250 per day for the insured's actual loss of earnings while attending hearings or trial at the insurer's request.

Worked CSL Example

A covered truck causes an accident: a passenger suffers $700,000 in bodily injury and a building sustains $500,000 in damage. The policy CSL is $1,000,000. The insurer pays the $1,000,000 limit toward the $1,200,000 of combined damages; the insured is personally responsible for the remaining $200,000. Defense costs and post-judgment interest are paid on top of the $1,000,000.

Physical Damage Coverage

Section III covers damage to the covered auto itself. There are three coverage choices:

You select either Comprehensive or Specified Causes of Loss (never both), and you may add Collision. Each coverage carries its own deductible per vehicle, per loss.

How Losses Are Paid — ACV Less Deductible

Physical damage is paid at the lesser of the Actual Cash Value (ACV) of the damaged property or the cost to repair or replace it, minus the deductible. ACV equals replacement cost minus depreciation.

Worked ACV Example

A covered van with an ACV of $24,000 is in a collision. The repair estimate is $9,500 and the collision deductible is $1,000. Because the repair cost ($9,500) is less than ACV ($24,000), the insurer pays repair cost minus deductible: $9,500 − $1,000 = $8,500. If instead the van were a total loss, the insurer would pay $24,000 − $1,000 = $23,000 (ACV less deductible).

Comprehensive Extras

Comprehensive coverage automatically adds two benefits worth memorizing.

Glass breakage is covered under comprehensive (you can elect to repair rather than replace to avoid the deductible). Transportation Expenses pay up to $30 per day to a maximum of $900 for temporary substitute transportation when a covered auto is stolen — but only beginning 48 hours after the theft is reported, and ending when the auto is returned or the loss is paid.

There is also a special rule that hitting a bird or animal, and damage from a falling object, is treated as comprehensive rather than collision — important because the comprehensive deductible may differ from the collision deductible.

Commercial Auto Liability Coverage

The BACF liability insuring agreement pays sums the insured is legally obligated to pay as damages for bodily injury or property damage caused by an accident and resulting from ownership, maintenance, or use of a covered auto. Like the CGL, it includes a broad duty to defend with defense costs outside the limit, and supplementary payments (bail bonds up to $2,000 on the commercial form, loss of earnings, etc.). "Who is an insured" includes the named insured, anyone using a covered auto with permission, and anyone vicariously liable — but not employees using their own vehicles unless non-owned coverage applies.

Physical Damage and Coverage Extensions

Commercial physical damage mirrors the personal auto split: Comprehensive (other-than-collision), Specified Causes of Loss (a named-peril, cheaper alternative — fire, theft, windstorm, flood, vandalism, etc.), and Collision. Each carries its own deductible, and the insurer pays the lesser of ACV or repair cost.

The form grants useful extensions: Transportation Expenses ($20/day, $600 max) after a covered theft, and Loss of Use Expenses for a hired/borrowed auto the insured must pay rental on. A frequently tested distinction is Specified Causes of Loss versus Comprehensive: Specified is a named-peril list (no coverage for, say, hitting a low bridge), while Comprehensive is open-peril except collision. Choosing Specified Causes of Loss lowers premium by accepting a narrower set of covered perils.