12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability Coverage

Section II of the Business Auto Coverage Form is Covered Autos Liability Coverage. The insurer pays sums the insured legally must pay as damages for bodily injury or property damage caused by an accident and resulting from ownership, maintenance, or use of a covered auto. It also covers covered pollution cost or expense in limited circumstances. The insuring agreement includes a duty to defend - defense costs are paid in addition to the limit of insurance, so they do not erode the limit.

Commercial auto liability is almost always written with a single combined limit (CSL) - one dollar amount applying per accident to all bodily injury and property damage combined. This differs from personal auto, which commonly uses split limits. A $1,000,000 CSL means the most the insurer pays for any one accident is $1,000,000, regardless of how the loss splits between injuries and property.

Contrast this with personal auto split limits such as 100/300/50, where bodily injury is capped per person ($100,000) and per accident ($300,000) and property damage has its own cap ($50,000). On a commercial CSL there is no per-person sublimit - a single severe-injury claimant could exhaust the entire combined limit. The exam may ask you to recognize that a CSL is generally more favorable to a claimant than split limits because it pools the dollars.

Who is an insured and supplementary payments

The Who Is An Insured provision is broad. It includes the named insured for any covered auto, anyone using a covered auto the named insured owns, hires, or borrows (with permission), and anyone liable for the conduct of an insured but only to the extent of that liability. Key exclusions from 'insured' status: the owner of a hired or borrowed auto (other than the named insured), employees using their own autos, and someone using a covered auto in the auto business (selling, servicing, parking) unless that is the named insured's business.

Supplementary payments (paid in addition to the limit) include all defense costs, up to $2,000 for bail bonds, the cost of bonds to release attachments, reasonable expenses incurred by the insured at the insurer's request including up to $250 per day for lost earnings, and post-judgment interest.

Exclusions in Section II mirror other liability forms but with auto-specific items. The form excludes expected or intended injury, contractual liability beyond an insured contract, workers compensation and employee injury (the employer's WC and EL policies respond instead), fellow-employee claims, care, custody, or control of property, handling of property before/after it is on the auto, pollution (with narrow exceptions), racing, and completed operations other than for covered-auto operation. Knowing that employee injuries route to workers comp - not auto liability - is a frequent distractor.

Physical Damage Coverage and a worked ACV loss

Section III provides Physical Damage: Comprehensive (all causes except collision/overturn), Specified Causes of Loss (a named-peril alternative - fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism), and Collision. Comprehensive and collision are each subject to a deductible per the declarations.

Valuation is Actual Cash Value (ACV), the cost to repair/replace, or - if a limit is shown - that limit, whichever is least. ACV = replacement cost minus depreciation.

Worked example: A scheduled box truck with ACV of $42,000 is totaled in a covered collision. The collision deductible is $1,000.

The form also adds up to $3,000 for towing of a private passenger auto and provides transportation expense (typically $20/day up to $600) after a covered theft of a covered private passenger auto, after a 48-hour waiting period.

Hired/Non-Owned Pairing and the Trailer Interchange Trap

Two structural points complete the commercial-auto liability picture. First, a business that owns vehicles still has exposure from hired autos (Symbol 8) and employees' personal autos used on company business (Symbol 9 non-owned); both must be selected by symbol or the exposure is uninsured — a near-universal exam scenario where an employee crashes a personal car on a delivery.

Second, the BACF's "Who Is an Insured" extends to anyone using a covered auto with permission, except the owner of a hired/borrowed auto, an employee using their own vehicle, and someone in the auto business (covered instead by a Garage/Auto Dealers form).

Physical damage on the BACF settles at the lesser of ACV or repair cost minus the deductible, with comprehensive (OTC) and collision written separately and specified causes of loss (fire, theft, windstorm, flood, etc.) as a narrower, cheaper alternative to comprehensive. Trailer interchange coverage handles a trucker's liability for damage to non-owned trailers in their possession under interchange agreements.

Specified-Causes-of-Loss vs. Comprehensive and the Towing Recap

On physical damage, the exam distinguishes comprehensive (OTC) — open-peril coverage for everything except collision and overturn — from the narrower specified causes of loss (fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism, and vehicle sinking/collapse of a bridge), which is cheaper because it omits, for example, falling-object and animal-strike losses. Collision covers upset and impact regardless of fault. Towing is available for private-passenger types.

A frequent trap: a deer-strike or flood loss is comprehensive, not collision, so it is uninsured if the insured carries collision only — exactly the distinction the exam probes with a single-vehicle loss scenario.