5.3 Commercial Auto & Business Auto Coverage

Commercial Auto & Business Auto Coverage

Commercial auto risks differ significantly from personal auto risks due to broader vehicle types, varied operational uses, non-owned employee vehicle exposures, and specialized customer vehicle custody. Insurance adjusters handling commercial motor vehicle claims must master the Business Auto Coverage Form (BACF), numerical covered auto symbols 1 through 9, Garagekeepers options, and specialized dealer forms.

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Business Auto Coverage Form (BACF) Structure

The ISO Business Auto Coverage Form (BACF) is modular and consists of five core sections:

• Section I — Covered Autos: Defines which vehicles qualify for coverage based on numerical symbols selected on the Declarations page.
• Section II — Liability Coverage: Details third-party bodily injury and property damage insuring agreements, defense duties, supplementary payments, and exclusions.
• Section III — Physical Damage Coverage: Details first-party coverage options for owned commercial autos (Collision, Comprehensive, Specified Causes of Loss).
• Section IV — Business Auto Conditions: Establishes policy duties, subrogation, appraisal rules, loss payment, and geographic territory.
• Section V — Definitions: Defines critical terms such as "auto," "mobile equipment," "pollutants," and "suit."

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Numerical Covered Auto Symbols (Symbols 1 through 9)

The Business Auto Coverage Form uses Covered Auto Symbols (numbered 1 through 9, plus Symbol 19 for Mobile Equipment) in the Declarations to specify exactly which vehicles are insured for each coverage.

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BACF Section I: Covered Autos & Newly Acquired Vehicle Rules

Understanding symbol mechanics is vital for claims adjusters investigating coverage on newly acquired commercial vehicles:

• Symbols 1 through 6: Automatically extend coverage to newly acquired autos of the same type for the remainder of the policy period without requiring immediate notice.
• Symbol 7 (Specifically Described Autos): Extends coverage to a newly acquired vehicle ONLY IF:
  1. The insurer already insures all autos owned by the named insured, or the new auto replaces an auto previously described on the schedule; AND
  2. The named insured notifies the insurer within 30 days of acquiring the vehicle.

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BACF Section II: Liability Coverage Provisions

Under Section II, the insurer pays all sums an insured legally must pay as damages because of bodily injury or property damage caused by an accident resulting from the ownership, maintenance, or use of a covered auto.

Who Is an Insured Under Section II?

1. The Named Insured for any covered auto.
2. Anyone else while using a covered auto owned, hired, or borrowed by the named insured with permission.
3. Anyone liable for the conduct of an insured, to the extent of that liability.

Supplementary Payments Under BACF

Supplementary Payments under the BACF pay outside policy limits and include defense costs, post-judgment interest, up to $2,000 for bail bonds required because of an accident, and up to $250 per day for loss of earnings due to trial attendance at the insurer's request.

Key BACF Exclusions

• Care, Custody, or Control: Property owned by, transported by, or in the care, custody, or control of the insured is excluded under liability.
• Workers' Compensation: Any obligation under Workers' Comp or Disability laws.
• Fellow Employee Injury: BI to any fellow employee of the insured arising out of and in the course of employment.
• Pollution: Discharge of pollutants, EXCEPT for covered pollution cause of loss arising directly from an auto accident.
• Mobile Equipment: Operation of attached machinery/equipment (backhoes, cherry pickers) while at a job site.

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BACF Section III: Physical Damage Coverage

Section III provides physical damage coverage options for commercial vehicles:

1. Collision Coverage: Covers loss caused by covered auto's collision with another object or overturn.
2. Comprehensive Coverage: Open-perils coverage for loss from any cause except collision or overturn (fire, theft, flood, hail, glass breakage, animal strike).
3. Specified Causes of Loss: A restricted, lower-cost named-perils alternative to Comprehensive. It covers loss caused only by:
   • Fire, lightning, or explosion;
   • Theft;
   • Windstorm, hail, or earthquake;
   • Flood;
   • Vandalism or malicious mischief; or
   • Sinking, burning, derailment, or collision of any conveyance transporting the covered auto.

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Garagekeepers Liability Coverage Form

Standard commercial auto liability excludes damage to property in the insured's care, custody, or control. This creates a critical coverage gap for businesses that service, repair, store, or park customer vehicles (auto repair shops, valet services, parking garages).

The Garagekeepers Coverage Form fills this gap by insuring physical damage to customer autos while in the insured's care, custody, or control.

Garagekeepers Coverage Options

Adjusters must verify which of three coverage options is selected in the Declarations:

1. Legal Liability Basis: The policy pays for loss or damage to a customer's vehicle ONLY IF the insured is legally liable (negligent) for the loss.
2. Direct Primary Basis: The policy pays for physical damage to customer vehicles regardless of legal liability or fault (e.g., customer vehicle damaged by hail while parked in repair shop lot). It acts as primary insurance to protect customer goodwill.
3. Direct Excess Basis: The policy pays for physical damage to customer vehicles regardless of fault, but only as excess coverage over any personal physical damage policy owned by the vehicle owner.

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Auto Dealers Coverage Form

The ISO Auto Dealers Coverage Form replaced the former Garage Coverage Form. It is a specialized, multi-line policy tailored specifically for franchised and non-franchised automobile, truck, RV, and motorcycle dealerships.

Combined Protections of the Auto Dealers Form

• Dealer Operations Liability: General liability for premises and business operations.
• Auto Liability: Commercial auto liability for dealer-owned vehicles, test-drive vehicles, and customer loaners.
• Garagekeepers Coverage: Coverage for customer vehicles left for service or repair.
• Dealer's Open Lot Physical Damage: Blanket inventory coverage for dealer vehicles held for sale against collision, theft, fire, and weather perils.