12.2 Commercial Auto Liability and Physical Damage
Key Takeaways
- Covered Autos Liability pays sums the insured legally must pay for bodily injury or property damage caused by an accident and resulting from ownership, maintenance, or use of a covered auto, plus the insurer's duty to defend.
- Supplementary payments — defense costs, bail bonds up to $2,000, and loss of earnings up to $250 per day — are paid IN ADDITION to the liability limit, usually a single combined-single-limit (CSL).
- Physical Damage offers Comprehensive, Collision, and Specified Causes of Loss; each owned auto can carry its own deductible, and coverage is settled at actual cash value (ACV) or cost to repair, whichever is less.
- Comprehensive covers everything except collision and overturn; Specified Causes of Loss is a narrower named-peril alternative (fire, theft, windstorm, flood, vandalism, etc.) with a lower premium.
- Towing, fire-department service charges, and a transportation-expense (rental) sublimit are built-in physical-damage extras subject to small daily and aggregate caps.
Covered Autos Liability
Covered Autos Liability (Section II of CA 00 01) pays all sums an insured legally must pay as damages because of 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 any suit seeking those damages, even if groundless.
Most commercial auto liability is written with a combined single limit (CSL) — one dollar amount, for example $1,000,000, that applies to BI and PD combined per accident. This contrasts with split limits (covered later). Pollution caused by covered autos is limited, and the form excludes expected/intended injury, workers-compensation obligations, and damage to property in the insured's care, custody, or control.
Where a state requires split limits, the policy shows three numbers, for example 100/300/50 — meaning $100,000 per person for BI, $300,000 per accident for BI, and $50,000 per accident for PD. Under split limits a single severely injured claimant collects no more than the $100,000 per-person cap even though $300,000 is available per accident. A combined single limit avoids this by treating all BI and PD as one pool, which is why most commercial risks prefer a CSL.
Supplementary Payments
Supplementary payments are paid in addition to the liability limit, so a $1,000,000 CSL is not eroded by defense or these extras:
| Supplementary Payment | Cap |
|---|---|
| Defense costs and allocated expense | No stated dollar cap |
| Bail bonds | Up to $2,000 |
| Bonds to release attachments | Up to the limit |
| Loss of earnings to attend trial at insurer's request | Up to $250 per day |
| Post-judgment interest | Full |
| Reasonable expenses the insured incurs at insurer's request | Actual |
Trap: Defense and these payments are OUTSIDE the limit. If a claim settles for the full $1,000,000 CSL, the insurer still owes the defense costs and the $250/day and $2,000 amounts on top.
Physical Damage Coverages
Physical Damage (Section III) insures the insured's OWN covered autos. Three options exist, each with its own deductible per auto:
- Comprehensive — all direct, accidental loss EXCEPT collision and overturn (covers fire, theft, glass, flood, hail, vandalism, animal strike).
- Collision — loss from the auto colliding with another object or overturning.
- Specified Causes of Loss (SCOL) — a cheaper named-peril alternative to Comprehensive: fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, or vandalism. It does NOT cover glass breakage or animal strikes unless from a covered peril.
Losses are settled at the lesser of actual cash value (ACV) or the cost to repair/replace, minus the deductible. Glass breakage may be settled under Comprehensive without a deductible if the insured chooses.
Worked ACV and Deductible Example
A covered box truck with an ACV of $48,000 is in a collision. Repairs are estimated at $41,500. The Collision deductible is $2,500.
- Repair ($41,500) is less than ACV ($48,000), so the repair figure controls.
- Insurer pays: $41,500 - $2,500 = $39,000.
If the same truck were a total loss, the insurer would pay ACV minus deductible: $48,000 - $2,500 = $45,500.
Built-in extras under Physical Damage include towing for private passenger autos, a transportation-expense rental sublimit (commonly $30 per day / $900 maximum) when a covered auto is stolen under Comprehensive, and fire-department service charges. These caps are tested verbatim, so memorize the $30/$900 figures.
Trailers, Mobile Equipment, and the Liability/Physical-Damage Split
Commercial auto liability covers sums the insured is legally liable to pay for bodily injury or property damage from a covered auto, plus defense in addition to the limit (like the CGL). Physical damage mirrors the personal auto split into collision and comprehensive (other than collision), settled at the lesser of ACV or repair cost minus deductible.
| Item | Auto policy treats it as |
|---|---|
| Attached trailer | Covered as part of the towing auto for liability |
| Mobile equipment (forklift, crane on a chassis) | Generally a CGL exposure, not auto |
| Snow plow, road-building gear | Often mobile equipment unless self-propelled licensed |
Exam trap: Mobile equipment (bulldozers, forklifts) is covered under the CGL, not the auto policy, unless it is a licensed self-propelled vehicle on public roads. Drawing the auto/CGL line on equipment is a recurring item.
Coverage Extensions
The Business Auto form includes a transportation-expense allowance after a covered theft and towing; broadening endorsements add rental reimbursement and new-vehicle replacement-cost options. As with the PAP, the form is primary for owned autos and excess over other insurance for autos the insured does not own.
A Worked Commercial Physical-Damage Settlement
Consider a delivery van with an ACV of $28,000 insured for collision with a $1,000 deductible. After an at-fault collision the repair estimate is $19,000. Because repair cost ($19,000) is less than ACV ($28,000), the insurer repairs and pays $19,000 - $1,000 = $18,000. If instead the estimate were $30,000, the insurer would declare a total loss, pay $28,000 ACV - $1,000 = $27,000, and take the salvage.
Exam trap: Physical-damage recovery is capped at the lesser of ACV or repair cost, then the deductible is subtracted. The stated liability limit does not cap physical damage - the vehicle's value does. A common wrong answer pays the full repair cost ignoring the ACV cap or the deductible.
For financed commercial vehicles, an auto loan/lease gap endorsement covers the shortfall between the ACV paid and a larger outstanding loan balance, mirroring personal-auto GAP coverage.
A covered truck with an ACV of $52,000 is destroyed by fire. The policy carries Comprehensive with a $1,000 deductible. How much does the insurer pay?
A jury awards $1,000,000 against the insured, exactly equal to the combined single limit, and the insurer incurred $85,000 in defense costs. How much does the insurer pay in total?