12.2 Commercial Auto Liability and Physical Damage

Covered Autos Liability Coverage (Section II)

Section II promises to pay all sums an insured legally must pay as damages because of bodily injury or property damage caused by an accident and resulting from the ownership, maintenance, or use of a covered auto. The insurer also has the right and duty to defend, and defense costs are paid in addition to the limit — they do not erode it.

Commercial auto liability is usually written with a Combined Single Limit (CSL) — one dollar amount per accident covering both BI and PD combined. This contrasts with personal auto's split limits.

CSL vs. Split Limits — Worked Example

A split limit of 100/300/50 means $100,000 per person BI, $300,000 per accident BI, and $50,000 PD. A $300,000 CSL is a single pool.

Consider an accident with one severely injured claimant ($250,000 BI) and $40,000 in property damage:

• Under 100/300/50: the per-person BI cap is $100,000, so the injured party collects only $100,000; PD pays $40,000. Total paid = $140,000.
• Under $300,000 CSL: the single pool absorbs $250,000 + $40,000 = $290,000, all payable.

Trap: A CSL is more flexible because no internal sub-limit can strand a single large claim.

Who Is an Insured (Section II)

The omnibus clause makes the following insureds for Covered Autos Liability:

• You (the named insured) for any covered auto.
• Anyone using a covered auto you own, hire, or borrow — with permission.
• Anyone liable for the conduct of an insured, but only to the extent of that liability.

Key exclusion: the owner of a hired or borrowed auto is NOT automatically an insured. Employees using their own vehicles are not insureds unless coverage is broadened by endorsement. Fellow employees injured in the course of employment are also excluded (workers' comp territory).

Physical Damage Coverage (Section III)

Physical damage is split into three optional coverages, each requiring its own symbol on the Declarations:

Trap: Hitting a deer is comprehensive (or specified causes), not collision. Specified Causes of Loss does NOT cover falling objects, missiles, or glass breakage independent of a covered peril — comprehensive does.

Valuation and Deductibles — ACV Example

The BACF settles physical damage losses at the lesser of actual cash value (ACV) or the cost to repair/replace, minus the applicable deductible. ACV is typically replacement cost minus depreciation.

Example: a delivery van with an ACV of $24,000 is totaled. The collision deductible is $1,000.

• Settlement = ACV $24,000 − deductible $1,000 = $23,000.

If instead the van had $5,000 in repairable hail damage (comprehensive) with a $500 comprehensive deductible, the insurer pays $5,000 − $500 = $4,500. Towing/labor is a separate small sublimit available only when collision or comprehensive is purchased on private passenger types.

The "Permission" Insured and the Fellow-Employee Issue

Under Covered Autos Liability, an insured includes the named insured and anyone using a covered auto with permission, with key exceptions: the owner of a hired/borrowed auto, employees using their own vehicles, and (absent endorsement) fellow employees for injury to co-workers. The Fellow Employee exclusion can be deleted by endorsement for supervisors. This mirrors the CGL/workers-comp boundary.

Physical Damage Coverage Recap

Comprehensive and Specified Causes of Loss are mutually exclusive — an insured chooses one, not both, for a given auto. Settlement is ACV or cost to repair, whichever is less, minus the deductible, paralleling the personal auto Part D engine but on commercial limits and with a CSL liability limit rather than split limits in most accounts.

Connecting Insureds, Limits, and Physical Damage

A commercial-auto stem typically asks one of three things: who is an insured, how the limit applies, or how physical damage settles. On the insured question, recall that the permission user is generally an insured but employees in their own vehicles and the owner of a borrowed auto are not, and that fellow-employee injury is excluded unless an endorsement deletes the exclusion. On limits, most commercial accounts use a combined single limit, so a single pool applies to all bodily injury and property damage from an accident rather than separate per-person caps, which usually benefits the insured on a severe single injury.

On physical damage, comprehensive and collision settle at actual cash value or repair cost whichever is less, minus the deductible, and comprehensive and specified-causes-of-loss are mutually exclusive choices. Holding these three threads straight lets you resolve the layered fact patterns the exam favors for commercial auto.