In the Garage Coverage Form, an exclusion states there is no coverage for loss of market value when new cars at a dealership suffer paint damage from a hail storm.
By Diana Kowatch, CPCU, AU, AAM, CPIW dianak@in.net
The ISO Business Auto programs and related State Supplements have recently been revised to add clarity and make the programs more consistent and compatible with other commercial and business policies such as the Commercial General Liability policy and the NCCI Workers Compensation and Employers Liability insurance policy.
The revised coverage forms and endorsements carry a July 1997 edition date, with the first batch of states implementing the program revisions as of October 1, 1997.
A list of the changes follows, grouped by the affected area of the contract where the change was made. The state supplements are not reviewed here.
Coverage revisions
Under the Physical Damage Coverage--Coverage Extensions, a change has been made to the coverage extension for Transportation Expense, by adding the word "temporary," thus making it clear that if transportation expenses are incurred by an insured after a total theft of a covered vehicle, the coverage extension provides only temporary transportation expenses. Although this may appear to be a reduction in coverage, it is only a clarification and, thus, no rate change is contemplated. One question still arises, however. "Temporary" has not been defined. What does temporary mean: a week, a month, a quarter, a year? It is to be hoped that future revisions will provide clarity.
The Supplementary Payments coverage has been corrected to read that the protection is for suits against the insured, clarifying that it is the insured, not the suit, that is covered. Similar wording in the condition outlining the Duties In the Event Of Accident, Claims, Suit or Loss has been amended. The insured must cooperate with the insurer in any investigation or settlement of the claim or defense against the suit. ("Defense against the suit" is the added wording.)
An increase in coverage has been made to Supplementary Payments. The maximum daily payment for loss of earnings by the insured under this item has been increased from $100 per day to $250 per day. The limit for the cost of bail bonds also has been raised to $2,000 from the previous $250.
Who Is An Insured has been amended to include protection for Limited Liability Companies (LLC).
Symbol 30 of the Garage Coverage form has been revised to track with the definition of what is a customer's auto as found in Garagekeepers Coverage Form--CA 99 37. The amended definition now states: "Symbol 30 = Autos LEFT WITH YOU FOR SERVICE, REPAIR, STORAGE OR SAFEKEEPING. Any customer's land motor vehicle or trailer or semitrailer while left with you for service, repair, storage or safekeeping. Customers include your employees and members of their households, who pay for the service performed."
Under the Garage coverage forms, the Excess Coverage option is amended to clarify that the Direct Coverage options are not mutually exclusive of the underlying legal liability coverage. Further, coverage may apply even when the insured is not legally liable, thus giving the ability to provide a no-fault type coverage.
In the Garage Coverage Form, an exclusion states there is no coverage for loss of market value when new cars at a dealership suffer paint damage from a hail storm.
Changes in exclusions
Exclusion #4 applies to Employee Indemnification and Employer's Liability. Within this exclusion, there is an exclusion to the exclusion, which basically means that the exclusion does not apply to domestic employees. However, domestic employees has never been defined within the contract. A definition has been added to the exclusion to spell out what is meant by the term. A "domestic employee" is "a person engaged in household or domestic work performed principally in connection with a residence premises."
This exclusion also has been further strengthened by adding new wording to clarify that not only is bodily injury to an employee resulting from employment by the insured excluded, but so is bodily injury to an employee while "performing the duties related to the conduct of the 'insured's business.'"
Exclusion #5--Fellow Employee has been similarly strengthened and revised by the addition of almost identical wording.
A change to an exclusion found only in the Garage Coverage Form--CA 00 05 is the exclusion dealing with physical damage to an auto dealership. This exclusion previously stated that expected profit was not covered after a physical damage loss. Now it also states that there is no coverage for the loss of market value or resale value. This diminution of value most often happens when a new auto suffers some type of physical damage such as paint damaged from a hail storm. The vehicle is repaired but market value has diminished as it can no longer be sold as a new vehicle. The Garage form did not specifically address diminution of value in the past, but now it makes clear that there is no such coverage.
Under the Physical Damage exclusions, the item pertaining to radar equipment or other such equipment that is designed to detect or locate radar has been revised to further exclude not only devices to locate or detect speed (which now include both radar and laser equipment), but also any jamming devices which are designed or intended to elude or disrupt speed measurement.
Revised or updated conditions
Under the conditions that refer to the Duties in the Event of Accident, Claim, Suit Or Loss, the obligations and duties of the insured have been outlined and the language strengthened to make clear that the insurer has no duty or obligation under the contract until the insured has fully complied with the outlined duties. This is referred to as "conditions precedent" language.
Definitions--New
The following new definitions have been added:
Employee--although an actual definition for employee itself has not been added, it is made clear that a leased worker is considered an employee, but a temporary worker is not.
Leased worker--means a person that has been leased to the insured by a labor leasing firm where there is an agreement between the insured and the labor leasing firm for that employee to perform the duties necessary to the insured's business operations.
Temporary worker--is a person furnished to the insured for a specific or finite time period, whose responsibility is to support or supplement the insured's work force for a special work-related situation. These special work-related situations are defined to include employee absences, temporary skill shortages, and seasonal workloads.
New endorsements added
CA 20 47--Additional Insured--Lessor of Leased Equipment
Provides protection for the owner of leased equipment for the existence hazard only, as it applies to the non-auto exposure under the Garage coverage form, for equipment that has been leased to an insured garage or repair shop.
CA 20 48--Designated Insured
Allows an additional insured to be specifically named as an additional insured for vicarious liability. Note that this coverage already is being provided under the WHO IS AN INSURED provision in the business auto policies because protection is granted for any party that is liable for the actions or conduct of a covered insured--but only for the extent of that particular liability. Thus this endorsement allows only that party to be scheduled or specifically named. This endorsement may be used with any of the business auto coverage forms.
CA 20 49--Additional Insured-Garages-Grantor of Franchise
Additional insured coverage may be added for the vicarious liability of the grantor of a franchise with respect to the named insured. This endorsement applies only to the Garage coverage form.
CA 23 24--Agricultural Produce Trailers-Seasonal
Use of this endorsement provides liability coverage for farm trailers that are used only seasonally to haul agricultural produce but not livestock. The 2,000 pound limit does not apply to this endorsement. The dates of the seasonal period and the specific produce must be scheduled.
CA 23 25--Coverage For Injury To Leased Workers
Coverage for bodily injury to leased workers is added by changing the definition of employee in Exclusion #4, Employee Indemnification and Employer's Liability. The revised definition for employee, for the purposes of this endorsement, does not mean leased employee. The end result of the change is that while the insured's employees are excluded, leased workers are not (and are thus covered). This endorsement may be used with any of the business auto coverage forms.
Revised endorsements
CA 02 40--Suspension of Insurance
Wording has been added with respect to underinsured motorist coverage (UIM), to make it flexible enough to apply whether combined with uninsured motorist coverage (UM) or as a stand-alone option. The following three endorsements are amended accordingly.
CA 20 15--Mobile Equipment
CA 20 21--Snowmobiles
CA 20 27--Registration Plates Not Issued For A Specific Auto
Further, the Suspension of Insurance endorsement has added a blank line in order for an insurer to insert a coverage not listed that may be suspended by a law of that particular state.
CA 20 19--Repossessed Autos
A simple correction has been made to this endorsement to add space to show a limit for any unlisted locations and to specify how the coverage applies to the specific locations listed.
CA 23 17--Truckers-Intermodal Interchange Uniform Endorsement Form UIIE-1
Various changes have been made in response to the Uniform Intermodal Interchange and Facility Access Agreement (UIIA) by the Intermodal Association of North America (IANA).
CA 25 03--False Pretense Coverage
Previous versions of the endorsement have restricted coverage to only those circumstances where a warrant has been issued for the arrest or detainment of the guilty party. However, since the actual issuance of a warrant is out of the control of the insured, revisions have been made requiring the insured to take all steps reasonably possible to do such.
An exclusion has been added. Excluded is coverage if a bank or other drawee fails to pay. A second exclusion has been revised to grant coverage for vehicles on consignment.
Under the Limits of Insurance, the reference to $25,000 for this coverage is replaced by the amount shown either in the Schedule or in the Declarations
CA 25 14--Broadened Coverage-Garages
The Commercial General Liability coverage forms and endorsements have been changed to state that the professional services excluded in the CGL are, in fact, professional health care services. CA 25 14 has been revised accordingly.
Further revisions include clarification that the coverages provided by this endorsement apply only to the non-auto exposures or the garage operations only. This is particularly important as there have been attempts to use the Limited Worldwide Liability coverage portion of the policy to provide worldwide auto liability protection. That was not the original intent of the endorsement, and revisions have been made accordingly.
This endorsement may be used only with the Garage coverage form.
CA 99 10--Drive Other Car Coverage--Broadened Coverage For Named Individuals
The mandatory $50 collision deductible has been deleted.
CA 99 28--Stated Amount Insurance
A simple revision has been made to clarify that the stated deductible applies to this endorsement.
CA 99 37--Garagekeepers Coverage
The Excess Coverage option is amended to clarify that the Direct Coverage options are not mutually exclusive of the underlying legal liability coverage. Further, coverage may apply even when the insured is not legally liable.
CA 99 59--Garagekeepers Coverage--Customers Sound Receiving Equipment
Same as with the Garagekeepers Coverage, the excess coverage option is amended to clarify that the Direct Coverage options are not mutually exclusive of the underlying legal liability coverage. Further, coverage may apply even when the insured is not legally liable.
Conclusion
Numerous other editorial changes, corrections, and clarifications have been made to many of the coverage forms and endorsements. Those discussed above are just the most significant. Please review all of the new forms and endorsements prior to using to make sure that you fully understand the changes and revisions.*
©COPYRIGHT: The Rough Notes Magazine, 1997