Commercial Auto Liability Insurance

Commercial auto liability insurance is a type of insurance that is designed to provide coverage for businesses that use vehicles as part of their operations. It is essential for businesses of all sizes and types that use vehicles to transport goods, people, or equipment. This insurance is designed to protect businesses from the financial risks associated with accidents or other incidents that can occur on the road.

Commercial auto liability insurance covers a range of potential losses and liabilities that businesses may face if their vehicles are involved in accidents. These may include damage to other vehicles, property, or injuries to other people. It can also cover medical expenses, legal fees, and other costs associated with accidents that are caused by your business's vehicles.

One of the primary benefits of commercial auto liability insurance is that it can help protect businesses from lawsuits and legal action that may arise as a result of accidents. If your business is sued after an accident, the insurance can help cover the cost of legal fees and damages that you may be required to pay.

There are several different types of commercial auto liability insurance available, and the coverage you need will depend on your business's unique needs and requirements. Some policies may include coverage for theft, vandalism, or damage caused by weather events, while others may only cover liability for accidents.

When shopping for commercial auto liability insurance, it's important to work with a reputable and experienced insurance provider. They can help you understand your options and choose the right policy to meet your needs. Be sure to carefully review the terms and conditions of any policy before signing up to ensure that you fully understand the coverage provided.

In conclusion, commercial auto liability insurance is an essential form of insurance for businesses that use vehicles. It provides coverage for a range of potential liabilities and can help protect businesses from the financial risks associated with accidents and other incidents on the road. By working with a reputable insurance provider, businesses can ensure that they have the right coverage to meet their unique needs and requirements.

The Business Auto Policy (BAP) contains extensive declaration pages that permit the insured to select from a series of coverage types and vehicles that are to be insured. A set of symbols is provided, and coverage is afforded only for those listed symbols. The symbols define coverage as follows:

• 1 - Any auto. When this symbol is used, no others are needed.
• 2 - Owned autos only. This covers autos owned by the insured and liability arising out of trailers of others while attached to owned autos.
• 3 - Owned private passenger auto only.
• 4 - Owned autos other than private passenger autos, and liability coverage for trailers of others while attached to such vehicles.
• 5 - Owned autos subject to no-fault benefits in the state where they are licensed or principally garaged.
• 6 - Owned autos subject to a compulsory uninsured motorist law in the state where they are licensed or principally garaged.
• 7 - Specified autos only.
• 8 - Hired auto only. This excludes autos borrowed or leased from the insured's employees or members of their households.
• 9 - Non-owned autos only.
• 19 - Mobile Equipment Subject To Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only.

So what does commercial auto liability insurance cover? The coverages and the types of vehicles insured are triggered by the symbols, and all vehicles of a similar type are covered automatically until the end of the policy period without having to notify the company.

When symbol 7 (Specified Autos Only) is entered, a newly acquired vehicle is covered only when: the new vehicle is replacing a specified vehicle; the company insures all the vehicles owned by the insured; and the company is notified within 30 days of the purchase. Protection is limited to the coverages that apply to all insured vehicles.

When symbol 19 (Mobile Equipment Subject To Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only) is entered Business Auto coverage is provided for property that is defined as mobile equipment but only when that mobile equipment is subject to motor vehicle registration and/or licensing laws. The symbol applies only in states with such registration and/or licensing laws.

HAZARDS COVERED

The hazards that commercial auto liability insurance covers include:

Trailers

Commercial auto liability insurance is extended to apply automatically to trailers with a load capacity of 2,000 pounds or less.

Mobile Equipment

While the policy does not, with the exception of the use of symbol 19, provide liability on mobile equipment (described below) as such, it does cover liability from such equipment while it is being transported on an insured vehicle.

Mobile equipment is spelled out in some 50 categories, e.g., bulldozers, farm machines and forklifts designed for use primarily off the roads; vehicles mounted on crawler treads; vehicles, whether self-propelled or not, maintained to provide mobility to permanently attached equipment such as air compressors, pumps, and generators, including spraying, welding, building cleaning, geophysical exploration, lighting, and well-servicing equipment, etc.

Contractual Liability

The policy covers all rental and lease agreements involving automobiles, except those rented with a driver and those made with a motor carrier. As a consequence, when an employee rents an automobile on behalf of his or her employer and agrees under contract to assume liability for its use, the policy automatically covers this exposure.

Outside of this extension, the business auto policy closely follows the commercial general liability (CGL) policy in covering only an insured contract as defined. (Discussed in the Commercial General Liability topic under Commercial General Liability-Hazards Not Covered-Assumed Liability.)

Loading and Unloading

A commercial general liability policy covers liability to the point where an individual picks an item up to place it in a motorized vehicle. The business auto covers the loading process and the unloading process. Once an item has been unloaded at the destination, the BAP coverage ceases and general liability takes over.

The hazards excluded from commercial auto liability insurance are:

Mechanical Device

Handling of property by mechanical device not attached to the insured vehicle is excluded. Note: In some states, this limitation on loading and unloading does not apply.

Pollution

With the exception of a few, narrow instances, there is no coverage for liability arising out of pollution. Essentially, there is no coverage for such liability if the actual or threatened discharge of pollutants is part of any property being transported or handled for movement from any covered auto (as in loading or unloading), or if the pollutant is being treated in the vehicle or otherwise is in the course of transit.

The commercial auto liability insurance exclusion applies even if the pollutants are accepted by the insured and are being moved into or onto the vehicle, or after the pollutants (or the property in which the pollutants are contained) are being moved from the covered automobile to their final destination..

There is no coverage, either, for the loss arising out of government direction that the insured monitor, clean up or remove, detoxify or otherwise treat any pollutant.

There is coverage for discharge of pollutants if one of the insured's vehicles that is not carrying pollutants collides with a truck that is not owned by the insured, and which is carrying pollutants, causing a spill..

Similarly, coverage applies if one of the insured's vehicles collides with a storage tank or derails a train carrying pollutants. Finally, if the insured vehicle overturns and spews pollutants from its gas tank, hydraulic system, or similar operating systems, there is coverage.

Other Drivers and Interests

The commercial auto liability insurance policy does not cover a person from whom the insured borrows or hires an automobile; an employee if the employee owns the covered auto; anyone using a covered auto while selling, servicing, or parking automobiles; anyone other than employees or partners in the process of moving property to or from a covered auto; or a partner of the named insured for a covered auto owned by him or her.

Trailers

Whether owned or not, covered trailers attached to vehicles that are not owned by the insured are covered on an excess basis. Covered trailers, whether owned or not, when attached to owned vehicles, are covered on a primary basis.

Out-of-state Extensions

If the insured vehicle is involved in an accident outside of the insured's home state, the policy limits are increased automatically to comply with the financial responsibility or compulsory insurance requirements of that state, if the limits on the insured's policy are lower than those limits.

The commercial auto liability insurance policy also provides at least the minimum amounts and types of coverage required by that state's laws, e.g., no-fault, uninsured motorist coverage, etc.

HIRED AUTOS

Symbol 1 (any auto) or symbol 8 (hired autos only) triggers coverage under the business auto policy for hired, leased, rented, or borrowed autos.

This commercial auto liability insurance coverage is important because a business may be held liable for accidents arising out of automobiles that are not owned by the business or any of its employees. A situation of this kind may develop when automobiles are hired, either with or without a driver, and an operator while on his or her employer's business causes an accident. The employer may be held jointly liable with the operator for damages inflicted or caused.

A business that hires automobiles will be covered as an additional insured under the automobile liability policy that covers the owner of the vehicle. It may be, however, that the owner of the vehicle is not insured, or not properly or adequately covered.

To be fully protected against any liability that may arise from hired automobiles, the firm that hires the automobiles should carry hired auto insurance.

Hired auto coverage under the business auto policy covers the insured for the liability that may be imposed on him or her arising out of automobiles whose complete supervision, direction, and control rests with him or her.

Hired auto coverage does not apply to any automobile that is owned by or registered in the name of the named insured or an employee or member of his or her household.

Hired auto coverage may be purchased on a specified automobile basis or on a cost of hired premium basis.

The specified hired auto rating basis is suitable for insureds who hire automobiles on a long-term basis. The vehicles to be covered are specified in an endorsement, and there is no coverage for vehicles other than those scheduled.

The rates used for the hired automobiles insured specifically are the same as used with the insured's owned vehicles. The owner of the vehicle is added to the policy as an additional insured.

The cost-of-hire basis is better suited to insureds that hire automobiles for temporary periods and cannot determine in advance how many automobiles may be hired during the policy period. On this basis, the interest of the owner of the hired vehicle is not included.

Commercial auto liability insurance rates are based on the total cost of hire of the automobiles including the wages paid to the chauffeurs who operate the automobiles.

Similar to other automobile liability policies, hired auto coverage is excess insurance over any other collectible insurance.

NON-OWNED AUTOS

Symbol 1 (any auto) or symbol 9 (non-owned autos only) triggers coverage under the business auto policy for employer's auto non-ownership liability and other auto non-ownership liability.

Employee Non-ownership Liability

As was pointed out in the Negligence and Other Torts topic, under the Master and Servant Rule, an employer is charged with the duty of protecting the public from coming to harm through the acts of his or her employees.

Usually when an employee causes an accident in the course of his or her work, the injured person will bring suit against the employee and the employer. The courts may find the employer jointly liable with the employee, and the plaintiff may satisfy the judgment against one or both.

When a firm or corporation owns and operates private passenger, commercial or public automobiles, it usually obtains a business auto policy to cover accidents arising out of the use, maintenance, or operation of the vehicles.

It is important, however, to understand that liability also may be imposed on the business because of accidents caused by non-owned automobiles.

When employees who are driving their own vehicles for the benefit of their employers become involved in an accident, the employers may be held jointly liable for the accident.

Employees who regularly use their vehicles in their employers' service include repair and maintenance persons as well as delivery and sales persons. However, even employees whose work does not call for regular use of an automobile may be requested to occasionally pick up or deliver or to make a special call on a customer.

The courts don't consider whether the vehicle usage is regular or sporadic. They are concerned only if the vehicle is used for the benefit of the employer. The employer may be held liable for an accident caused by an employee even when the employer was completely unaware of the action and had not specifically authorized or requested the employee to take such an action.

If the employee carries commercial auto liability insurance insurance on the automobile involved in the accident, the employer will be protected under the policy as an additional insured. However, the limit of liability on the employee's policy may not be sufficient to meet a large claim.

An employer should take steps to confirm that all employees who drive an automobile in the course of their work do carry automobile liability insurance. It is important to remember, however, that the employer can never guarantee that the employees will keep their policies in force.

The commercial auto liability insurance coverage provided is solely for the benefit of the employer—not the employee. The employee is not considered an additional insured under this section unless a separate endorsement is purchased.

Others Non-Owned Liability

Other persons may use their own vehicles for the benefit of the named insured. These could be partners or volunteers. A good example of volunteer usage is when club or church members pick up others to take them to a church or club-related activity.

It could also include volunteers who deliver meals or other services to disabled or shut-in individuals.

Commercial auto liability insurance coverage for these non-ownership exposures are included when symbol 1 or 9 is indicated on the declarations, but remember that symbol 9 restricts coverage to non-owned autos other than autos hired, leased, or borrowed.

This coverage is excess over the owner's insurance and is for the benefit of only the named insured. The volunteer is not covered as an additional insured unless specific coverage is purchased.

Partnership Non-Owned Liability

Partners are specifically mentioned as covered for non-ownership liability when they use their vehicles for the benefit of the partnership and symbols 1 or 9 are indicated in the declarations. However, the coverage is solely for the benefit of the named insured, not the partner.

The coverage is excess over the partner's insurance. An endorsement is available that lists partners as additional insureds under this coverage.

n addition to commercial auto liability insurance, businesses that use vehicles should also consider other types of insurance, such as physical damage coverage, uninsured motorist coverage, and general liability insurance. These additional coverages can provide additional protection and peace of mind for your business.

Drive Other Car

Often executives of a firm are furnished with a company car for business and personal use. If these persons own no other vehicles, they may choose not to purchase personal automobile coverages.

This lack of personal insurance could leave them uncovered in many nonbusiness-related automobile situations that would be covered under a standard personal automobile policy such as when driving a neighbor's vehicle, renting a vehicle for a family vacation, or suffering an uninsured motorist incident while not in the company car.

The drive other car endorsement extends the company's auto policy to provide personal auto coverages to the employee, his or her spouse and other family members. A premium is charged for each individual named in the endorsement.

Individual As Named Insured

This coverage is very similar to the drive other car coverage explained above with one very important difference - it is provided at no additional charge but only if the business entity is an individual and if the necessary endorsement is attached.

Medical Payments

Coverage for medical payments is available under commercial auto liability insurance policies. There is an important restriction of coverage that should be considered prior to purchasing this coverage. Medical payments are not available to any person who may receive benefits under a workers compensation law.

Because the individual operating a truck is usually an employee covered by a workers compensation law, and because passengers are relatively rare in such vehicles, it can be seen that for many commercial automobiles, medical payments coverage will afford comparatively limited coverage.

On the other hand, sole proprietors and partners who personally operate trucks may be covered under the medical payments coverage, if they are not eligible for benefits under a workers compensation law. State law determines eligibility under the workers compensation law and should be consulted prior to making decisions.

Bobtail Operations

Tractor owners frequently contract to haul cargo in trailers belonging to others. Where this arrangement is entered into on a frequent basis, it is customary for the shipper who owns the trailer to provide insurance not only for his or her own liability, but also for liability of the tractor owner.

When the tractor is not being used in this manner, its owner is uninsured unless he or she has purchased separate commercial auto liability insurance. This type of insurance is commonly called bobtail insurance because the tractor is covered only when being operated without a trailer.

The Insurance Services Office has a simplified rating system for commercial automobiles. After extensive study, the rating organization concluded that premiums for liability and physical damage insurance could be figured in approximately the same way as the rating of private passenger automobiles by applying a single set of primary and secondary rating factors to both commercial auto liability insurance and physical damage base rates.

Primary Classifications

The primary rating factors are based on three essential elements:

Size Class: All commercial vehicles are classified as to size by gross vehicle weight (GVW) or gross combination weight (GCW). Gross vehicle weight is a manufacturer's recommended maximum loaded weight of a single-unit vehicle (weight of vehicle plus load). Gross combination weight is a manufacturer's recommended maximum loaded weight of a combination-unit vehicle (tractor plus trailer or semitrailer plus load).

Size class by gross vehicle weight or gross combination weight is divided into seven categories:

• Light Trucks: Trucks having a gross vehicle weight (GVW) up to 10,000 pounds. Included in this class are light pickup and step van vehicles.
• Medium Trucks: Trucks having a gross vehicle weight of 10,001-20,000 pounds.
• Heavy Trucks: Trucks having a gross vehicle weight of 20,001-45,000 pounds.
• Extra-Heavy Trucks: Trucks having a gross vehicle weight of over 45,000 pounds.
• Heavy Truck-Tractors: Truck-tractors having a gross combination weight (GCW) of up to 45,000 pounds. A truck-tractor is a motorized vehicle, with or without a body for carrying commodities or materials that is equipped with a fifth wheel coupling device for semitrailers.
• Extra-Heavy Truck-Tractors: Truck-tractors as described above but having a gross combination weight of over 45,000 pounds.
• Trailer Types: This classification consists of semitrailers, trailers, and service or utility trailers. A semitrailer must have a fifth wheel coupling device for use with a truck-trailer and have a load capacity exceeding 2,000 pounds A trailer is any trailer with a load capacity exceeding 2,000 pounds that is not a semitrailer. Service or utility trailers are trailers with a load capacity of less than 2,000 pounds. These small trailers are generally included without any premium charge.

Business Use Class: This element is divided into three basic categories and is applicable to all trucks except extra-heavy trucks, extra-heavy truck-trailers, and trailer types. The three use categories are:

• Service Use: Applicable to vehicles used for transportation of personnel and equipment to or from job locations. This class includes carpenters, plumbers, small contractors, and other artisans whose vehicles are normally parked at work sites during the day. It also includes pickups used in the insured's business but not those transporting property to customers.
• Retail Use: Applicable to vehicles used to pick up property from or deliver property to individual households.
• Commercial Use: Applicable to vehicles used for transportation of property other than those vehicles specifically defined as service or retail.

Radius Class: This element is divided into three categories. Radius is determined on a straight line from the point of principal garaging. The three categories are:

• Local: Applicable to an automobile not regularly or frequently operated beyond a radius of 50 miles from its point of principal garaging.
• Intermediate: Applicable to an automobile operated beyond a radius of 50 miles but not regularly or frequently beyond a radius of 200 miles from its point of principal garaging.
• Long Distance: Applicable to an automobile operated regularly or frequently beyond a 200-mile radius from the point of principal garaging. All commercial vehicles used by private carriers or truckers and operating over a 200 mile radius are subject to Zone Rates, except for those vehicles in the light truck size class.

Secondary Classifications

This is a risk-specific rating factor. The factor is used only if the vehicle is used in the specific industry.

Premium Determination

1. Determine the primary rating factor from the primary classification table by looking up the size, business use and radius classes in the table.
2. Determine if a secondary rating factor applies based on the industry type and the vehicle use.
3. Add the primary rating factor to the secondary rating factor.
4. Multiply the appropriate state and territory base rates for both liability and for physical damage coverages by the entire rating factor to obtain the specific vehicle premium.
5. Apply other factors such as fleet factors, schedule, and experience rating factors if eligible.

Note: Medical payments premiums, also quoted in the state rate pages, are full charges and the rating factor is not applied to them.

Note: If zone rating applies, refer to the appropriate zone-rating table in the manual, instead of the state rate pages. For each zone, there is a base premium for liability and medical payments coverage and a rate factor for physical damage coverages.

Public Transportation Rates

Special rating categories apply to vehicles registered or used for the transportation of the public. These rating categories include taxis, limousines, school buses, church buses, urban and intercity buses and van pools.

Rating is based on territory, fleet size (five or more owned vehicles take fleet rates), primary and secondary rating factors. The primary rating factors include use, radius, seating capacity and ownership for van pools, and differ as outlined below from other business auto rates.

1. Territory: The highest rated territory in which the vehicle operates is used for rating purposes.
2. Radius: Similar to other business autos.
3. Use: Classes include taxis (up to eight passengers), limousines (up to eight passengers), school buses (including those owned by churches or others), church buses (for other than school use), urban and intercity buses, airport buses and limousines, charter buses, sightseeing buses, athletic team or entertainment group buses, van pools, other employee transportation, social service autos (for day care centers, senior citizen centers, etc.), and other public autos (country club buses, cemetery buses, etc.).
4. Van pools: Rates vary, depending on if the vehicle is furnished by the employer or otherwise. Also, seating capacity is used as a rating factor.

The secondary rating factor is seating capacity, exclusive of the driver. This factor does not apply to taxis, limousines (other than airport limousines), van pools and zone-rated vehicles.