Eligible risks for the auto services segment include: repair shops; service stations; and storage garages and other public parking places. The ISO commercial lines manual (CLM) lists the following classifications as eligible for this program:

a. Automobile Quick Lubrication Services

b. Automobile Repair or Service Shops

c. Automobile Repair Shops—Self-Service

d. Automobile Rustproofing

e. Automobile Storage

f. Car Washes—Self-Service

g. Car Washes—Other Than Self-Service

h. Convenience Food/Gasoline Stores—Full Service

i. Convenience Food/Gasoline Stores—Self-Service Convenience

j. Food/Gasoline Stores—Full- and Self-Service Combined

k. Gasoline Stations—Full-Service

l. Gasoline Stations—Self-Service

m. Gasoline Stations—Self- and Full-Service Combined

n. Parking—Public—Open Air

o. Parking—Public—Not Open Air

The following are not eligible for this program: automobile, motor home, mobile home, trailer, and motorcycle dealers.

This treatment provides information on the auto service risks coverage form, MS AS 01 07 13. The endorsement modifies the CGL forms, the building and personal property coverage form, and the causes of loss—special form. These policies are analyzed in the following pages: see CGL Coverage Form—Coverage A; see CGL Coverage Form—Coverage B; see Medical Payments; see General Provisions of the CGL; see Building and Personal Property Coverage Form; and see Causes of Loss.

Topics covered: Introduction Changes to the commercial property form Additional coverages Coverage extensions Changes to the causes of loss – special form Change to the CGL form – premium audit Definitions Endorsements

Introduction

Endorsement MS AS 01 modifies the CGL form, the commercial property form, and the causes of loss—special form. The modifications tailor these forms to the needs of the auto service risk. The endorsement adds property and crime coverages and modifies the premium audit section of the CGL form. Endorsements are also available to add legal liability coverage for customers' cars; direct damage coverage for customers' cars; hired and non-owned auto coverage; mechanical breakdown coverage.

Changes to the Commercial Property Form

The commercial property form (CP 00 10 10 12) covers the building and business personal property of the insured and property of others that the insured has in his care. Endorsement MS AS 01 adds fuel storage tanks and their electrical equipment to the coverage or building. Such tanks may be above or below ground.

The CP 00 10 specifies that “underground pipes, flues, or drains” are property not covered. However, the AS 01 removes that provision as it pertains to the new items of covered building property. While underground pipes, like plumbing, that serve the building are still not covered, those pipes that pertain to and connect fuel tanks on the premises are covered.

The AS 01 adds two items to the list of “property not covered”:

1.     Stored property off the premises. However, some coverage for such property is provided in the coverage extensions.

2.     Permanently installed computers in aircraft, watercraft, motor trucks, or other vehicles. Since so many of today's vehicles have computers in them, this exposure is more than the rate contemplates – thus the exclusion.

Additional Coverages

Like the CP 00 10 10 12, the MS AS 01 pays any fire department service charges. However, in the AS form, the limit is $5,000 per occurrence, as opposed to $1,000 in the CP 00 10.

The MS AS 01 adds eight additional coverages not found in the CP 00 10:

1.  Money and securities. This form provides auto service risks with crime coverage for money and securities. It pays up to $2,500 for loss of these items due to theft, disappearance, or destruction. The coverage applies at a bank or at the named insured's living quarters. It also applies while the property is in the living quarters of an employee and while in transit. The crime coverage contains the usual exclusions of loss resulting from arithmetical mistakes or the exchange of money in a retail transaction. It adds a limitation on money that is contained in a “money-operated device”(like a coin-operated car wash). The form covers loss to this money only if the device continuously records the money being deposited.

2.  Fire extinguisher system expense. The form pays, without a deductible, up to $2,500 per occurrence to recharge or replace fire extinguishers and extinguishing systems. It also pays for damage to covered property that occurs due to an accidental discharge of the fire extinguishers.

3.  Reward payment. The policy provides two different types of reimbursement to the insured for any reward payments. The first is up to $5,000 for information that leads to the arrest and conviction of anyone who commits a crime against covered property. The second coverage pays up to $5,000 for the return of stolen property.

In order to collect the reward, the person must qualify as an “eligible person.” The form says an eligible person is the one who first provides information to law enforcement or who first returns stolen property. However, the named insured or his family, employees, and their families are not eligible to collect. Others not eligible include law enforcement employees; those whose business is property protection; anyone who had custody of the property at the time of the crime; and anyone who actually committed the crime.

4.   Money orders and counterfeit paper money. The policy provides up to $1,500 to compensate for the insured's accepting counterfeit money or money orders that are not honored by the issuing agency.

5.   Forgery or alteration. The forgery or alteration additional coverage pays up to $5,000 for the forgery or alteration of checks and other instruments that are either made by the insured or by someone acting as the insured's agent. This coverage also provides defense (within the limit of $5,000) if the insured is sued for refusing to pay or cover a forged or altered instrument.

6.    Outdoor signs. The outdoor signs additional coverage pays for damage to outdoor signs that the insured owns or for which he is responsible. The limit of $5,000 may be increased with an indication on the declarations page.

7.   Employee dishonesty. The policy also pays up to $5,000 (more is available) for the loss of money and securities due to dishonest acts by employees. Like other fidelity coverages, this one contains the usual exclusions for losses that can only be documented via inventory or profit and loss computations.

8. Artificially generated electrical current. Additional coverage is also available for loss or damage to computers caused by artificially generated arc that takes place within 1,000 feet of the described premises or an interruption of electric power supply, power surge, blackout, or brownout that takes place within 1,000 of the described premises.

Coverage Extensions

The auto services form modifies some and adds some coverage extensions to those contained in the CP 00 10. The first modified extension is that for newly acquired property. The AS form covers computers at a newly acquired location until the insured acquires specific coverage on them.

The CP 00 10 provides $2,500 for personal effects and property of others. The AS form does the same but excludes coverage for employees' tools.

Like the CP 00 10, the AS form extends coverage to valuable papers and records, other than electronic data. The AS form provides $5,000 of coverage for valuable papers and records at a described location and $2,500 for such items while not at a described location. The CP form's limit is $2,500. The AS form specifies that the extension does not apply to property held as samples or to property in storage away from the premises. The CP form does not contain such limitations.

Like the CP form, the AS form extends $10,000 of coverage to property off-premises. The only difference is that while both forms exclude coverage for property in vehicles, the AS form makes an exception for computers.

The CP form extends $1,000 to these types of outdoor property:

1.     Fences.

2.     Antennas.

3.     Trees, shrubs, and plants ($250 for any one plant).

4.     Signs.

The AS form extends coverage to the same types of outdoor property, but in these amounts:

1.     Fences and retaining walls, $2,500.

2.     Antennas, $3,000.

3.     Trees, shrubs, and plants, $2,500 ($500 for any one plant).

These items are covered against loss from these perils fire, lightning, explosion, riot or civil commotion, and aircraft.

The AS form adds coverage extensions for employees' tools and accounts receivable. Employees' tools are covered for up to $2,500, with a limit of $500 for the tools of any one employee.

The insured also receives $5,000 coverage if his accounts receivable records (on premises) are damaged or destroyed by a covered peril. The coverage is $2,500 for off-premises records.

Changes to the Causes of Loss— Special Form

The AS form broadens coverage for certain types of property by removing some exclusions for those types of property. The AS form removes the mechanical breakdown exclusion, as it applies to loss or damage to computers, is removed.

The AS form also changes the exclusion of loss to personal property from dampness, dryness, or changes in temperature. The AS form covers such damage to computers if an air conditioning unit is damaged by a covered peril. Marring or scratching are also excluded.

The AS 01 adds four exclusions that pertain only to the coverage for computers that the endorsement offers: errors or omissions; electrical disturbance; computer-related losses; and computer advice or consultation.

Errors or Omissions. There is no coverage for loss or damage caused by errors or omissions in processing, recording, or storing information on media or computers. However, the insurer will pay for direct loss or damage caused by resulting fire or explosion if these causes of loss would be covered by the endorsement.

Electrical Disturbance. The form does not cover loss due to electrical or magnetic injury, disturbance, or erasure of electronic recordings. Direct loss or damage caused by lightning is covered.

Computer-Related Losses. The inability to correctly recognize, process, distinguish, interpret, or accept one or more dates or times is another cause of loss that AS 01 does not cover. This relates to the failure, malfunction, or inadequacy of the following: computer hardware, software, operating systems, and networks, microprocessors (computer chips) that are not part of any computer system, and any other computerized or electronic equipment or components.

Computer Advice or Consultation. The AS form will not respond to a loss or damage caused by any advice, consultation, design, evaluation, inspection, maintenance, repair, replacement, or supervision provided or done by or for the named insured in order to rectify or test for any potential or actual problems described in the computer-related loss clause.

If an excluded cause of loss as described in these four clauses results in a specified cause of loss (a defined term on CP 10 30 10 12), or in elevator collision resulting from mechanical breakdown, the insurer will pay for the loss or damage caused by these things.

The exclusions section does not apply to employee dishonesty, except for exclusions for governmental action, nuclear hazard, or war and military action.

The exclusions and limitations sections on CP 10 30 do not apply to outdoor signs, except for governmental action, nuclear hazard, war and military action, wear and tear, rust or corrosion, and mechanical breakdown. An elevator collision resulting from mechanical breakdown is covered, though.

The following exclusions apply to the valuable papers and records (other than electronic data) and accounts receivable coverage extensions offered by the AS 01: governmental action, nuclear hazard, war and military action, computer-related losses, computer advice or consultation, continuous or repeated seepage or leakage of water that occurs for fourteen days or more, water and other liquids that leak from plumbing equipment (unless heat is maintained or the equipment is drained), weather conditions (if they contribute in any way with ordinance or law, earth movement, governmental action, nuclear hazard, utility services, war and military action, water, and fungus), acts or decisions, and faulty workmanship, planning, constructions, materials, and the like.

The following additional exclusions apply only to the accounts receivable coverage extensions offered by the AS 01. There is no coverage for electrical or magnetic injury to accounts receivable, if the damage is due to programming errors or faulty installation/maintenance of computers. The insurer will not pay for loss or damage caused by or resulting from alteration, falsification, concealment, or destruction of records of accounts receivable done to conceal the wrongful giving, taking, or withholding of money, securities or other property. The exclusion applies only to the extent of the wrongful giving, taking, or withholding. The insurer also will not pay for loss or damage caused by or resulting from bookkeeping, accounting, or billing errors or omissions. And, the insurer will not pay for any loss or damage that requires any audit of records or any inventory computation to prove its factual existence.

The final exclusion added by the AS 01 applies to the coverage for valuable papers and records (other than electronic data). The form specifies that it does not cover damage that results from errors in copying or processing. However, loss from fire or explosion is covered. It also adds exclusions for loss from wear and tear; gradual deterioration; and latent defect.

Change to the CGL Form—Premium Audit

The AS form makes one change to the premium audit condition of the CGL form. The CGL form specifies that the premium shown is only a deposit premium and is subject to audit. The AS form says that the premium is subject to audit only “if a premium designated as an advance premium is shown in the Declarations.”

Definitions

The AS 01 adds the definitions for computer; counterfeit money, employee, forgery, manager, money, occurrence, and securities.

Computers are defined as those belonging to the named insured. This is important, because so many cars now have computers in them. The definition makes it clear that the only computers covered for mechanical breakdown are the insured's computers. The definition includes peripheral devices (like printers, scanners, external disk drives, etc.), but not data and media.

Counterfeit money. Since the AS form covers the insured for acceptance of counterfeit money, a definition of counterfeit money is necessary. It means an imitation of money that is intended to “deceive and to be taken as genuine.”

Employee is defined for the coverages of money and securities and employee dishonesty. It includes former employees for up to thirty days after they leave the insured's service. In order to qualify as an employee, one must be compensated by the insured and the insured must have the right to “direct and control” his activities. The term also includes those provided temporarily to the insured as substitutes for permanent employees or to meet short-term needs.

Forgery. Because the AS form covers the insured for loss from forgery of negotiable instruments, a definition of forgery is needed. Forgery is the signing of the name of another person or organization with intent to deceive. It does not mean a signature that consists in whole or in part of one's own name signed with or without authority, in any capacity, or for any purpose.

Manager. The coverage for employee dishonesty excludes dishonest acts committed by a manager. For the purposes of this form, a manager is someone serving “in a directorial capacity for a limited liability company.”

Member. As respects coverage provided under section I for employee dishonesty only, a member is an owner of a limited liability company represented by its membership interest who also may serve as a manager.

Money. Money is currency, coins, and bank notes in current use and having a face value, and travelers checks, register checks, and money orders held for sale to the public.

Occurrence, as it applies to money and securities coverage only, is all loss caused by one or more persons and involving a single act or series of related acts. As it applies to money orders and counterfeit money coverage, an occurrence is an act or series of acts involving one or more persons or that does not involve any person. As it applies to forgery or alteration coverage, an occurrence is all loss caused by an person or in which that person is involved, whether the loss involves one or more instruments. As it applies to employee dishonesty coverage, occurrence is all loss caused by or involving one or more employees, whether the result of a single act or a series of acts.

Securities. Securities are negotiable and nonnegotiable instruments or contracts representing either money or other property. The term includes redeemed coupons, tokens, tickets, revenue, and other stamps in current use, and evidences of debt issued in connection with credit cards. The term does not include money.

Endorsements

The auto service insured may modify the coverage through the purchase of several endorsements: loss or damage to customers' autos (direct primary coverage); loss or damage to customers' autos (legal liability coverage); loss or damage to customers' autos and other customers' property (direct primary coverage); loss or damage to lessors' property; hired auto and non-owned auto liability; and equipment breakdown protection coverage.

Loss or Damage to Customers' Autos (Direct Primary Coverage): Coverage is available under endorsement MS AS 02 04 06 for loss or damage to customers' autos parked at the described premises. The form promises to pay for direct physical loss or damage to autos or auto equipment in the insured's care while attending, servicing, repairing, operating, or storing the autos on premises or temporarily away from the premises. Payment for loss or damage is for the account of the auto owner only.

The loss must be caused by a covered cause of loss, which is defined on the form as any cause of loss not excluded. The endorsement lists three exclusions: loss or damage due to theft or conversion caused by any insured or its partners, executive officers, or employees; defective parts or materials; and defective work the insured performed, including work someone else performed for the insured.

The most the form pays for autos left in the insured's care, custody, or control is the limit of insurance, minus the deductible for loss or damage by collision, theft, or mischief or vandalism, regardless of the number of autos. The maximum deductible stated in the declarations is the most that will be deducted for any one event caused by theft or mischief or vandalism.

Loss or Damage to Customers' Autos (Legal Liability Coverage): Endorsement MS AS 03 04 06 applies to loss or damage to customers' autos parked at the described premises. The form promises to pay for sums the insured must legally pay as damages for direct physical loss or damage to autos or auto equipment in the insured's care while attending, servicing, repairing, operating, or storing the autos on premises or temporarily away from the premises. Payment for loss or damage is for the account of the auto owner only.

The loss must be caused by a covered cause of loss, which is defined on the form as any cause of loss not excluded. The endorsement lists four exclusions: liability resulting from any agreement by which the insured accepts responsibility for direct physical loss of or damage to autos left in the insured's care; loss or damage due to theft or conversion caused by any insured; defective parts or materials; and defective work performed by the insured or on the insured's behalf.

The insured has a right and duty to defend the insured against a suit asking for damages for which the insurance applies and within the policy limits.

Insureds under the form are the named insured and the named insured's partners, executive officers, and employees.

In addition to the limit of insurance, the form also pays for the insurer's expenses; the cost of bonds to release attachments; all reasonable expenses incurred by the insured—at the insurer's request—to assist in the investigation or defense of the claim or suit (up to $250 per day) due to time off work; costs taxed against the insured in a suit; prejudgment interest; and all interest on the full amount of any judgment that accrues after entry of the judgment and before the insurer pays, offers to pay, or deposits payment with the court.

The most the form pays for autos left in the insured's care, custody, or control is the limit of insurance, minus the deductible for loss or damage by collision, theft, or mischief or vandalism, regardless of the number of autos. The maximum deductible stated in the declarations is the most that will be deducted for any one event caused by theft or mischief or vandalism.

Under the endorsement, auto is “a land motor vehicle, trailer or semitrailer.”

Loss or Damage to Customers' Autos and Other Customers' Property (Direct Primary Coverage): Coverage is available under endorsement MS AS 04 04 06 for direct physical loss or damage to autos, auto equipment in the insured's care while attending, servicing, repairing, operating, or storing the autos on premises or temporarily away from the premises. Payment for loss or damage is for the account of the auto owner only.

The loss must be caused by a covered cause of loss, which is defined on the form as any cause of loss not excluded. The endorsement lists three exclusions: loss or damage due to theft or conversion caused by any insured or its partners, executive officers, or employees; defective parts or materials; and defective work the insured performed, including work someone else performed for the insured.

The most the form pays for autos left in the insured's care, custody, or control is the limit of insurance, minus the deductible for loss or damage by collision, theft, or mischief or vandalism, regardless of the number of autos. The maximum deductible stated in the declarations is the most that will be deducted for any one event caused by theft or mischief or vandalism.

Loss or Damage to Lessors' Property: Endorsement MS AS 05 04 06 covers property leased to the named insured for direct physical loss or damage if lost or damaged by a covered cause of loss. Payment is made only for the account of the owner of the leased property (must be shown in the schedule) and only for loss or damage not covered by the lessor's policy due to the application of a deductible provision.

The most that will be paid is the limit of insurance shown in the schedule, which applies separately from the limits on the CP 00 10 form.

The Building and Personal Property Coverage form's coinsurance condition does not apply to this endorsement.

The following exclusions are added to this endorsement: loss or damage that takes place after the termination of the applicable lease; loss or damage resulting from structural operations, new construction, or demolition operations performed by or on behalf of the lessor; or loss or damage resulting from the sole negligence of the lessor.

Leased property is defined as property described in the schedule that is rented or leased to the named insured and includes substitute, replacement, or extra equipment to meet the insured's needs, under an agreement that the named insured provides insurance for the lessor.

Auto Service Risks – Hired Auto And Non-Owned Auto Liability Insurance: Endorsement MS AS 06 04 06 modifies the CGL coverage part. The insurance provided under Bodily Injury and Property Damage Liability applies to bodily injury or property damage arising out use or maintenance of a hired auto by the named insured or his employees in the course of business or a non-owned auto by any person in the course of business.

The following Bodily Injury and Property Damage Liability endorsements do not apply: contractual liability; liquor liability; employers liability; aircraft, auto, or watercraft; mobile equipment; damage to property; damage to your product; damage to your work; damage to impaired property or property not physically injured; and recall of products, work, or impaired property.

The following Bodily Injury and Property Damage Liability exclusions are added: bodily injury or property damage for which the insured must pay damages by reason of assumption of liability in a contract or agreement, except that the inured would have without the contract or agreement or in an insured contract; bodily injury to an employee in the course of employment or performing duties related to the performance of the insured's business; bodily injury to the spouse, child, parent, or sibling of an employee in the course of the insured's business; property damage to property owned or being transported by, rented to, or loaned to the insured or in the insured's care, custody, or control.

The following are insureds under the endorsement: the named insured; any other person using a hired auto with the named insured's permission; with respect to non-owned autos, any partner or executive officer of the named insured, only when such auto is used in the named insured's business; any other person or organization with respect to their liability due to acts or omissions of an insured.

The most the insurer will pay under the limit of insurance shown, regardless of the number of hired autos, non-owned autos, insured, premiums paid, claims made, or vehicles involved in the occurrence.

The insurance is excess over any primary insurance covering the hired auto or non-owned auto.

Auto business means the business or occupation of selling. Repairing, servicing, storing, or parking autos.

Hired auto means any auto the insured leases, hires, rents, or borrows, but not from employees, partners, executive officers, or members of their households.

Non-owned auto means an auto the insured does not own, lease, hire, rent, or borrow and is used in connection with the insured's business. Autos owned by the insured's employees, partners, executive officers, and members of their households are included, but only when used in the insured's business or personal affairs.

Mechanical Breakdown Coverage: this endorsement has been withdrawn.

Equipment Breakdown Protection Coverage: new endorsement MS AS 08 04 06 pays for direct loss or damage caused by mechanical breakdown or electrical failure to pressure, mechanical, or electrical machinery and equipment.

The artificially generated electrical current, mechanical breakdown, and explosion of steam boilers exclusions of the CP 10 30 do not apply to this endorsement.

The following limitations of the CP 10 30 do not apply to the AS 08 endorsement: limitation relating to steam boilers, steam pipes, steam engines, and steam turbines and the limitation relating to hot water boilers or other water heating equipment.

The AS 08 adds the following provisions to the deductible section of the commercial property form, as it relates to equipment breakdown protection coverage: the form does not pay for loss or damage in any one occurrence until it exceeds the deductible in the declarations for equipment breakdown protection coverage, for loss caused by mechanical breakdown or electrical failure; if a deductible is shown in the declarations for equipment breakdown protection coverage, the insurer will first subtract the deductible amount from any loss it would otherwise pay and then pay the amount of loss in excess of the deductible; if no deductible is shown for equipment breakdown protection coverage, the deductible provisions of the Building and Personal Property Coverage form apply; and, if two or more deductibles apply, only the largest of the applicable deductibles will apply.

The following apply if Business Income (And Extra Expense) coverage is provided: if the waiting period is amended for equipment breakdown protection coverage, the form does not pay for business income loss occurring during the consecutive number of hours shown in the declarations immediately following a mechanical breakdown or electrical failure; if no waiting period is shown, the provisions of the Business Income (And Extra Expense) form apply; if two or more waiting periods apply, only the longest of the applicable waiting periods will apply.

The following are not considered mechanical breakdown or electrical failure to pressure, mechanical, or electrical machinery or equipment: malfunction, including adjustment, alignment, cleaning, or modification (this is not an exhaustive list); leakage to any valve, fitting, shaft seal, gland packing, joint, or connection; damage to any vacuum tube, gas tube, or brush; or functioning of any safety or protective device.

The provisions of the endorsement do not increase any amount or limit of insurance that is otherwise provided by the policy.

The insured may suspend the coverage when any covered pressure, mechanical, or electrical machinery and equipment is found to be in or exposed to a dangerous condition. A pro rata refund of premium is provided if insurance is suspended, but the suspension is effective even if the refund has not been made or offered.

Auto Service Risks—Defective Products Coverage: this endorsement will replace the damage to your product exclusion in the auto service risks coverage form. MS AS 09 10 11 states that it applies to property damage to the named insured's product arising out of it or any part of it. However, with respect to the named insured's product that is sold or installed as part of the business of the named insured, this exclusion will not apply if the property damage is caused by a defect that existed in the product or any part of it when it was transferred to another and the defect was not the result of the named insured's work.

The coverage that this endorsement gives applies only to the amount of property damage to the product that is in excess of the deductible amount, if any stated in the schedule of MS AS 09. The deductible is the only deductible that applies to the coverage provided by MS AS 09. The deductible can be applied on a per claim or a per occurrence basis.