Conversion, embezzlement, or secretion coverage CA 20 10

Excluding autos under lease CA 20 11

Rent-it-there/leave-it-here autos CA 20 12

Schedule of limits for owned autos CA 20 13

Second level coverage CA 20 14

Auto leased with drivers—physical damage coverage CA 20 33

Lessor—Additional Insured and Loss Payee CA 20 01

 Endorsement CA 20 01 gives the scheduled lessor additional insured status on the commercial auto forms of the lessee for bodily injury or property damage resulting from the acts or omissions of the named insured (lessee) or any of his employees or agents. The coverages offered are liability and physical damage; the liability coverage is for each accident, while the physical damage coverage is for each covered leased auto. Any leased auto listed on the schedule is considered a covered auto owned by the named insured and the coverages apply until the expiration date shown on the schedule or when the lessor takes possession of the leased auto, whichever occurs first. The loss payable clause on CA 20 01 states that: the insurer will pay, as interest may appear, the named insured and the lessor for loss to a leased auto; the insurance covers the interest of the lessor unless the loss results from fraudulent acts or omissions of the part of the named insured; and if the insurer makes any payment to the lessor, the insurer obtains his or her rights against any other party.

 CA 20 01 also notes that cancellation notices will be mailed to the lessor and that the lessor is not liable for payment of the lessee's premium.

 Contingent Liability Coverage CA 20 09

 The potential danger to the lessor using the exclusion of certain leased autos endorsement is that for one reason or another — material misrepresentation, applicable exclusion, etc. — the lessee's policy will not cover an accident involving a leased auto. This could result in a subsequent action against the lessor. To protect against that possibility, the contingent coverage endorsement (CA 20 09) can be used in lieu of the exclusionary endorsement. Under the contingent approach, the lessor's liability coverage and any required no-fault coverage apply, if two conditions are met:

 1.     The lessee has furnished the lessor with a certificate of insurance (or a copy of the additional insured endorsement) meeting the insurance requirements of the leasing agreement

2.     The lessee's insurance is not collectible at the time of the accident. In this way, the leasing firm does not have to pay the premium for primary coverage on the leased auto, but does have access to its own insurance in the event the lessee's fails.

 The limit of liability for contingent coverage differs for the lessee and the lessor. The lessor is covered for the amount shown in the endorsement or the amount required by the leasing agreement, whichever is smaller. The lessee is covered only to the minimum limits required by the applicable financial responsibility or compulsory insurance law.

 Contingent coverage is excess over any other collectible insurance except insurance that is specifically stated to be excess over the lessor's policy, such as an umbrella liability policy. If the lessee's policy is cancelled, contingent coverage terminates when the lessor regains custody of the leased auto or thirty days after the effective date of cancellation, whichever is earlier.

 Conversion, Embezzlement, or Secretion Coverage CA 20 10

 Either comprehensive or specified causes of loss physical damage coverage under the BAP covers theft of a covered auto. In the case of most insureds, the theft exposure — normally theft by an outsider who did not have prior possession of the auto — is adequately represented in the comprehensive or specified perils premium. Not so, usually, in the case of an auto leasing or rental firm. There, a large part of the theft exposure relates to the possibility that a lessee or rentee in possession will abscond with an auto. This type of theft is variously referred to as conversion, embezzlement, or secretion. Because "theft" is a broad term encompassing any unlawful taking of another's property, the BAP's coverage of auto theft might, depending on the circumstances, be construed to cover losses resulting from conversion, embezzlement, or secretion — unless the policy is amended to exclude it.

 The first purpose of the conversion, embezzlement, or secretion endorsement (CA 20 10) is to eliminate coverage for these perils from the lessor's policy. The exclusion applies to "loss due to theft, conversion, embezzlement or secretion by any person in possession of a covered auto either (i) under a bailment lease, conditional sale, purchase agreement, mortgage or other encumbrance or (ii) as a rentee or lessee of such covered auto." The exclusion does not eliminate theft coverage for a covered auto under any other circumstances. For example, if a leased or rented auto were stolen by someone other than "any person in possession . . .", the lessor's theft coverage would apply to the loss.

 The second purpose of the exclusion is to enable the lessor to buy back the excluded coverage, on either an "all covered autos" basis or a designated autos basis. Coverage applies to loss to covered autos by theft, conversion, embezzlement, or secretion by any lessee or rentee. The limit of liability, however, is 75 percent of the auto's actual cash value, less the amount of any security deposit made by the lessee or rentee. If the lessor becomes aware of a loss or even a possible loss, it must do all of the following:

 1.     Promptly notify the police and the insurance company