Section VI of the Policy

Summary: Words and terms that have a contractually defined meaning that applies throughout the garage coverage form are collected in this section of the form. There are nineteen such defined words or phrases, A through S, with sub-parts. Each is quoted, and where appropriate, commented on below. Note that throughout this policy the words “you” and “your” refer to the Named Insured shown in the Declarations. The words “we”, “us” and “our” refer to the Company providing this insurance (the insurer).

Topics covered:

Accident

Auto

Bodily injury

Covered pollution cost or expense

Customer’s auto

Diminution in value

Employee

Garage operations

Insured

Insured contract

Leased worker

Loss

Pollutants

Products

Property damage

Suit

Temporary worker

Trailer

Work you performed

Accident

 A.”Accident” includes continuous or repeated exposure to the same conditions resulting in “bodily injury” or “property damage”.

Auto

 B.”Auto” means a land motor vehicle, “trailer” or semitrailer.

Bodily Injury

 C.”Bodily Injury” means bodily injury, sickness or disease sustained by a person including death resulting from any of these.

 Analysis

 Note that accident is not really defined. All can rely on common usage—a chance happening—for interpretation. An insured’s mistake in towing the wrong car from a parking lot and repairing it is a chance happening, an accident, and the owner’s claim for the loss of use of the vehicle calls on the liability coverage under the insured’s garage coverage form.

 What this definition accomplishes is to specify that use of the word accident in the policy includes the concept of unintended or unexpected injury or damage resulting from continuous or repeated exposure to the same conditions. Thus, insuring agreements tied to an accident automatically encompass occurrence. An example of such an occurrence—unique to the garage business—happened when an insured purchased what appeared to be an abandoned junker from a neighboring body shop. The insured dismantled the car to salvage its parts only to have the rightful owner turn up, brandishing the title to the vehicle and demanding the book value of the car plus a sizable sum in exemplary damages. The car had been exposed to the continuous scavenging operations of the insured and had been unintentionally damaged thereby—an occurrence.

 As is indicated in the limit of insurance provisions, all injury or damage stemming from a series of repeated occurrences is considered as resulting from one accident for purposes of applying the policy’s limits. Any coverage that is afforded by the policy is subject, of course, to other policy provisions.

 The definition of auto—any land motor vehicle, trailer or semitrailer—is quite broad. Mopeds and motorcycles, three-wheelers, motor homes, cars, trucks, and tractor-trailer combinations all come under the term auto.

 Bodily injury carries the familiar meaning. The term includes sickness or disease along with traumatic injury and includes death from these causes injury, sickness or disease. Emotional injury, mainly if evidenced by physical symptoms, has been included in the meaning of the term.

 Covered Pollution Cost or Expense

 D.”Covered pollution cost or expense” means any cost or expense arising out of:

1.Any request, demand, order or statutory or regulatory requirement that the “insured” or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of “pollutants”; or

2.Any claim or “suit” by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of “pollutants”.

“Covered pollution cost or expense” does not include any cost or expense arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of “pollutants”:

a.That are, or that are contained in any property that is:

1.Being transported or towed by, handled, or handled for movement into, onto or from the covered “auto”;

2.Otherwise in the course of transit by or on behalf of the insured”; or

3.Being stored, disposed of, treated or processed in or upon the covered “auto”; or

b.Before the “pollutants” or any property in which the “pollutants” are contained are moved from the place where they are accepted by the “insured” for movement into or onto the covered “auto”; or

c.After the “pollutants” or any property in which the “pollutants” are contained are moved from the covered “auto” to the place where they are finally delivered, disposed of or abandoned by the “insured”.

Paragraph a. above does not apply to fuels, lubricants, fluids, exhaust gases or other similar “pollutants” that are needed for or result from the normal electrical, hydraulic or mechanical functioning of the covered “auto” or its parts, if the “pollutants” escape, seep, migrate, or are discharged, dispersed or released directly from an “auto” part designed by its manufacturer to hold, store, receive or dispose of such “pollutants”.

Paragraphs b. and c. above do not apply to “accidents” that occur away from premises owned by or rented to an “insured” with respect to “pollutants” not in or upon a covered “auto” if:

(1)The “pollutants” or any property in which the “pollutants” are contained are upset, overturned or damaged as a result of the maintenance or use of a covered “auto”; and

(2)The discharge, dispersal, seepage, migration, release or escape of the “pollutants” is caused directly by such upset, overturn or damage.

 Analysis

 The term behind this lengthy definition is used three times in the garage coverage form: in Section V, part B, General Conditions, covered pollution cost or expense, to be covered, must arise out of accidents occurring during the policy period and in the coverage territory; in Section VI, suit is defined to include proceedings in which covered pollution cost or expense figure, and; in liability exclusion 6 various properties in the insured’s care, custody, or control are not covered for either property damage or covered pollution cost or expense. The term is not used in the policy’s even lengthier pollution exclusions (numbers 8 and 9).

 In a nutshell, the term is defined as the activity involved in locating, handling, or removing pollutants. It does not apply to any such activity involving transporting pollutants unless they are contained in (and escape from) automotive fuel tanks, crank cases, and so on or unless they are released when the insured’s auto, operating off the insured premises, crashes into them.

 This definition is also discussed in an article on the business auto form; see Business Auto Definitions.

 Customer’s Auto

 E.”Customer’s auto” means a land motor vehicle, “trailer” or semitrailer lawfully within your possession for service, repair, storage, or safekeeping, with or without the vehicle owner’s knowledge or consent. A “customer’s auto” also includes any such vehicle left in your care by your “employees”, and members of their households who pay for services performed.

 Analysis

 This definition is new to the current garage policy. Previous versions of the garage policy referred to “covered autos” in reference to garagekeepers coverage, but that has now been changed to “customer’s autos”. This definition explains the point that garagekeepers coverage applies to the insured’s servicing, repairing, parking, or storing of a vehicle that belongs to another entity. Note that this other entity can be a paying customer who willingly takes his vehicle to the insured for repair work, or it can be one who has his car legally towed for a traffic violation and then the vehicle is stored in the insured’s lot until the traffic fine is paid.

 It is interesting to note that the definition includes the vehicles of employees under certain circumstances. If an employee of the insured garage leaves his car with the insured for repair work and pays for the repair work, the vehicle is a customer’s auto and so, is a covered auto for damages done to it. If the employee does not have to pay for the repair work or if he does the work himself with no compensation to the garage owner, the vehicle is not a customer’s auto and not a covered auto for any damage it might suffer.

 Diminution in Value

 F.”Diminution in value” means the actual or perceived loss in market value or resale value which results from a direct and accidental “loss”.

 Analysis

 This term is used in reference to an exclusion in the physical damage coverage section of the garage policy. Basically, the definition helps to explain to the insured that the garage policy will not pay for the loss in value that a car suffers after it has been in an accident. Even if a damaged car is repaired quickly and efficiently, it is a basic truth that the value of that car is diminished because of the physical damage it has suffered. The garage policy does not cover this loss in value; it is not considered direct physical damage which is what the policy is meant to cover.

 Employee

 G.”Employee” includes a “leased worker”. “Employee” does not include a “temporary worker”.

 Analysis

 This term is defined in a general way, just as it is in other liability policies. See Business Auto Definitions; also see Commercial General Liability Definitions.

 Garage Operations

 H.”Garage operations” means the ownership, maintenance or use of locations for garage business and that portion of the roads or other accesses that adjoin these locations. “Garage operations” includes the ownership, maintenance or use of the “autos” indicated in SECTION I of this Coverage Form as covered “autos”. “Garage operations” also include all operations necessary or incidental to a garage business.

Insured

 I.”Insured” means any person or organization qualifying as an insured in the Who Is an Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or “suit” is brought.

 Analysis

 Garage operations takes in: (1) the ownership, maintenance, or use of locations — including roads and access ways — for garage business, (2) of covered autos, and (3) all operations that are either necessary or incidental to a garage business.

 Premises liability protection is stipulated in the promise to cover claims for bodily injury or property damage that accidentally results from the ownership, maintenance or use of locations for garage business. Consequently, injury or damage arising out of the condition of the premises at a garage location is covered. Expanding, remodeling, or rebuilding a structure used to house the garage business is one such operation and the garage policy insured has coverage for liability arising out of the acts of contractors or for the insured’s own supervision of any such project.

 Note that whenever a location is assigned a dual purpose, that must be made known to the underwriter. For example, a garage policy insured might deal in boats as a sideline; if the prospective purchaser of a new car is injured by a boat that capsizes on the showroom floor, the accident would be difficult to describe as one resulting from the ownership, maintenance, or use of the location for garage business. So the underwriter should have all the facts pertaining to the risk.

 To what extent are other business operations either necessary or incidental to a garage business? Many insureds engage in activities having only a tenuous connection to a garage business, e.g., a line of correlated clothing to be sold in dealers’ showrooms, or an insured might operate a car wash or a car rental agency as a sideline. Are these activities necessary or incidental to a garage business?

 Many examples could be given of operations that are “necessary . . . to a garage business,” all, of course, being covered by this part of the garage form’s insuring agreement. Many more examples of operations that could be “incidental . . . to a garage business” can be imagined (boat sales, clothing sales, car washateria, car rental agencies as above, for example), but it is unclear if these are reached automatically by the coverage promise. As is noted in the general discussion of garage operations, the courts have been reluctant to apply the broad interpretation that the word incidental is capable of having. Insureds and their advisers need to scrutinize all operations for any that might come outside the usual business of a garage and report the exposure to the underwriter for proper handling that is mutually acceptable to all parties.

 The New Hampshire supreme court has held that a car rental operation in conjunction with an auto sales and service agency was covered as an incidental operation of the garage. Two of the justices, dissenting from the majority opinion, agreed with the trial court that “leasing automobiles is not an activity incidental to garage operations.” The case is Moore v. New Hampshire Ins. Co., 444 A.2d 546 (N.H. 1983).

 A car wash operation was held to be incidental to the operation of a service station by an Illinois appellate court in Great Central Ins. Co. v. Bennett, 351 N.E.2d 582 (Ill. App. 1977). Here too, however, one of the justices dissented from this court’s decision as to the proper interpretation.

 In Linderman v. American Home Assurance Co., 414 So. 2d 1124 (Fla. App. 1983), a Florida district court of appeal ruled for coverage of an occurrence involving an employee of a service station causing an accident while working on his own auto. The court determined that the coverage promised for use of the premises for garage operations as well as the coverage for operations necessary or incidental to the garage operation could both be applicable.

 Courts have sometimes overlooked the distinction between use of the premises for garage operations and coverage of operations (at any site) that are usual or incidental to a garage business. The word “incidental,” undefined in the contract, carries the common usage meaning of happening by chance or as a minor concomitant. But the courts have shied from interpreting the contract as broadly as its language warrants. In Automobile Underwriters, Inc. v. Hitch, 349 N.E.2d 271 (Ind. App. 1977), an Indiana court of appeals overturned a trial court’s ruling that the sale of shotgun shells at a service station was covered as incidental to the operation of a garage. “The only reasonable interpretation,” according to the appeals court, is that “the sale of . . . shells is not necessary or incidental to the use of the premises for the purpose of operating a garage.” (The policy in question carried the standard provisions respecting both use of the premises as a garage and all operations necessary or incidental thereto.) Adding another embellishment to the language of the contract, the appeals court said that “it is only matters arising on garage premises or directly incidental to the garage business for which the insurance company must answer” (emphasis supplied).

 One fact stands out: even where cases were concerned with such closely related (to a garage operation) activities as car washes and car rentals, decisions favoring insureds were not unanimous. The producer should be alert to uncover the existence of incidental operations and discuss them with the underwriter on the risk before a claim is presented.

 Insureds who go out of business and discontinue the coverage of the garage policy have another exposure to consider. The coverage of the policy pertains to incidents of bodily injury or property damage that occur during the policy period. Products that the insured has sold or made or work that the insured has performed will be in existence for some time after the business is closed and accidents could well occur after termination of the policy.

 Insureds who have gone out of business but still desire protection for potential claims that may arise from their products and completed operations exposures will need to turn to specialty markets; ISO has discontinued its A-rated classification of discontinued operations. Premium is commonly based on a percentage of the liability premium for the insured’s last year of business, with the percentage generally decreasing for each succeeding year of protection.

 Insureds who remain in business, but change insurers for their garage policy protection do not have the same need. Claims for bodily injury or property damage occurring during the term of the replacement policy are covered by the replacement policy regardless of when the product or the work that caused the accident took place.

 Liability insurance for elevators, escalators, and auto service hoists is included in the garage policy as simply another facet of garage operations, either as a premises feature or as being used in the activities of the garage business. However, the garage policy’s exclusion of damage to property in the care, custody, or control of the insured eliminates protection for the most common garage exposure in this line, i.e., damage to customers’ automobiles on an auto service hoist. Garagekeepers collision insurance, if purchased, protects the garage owner in these accidents. See Garage Liability Section III for more information on this subject. Elevator collision insurance as a separate option (and of infrequent use in recent years because of the widespread utilization of open perils property forms) is no longer available. The rules for writing elevator collision insurance have been withdrawn from the general liability section of the ISO commercial lines manual (CLM).

 Extension of insured status to any person or organization who may qualify for coverage within the stated provisions is commonly called the omnibus clause. Related to this clause is the severability provision that says the policy applies separately to each insured who is seeking coverage or against whom a claim or suit is brought. As regards the limit of insurance, though two or more may qualify as insureds the limits stated in the policy remain as they are written unless changed by endorsement. This idea is reinforced by a similar statement within the provisions dealing with the limit of insurance.

 The definition of insured, note, is distinct from named insured. Named insured is the party so identified in the declarations and is often referred to as “you” and “your.”  Plain insured is anyone who, not named in the policy, nevertheless qualifies as someone entitled to the policy’s protection. Perhaps the individual is a permissive user of a dealership auto, for one example.

 Insured Contract

 J.”Insured Contract” means: