Accident. The word “accident“ is not actually defined. One, however, can rely on its common usage—a chance happening—for interpretation. When first used in insurance, it was meant as a sudden, unexpected, or unintentional event definite in time and place. In other words, fortuitous. This definition also includes the characteristics of an occurrence, i.e., continuous or repeated exposure to the same conditions. Accident is commonly used in relation to automobiles since, when there is a mishap involving an automobile, people describe the situation as an auto accident, not an auto occurrence.

 Act, error, or omission. This means any actual or alleged negligent act, error or omission committed by an insured in the course of the named insured's auto dealer operations arising: out of an insured's failure to comply with any local, state or federal law or regulation concerning the disclosure of credit or lease terms to consumers in connection with the sale or lease of an auto in the auto dealer operations, including, but not limited to, the Truth In Lending and Consumer Leasing Acts; out of an insured's failure to comply with any local, state or federal law or regulation concerning the disclosure of accurate odometer mileage to consumers in connection with the sale or lease of an auto in auto dealer operations; in an insured's capacity as an insurance agent or broker in the offering, placement or maintenance of any auto physical damage, auto loan/lease gap, credit life or credit disability insurance sold in connection with the sale or lease of an auto in auto dealer operations, but only if the insured holds a valid insurance agent or broker license at the time the act, error or omission is committed in the jurisdiction in which the auto dealer operations is located, if required to do so by such jurisdiction; and, out of a defect in title in connection with the sale or lease of an auto in auto dealer operations.

 Act, error or omission is the name given by ISO to provide those eligible for this insurance the opportunity to purchase the four described kinds of coverages. Those insurers that offer their own independently filed (proprietary) auto dealer policies use different terms for purposes of providing these kinds of coverages. Instead of packaging the various coverages, some insurers offer each of the coverages separately. Also, the coverages as described under this standard ISO act, error or omission section are not usually the same as what other insurers provide. In fact, it is difficult to identify all of the different types of coverages that a dealer actually requires.

 Advertisement. Advertisement means a notice that is broadcast or published by the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition: notices that are published include material placed on the Internet or on similar electronic means of communication; and regarding web sites, only that part of a web site that is about your goods, products or services for purposes of attracting customers or supporters is considered an advertisement.

 Auto. An auto is a land motor vehicle, trailer or semi-trailer.

 Auto dealer operations. Auto dealers operations means the ownership, maintenance or use of locations for an auto dealership and that portion of the roads or other accesses that adjoin these locations. Auto dealer operations also include all operations necessary or incidental to an auto dealership. Auto dealer operations take in (1) the ownership, maintenance, or use of locations—including roads and access ways for the franchised or nonfranchised dealership, (2) covered autos, and (3) all operations that are either necessary or incidental to the business.

 Premises liability protection is stipulated in the promise to cover claims for bodily injury, property damage, and personal and advertising injury liability (unless excluded by endorsement) that results from the ownership, maintenance, or use of locations for this kind of business. Consequently, bodily injury or property damage arising out of a condition of the premises at the business location should be covered. Expanding, remodeling, or rebuilding a building or structure to house the dealership business is one such operation, and the auto dealer operations also should have coverage for liability arising out of the acts of contractors or for the named insured's own supervision of any such project related to the auto dealer operations.

 Note that whenever a location is assigned a dual purpose, it is advisable that the insurer be notified through the producer of record. For example, assume a dealership deals in boats as a sideline. If a prospective purchaser of a new auto were to be injured by a boat in the showroom that the customer was drawn to see, the accident would be difficult to describe as being one that resulted from the ownership, maintenance, or use of the location for an auto dealer business.

 To what extent other business operations are either necessary or incidental to an auto dealership may be difficult to determine. Some insureds engage in activities having only a tenuous connection to an auto dealership, e.g., a line of correlated clothing to be sold in dealers' showrooms, or a named insured may operate a car wash or a car rental agency as a sideline. Are these activities necessary or incidental to an auto dealership operation?

 Many examples could be given of operations that are “necessary. . .to an auto dealer operation”, all, of course, being covered by this part of the auto dealer coverage form's (ADCF) insuring agreement. Many more examples of operations that could be “incidental . . . to an auto dealer operation” can be imagined (boat sales, clothing sales, car washateria, and car rental agencies, for example), but it is unclear if these are reached automatically by the coverage promise. Courts, as a rule, have been reluctant to apply the broad interpretation that the word incidental is capable of having. Insureds and their producers and/consultants need to scrutinize operations for any that might come outside the usual business of an auto dealership and report the exposure to the insurer for proper handling that is mutually acceptable to both parties.

 Bodily injury. Bodily injury means bodily injury, sickness or disease sustained by a person including death resulting from any of these. In the usual sense of these words, bodily injury means hurt or harm to the human body by contact of some force and any resulting pain and suffering, sickness, or disease, including death. A definite uncertainty is whether bodily injury encompasses mental or emotional harm. Some courts have held that the term bodily injury is ambiguous and, therefore, includes emotional distress, whereas other courts have rejected such arguments. Much will likely depend on the facts. But if, as a result of bodily injury, mental or emotional injury follows as a consequence of bodily harm, the liability policy generally covers such injury.

 Covered pollution cost or expense. Covered pollution cost or expense means any cost or expense arising out of: 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 respond to, or assess the effects of pollutants; or any claim or suit by or on behalf of any 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: that are or that are contained in any property that is being transported or towed by, handled, or handled for movement into, onto or from the covered auto, otherwise in the course of transit by or on behalf of the insured, or being stored, disposed of, treated or processed in or upon the covered auto.

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

 Customer's auto. 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.

 This term is not new. It was part of the garage policy for a number of years. Its purpose is to distinguish between the coverages having to do with garagekeepers coverage and all of the other coverages that make up the auto dealer coverage form. (Previous editions of the garage policy referred to covered autos in reference to garagekeepers coverage, but that was changed.) This defined term explains the point that garagekeepers coverage applies to the named insured's servicing, repairing, storing, or parking of a vehicle that belongs to someone else. Note that this someone else can be a paying customer who willingly takes his or her vehicle to a dealership for repair work, or it can be one who has his or her car legally towed for a traffic violation and then the vehicle is stored in the named insured's lot until the fine is paid.

 It is interesting to note that this definition includes the vehicles of employees under certain circumstances. If an employee of the dealership leaves his or her auto with the named insured for repair work and pays for the repair work, the vehicle is a customer's auto and, therefore, is a covered auto for damages done to it. If the employee does not have to pay for the repair work or if the employees does the work himself or herself with no compensation to the dealer, the vehicle is not a customer's auto and, therefore, not a covered auto for purposes of any damage sustained by it.

 Diminution in value. Diminution in value means the actual or perceived loss in market value or resale value which results from a direct and accidental loss. This term is used in reference to the exclusion in the physical damage coverage section of the ADCF. Basically, this definition helps to explain to the insured that the auto dealer coverage form will not pay for the loss in value that an auto sustains after it has been in an accident.

 Even if a damaged auto is repaired quickly and efficiently, it is a basic truth that the value of that auto is diminished because of the physical damage it has sustained. The ACDF does not cover this loss in value; it is not considered direct physical damage, which is what the policy is meant to cover. The reason it is defined is because without it, disputes can arise and how they are settled can vary, sometimes against insurers for coverage.

 Employee. An employee includes a leased worker, but does not include a temporary workers. Since this term does not use the word means, the term is not defined. Who an employee is can be problematic. While there are many attributes in determining whether a person is an employee, two common ones are: (1) control and direction, and (2) providing of tools. Control and direction mean situations in which a person is told what work to perform, where to perform it, and when the work needs to be performed. Also, the person for whom the work is being performed may even provide the direction under which the work is to be performed. An employee, furthermore, usually is given the tools with which to perform the given assignment to its conclusion.

 Executive officer. An executive officer is a person holding any of the officer positions created by the named insured's charter, constitution, by-laws or any other similar governing document.

 One of the primary reasons executive officer is a defined term is to avoid the argument raised by some employees confronted with a fellow employee lawsuit (currently also referred to as co-employee lawsuit) that they were acting in the capacity of an executive officer at the time their negligent conduct injured another employee. This may be done in order to overcome the CGL policy's co-employee exclusion. With this definition of executive officer in the policy, an alleged tortfeasor/co-employee will unlikely obtain coverage unless he or she in fact is an executive officer as defined in the policy.

 Impaired property. Impaired property means tangible property, other than the named insured's product or work the named insured performed that cannot be used or is less useful because: it incorporates the product or work that is known or thought to be defective, deficient, inadequate or dangerous; or the named insured has failed to fulfill the terms of a contract or agreement; and if such property can be restored to use by the repair, replacement, adjustment or removal of the product or work or fulfilling the terms of the contract or agreement.

 The purpose of the impaired property exclusion is to exclude damages or costs or both associated with tangible property that cannot be used, or is made less useful, because (1) it incorporates the named insured's product or work, or (2) the named insured fails to fulfill the terms of a contract—but only if that property can be restored to use by the repair, removal, or replacement of the work or product or by fulfilling the terms of the contract.

 To understand the application of the impaired property exclusion, one has to read both the exclusion and the definition of impaired property in concert. In doing so, one should note the following:

• The exclusion acknowledges that the incorporation of a defective product or work into other property constitutes property damage;
• The exclusion is inapplicable if the property damage amounts to loss of use of other tangible property arising from the sudden and accidental physical injury to the named insured's product or work; or conversely, the exclusion is applicable if the loss of use of other tangible property does not arise from sudden and accidental physical injury to the named insured's products or work;
• If the property damage did not arise from sudden and accidental physical injury to the named insured's product or work and the property damage was due to the incorporation of such work or product: (1) if the damaged property can be corrected or fixed through the repair, removal, or replacement of the named insured's product or work, then such property damage is excluded; or (2) if the damaged property cannot be corrected or fixed through the repair, removal, or replacement of the named insured's product or work, then the impaired property exclusion does not apply and the property damage is covered;
• If the property damage did not arise from the sudden and accidental physical injury to the named insured's product or work, and the resulting loss of use is due to breach of contract, (1) if the other property can be restored to use by full performance of the contract, then the property damage is excluded; or (2) if the other property cannot be restored to use by full performance of the contract, then the impair property exclusion does not apply and the property damage is covered.

 This exclusion is likely to be instrumental in a claim involving some repair to an auto when a defective component of a third party supplier is used on the auto making it operate improperly. As a result, the auto's owner sustains a loss of use. This exclusion would likely apply here because the auto can be restored to use with the repair, removal or replacement of the defective component.

 Insured. Insured is 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 lawsuit is brought. So, when there is more than one insured, the coverage provided applies separately to each insured against whom claim is made or suit is brought.

 To determine who qualifies as an insured requires referral to the who is an insured provision of the respective sections of the ACDF, since they vary. The who is an insured provision applying to Section I – Covered Auto Liability Coverage parallels the coverage of the BAP, whereas who an insured is for purposes of Section II – General Liability Coverage will be the same as the provision as it appears in the CGL coverage form. Section III – Acts, Errors or Omissions coverage also has its own who is an insured provision that is a shorter version of the Section II – General Liability Coverage because Section III does not deal with bodily injury, property damage or personal and advertising injury.

 Insured contract. The definition of insured contract in the ADCF is similar to the one applicable to the CGL coverage form with the following exceptions:

 First, the definition in the ADCF also includes a provision having to do with the rental or lease, by the named insured or any of its employees, of any auto. This kind of contract or agreement is not considered an insured contract to the extent that it obligates the named insured or any of its employees to pay property damage to any auto rented or leased by the named insured or any of the named insured's employees.

 Secondly, an insured contract is said not to include that part of any contract or agreement that pertains to the loan, lease, or rental of an auto to the named insured or any of its employees, if the auto is loaned, leased, or rented with a driver.

 Finally, an insured contract does not include that part of any contract or agreement that holds a person or organization engaged in the business of transporting property by auto for hire harmless for the named insured's use of a covered auto over a route or territory that person or organization is authorized to serve by public authority.

 Leased worker. A leased worker is a person leased to the named insured by a labor leasing firm under an agreement between the named insured and the labor leasing firm, to perform duties related to the conduct of the business. A leased worker does not include a temporary worker.

 Workers in this category are those of a leasing firm who are assigned duties with the entity that requires the services of those persons on a long-term basis. When workers are leased from an entity, they are viewed as though they are the regular employees of the firm acquiring their services. Note, however, that a leased worker is not a temporary worker.

 Loading or unloading. Loading or unloading means the handling of property: after it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft or auto; while it is in or on an aircraft, watercraft or auto; or while it is being moved from an aircraft, watercraft or auto to the place where it is finally delivered. Loading or unloading does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft or auto.

 The main point of the definition of loading or unloading in its use with the auto exclusion (g) in the General Liability Coverage section of the ADCF is that there is no coverage for injury or damage arising out of the transporting of property. And, in order to correspond with the wording in the business auto policy and motor carrier coverage form, and to attempt to clarify what form would apply to a claim, the definition here goes on to include the handling of property for movement into or from an auto, unless the movement is by means of a mechanical device, such as a forklift.

 Loss. A loss is direct and accidental loss or damage; but, for garagekeepers coverage only, loss also includes any resulting loss of use.

Loss, quite naturally, was a frequently used word in the garage coverage form and will likely continue to be a popular term with the auto dealer coverage form (ADCF). Whenever encountered, it means direct and accidental. Indirect loss, such as diminution in value and consequential loss, are not meant to be included in the scope of a covered loss.

 Personal and advertising injury. As a matter of interest, it was in 1998 that the definitions of personal injury and advertising injury were combined. The lead-in language to this definition states that it includes bodily injury that occurs as a consequence of any of the listed personal and advertising injury offenses. The definitions of advertising injury and personal injury that preceded the combined definition of personal and advertising injury excluded bodily injury, which could be covered only where bodily injury was covered.

 The seven categories of offenses listed as personal and advertising injury are commonly referred to as intentional torts. Insureds must be careful not to act excessively, despite coverage for intentional torts, since no coverage applies when injury caused by or at the direction of the insured happens with knowledge that the act would violate the rights of another.

 Personal and advertising injury coverage is automatically included in the ADCF. However, not all dealers are likely to find this kind of coverage to be necessary in their operations. When that occasion arises, personal and advertising injury liability coverage can be deleted by endorsement.

 Pollutants. Pollutants means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

 This definition, in relation to the CGL coverage form, was at one time part of the pollution exclusion. It is now within the definition sections of coverage forms, including the ADCF. However, its meaning has not been altered. It continues to be broad in scope, allowing an insurer to include just about anything under the terms of this definition.

 Products. Products include: the goods or products made or sold in an auto dealership by the named insured or an auto dealership the named insured has acquired; and the providing of or failure to provide warnings or instructions.

 Given the fact that many auto dealers deal in auto accessories, coverage for injury or damage emanating from those products requires some coverage. Note that this term is not defined. It merely says it includes what is stated in the previous paragraph. This term, as defined, is quite broad because it deals not only with goods or products made by the dealership but also sold by it (and made by others).

 Property damage. Property damage means damage to or loss of use of tangible property.

 Suit. Suit means a civil proceeding in which: damages because of bodily injury, property damage, personal and advertising injury or acts, errors or omissions, or a covered pollution cost or expense, to which this insurance applies, are claimed. A suit includes: an arbitration proceeding in which damages or covered pollution cost or expenses are claimed and to which the insured submits or does submit with our consent; or any other alternative dispute resolution proceeding in which such damages or covered pollution cost or expenses are claimed and to which the insured submits with our consent.

 The word suit, in the defense provision, was first defined in the 1986 policy provisions. It was broadened in 1992 and 1996 to include arbitration proceedings and other alternative dispute resolution proceedings to which any insured submits. These are also less costly than court proceedings and have become a popular way to resolve claims against the insured.

 Temporary worker. Temporary worker means a person who is furnished to the named insured to substitute for a permanent employee on leave or to meet seasonal or short-term workload conditions.

 Note that since a temporary worker is not considered to be an employee or a leased worker, the employers liability exclusion does not apply to the entity to whom the temporary worker is furnished. Depending on the facts of a claim, the insurer of the auto dealership may be required to defend and possibly pay damages for a suit brought against the dealership by a temporary worker, alleging that it was the dealership's lack of control and fault that brought about the injury claimed.

 The main problem over the definition of temporary worker has to do with the phrase “who is furnished to you”. A person who is hired by a dealership/named insured for a short period generally would be considered an employee and subject to the dealership's workers compensation and employers liability exclusions. The temporary worker here would not have much of a chance to obtain damages for his or her injuries. The phrase “who is furnished to you” is meant to encompass those workers who are furnished by a third party, such as a temp agency.

 One of the many cases that has held that this phrase “who is furnished to you” requires a third party involvement is Brown v. Indiana Ins. Co., 184 S.W.3d 528 (Ky. 2005), where the Kentucky Supreme Court explained the meaning as follows:

 It is no coincidence that the definition of temporary worker in the policy mirrors the definition of temporary worker in KRS 342.615 (1)(e). The statute explains why injuries to temporary workers are not included within the employee exclusion from the liability coverage of the automobile (or CGL) policy. For insurance purposes, the temporary worker remains the employee of the temporary help service that furnished the worker (rather than becoming an employee of the entity to which the worker is furnished). Thus, the temporary worker is covered under the temporary help service's workers compensation insurance, not that of the entity in which the worker is furnished. Since the temporary worker is not the employee of the entity to which he or she is furnished, that entity's automobile or CGL policies except the temporary worker from the definition of employee. However, for that exception to apply, the worker must have been furnished to the entity by a temporary help service, thereby assuring that the temporary worker is covered by the workers compensation insurance of the temporary help service. If the worker is not furnished to the entity by the temporary help service, that worker is simply the employee of that entity, and the worker is insured under that entity's workers compensation insurance and excluded from coverage under its automobile and CGL policies.

 Not unexpectedly, some other courts have refused to follow the previous logic; however, they are in the minority. Despite this kind of explanation, these disputes still arise from time-to-time because of the seriousness of the injuries and suits seeking large sums.

 Trailer. Trailer includes semitrailer. This clarification seems to be superfluous, since the term auto includes trailers and semi-trailers. However, since the covered auto designation symbols delineate between autos and trailers the named insured does not own, it may help clarify coverage should a dispute arise here.

 Work you performed. Work the named insured performed includes: work that someone performed on your behalf; and the providing of or failure to provide warnings or instructions.

 One of the important points about this definition, when used in conjunction with the work the named insured performed exclusion under Section II—General Liability Coverage of the ADCF, is that damage to work performed by the dealer is not only what is excluded. Also precluded from coverage is the work of others that might have been performed for the dealership. For example, it is not unusual for a dealership to subcontract some of the work on autos to specialty shops. A sophisticated audio or visual system may have to be installed in a vehicle by someone who is well-versed in that kind of work. The dealer will farm out the work to this specialty shop. If the work is faulty or damages other property of the customer, the damage is as much excluded as if the work had been performed by the dealer (named insured). This is unlike the CGL coverage form where, unless an exclusion has been issued, coverage applies for property damage to work performed on the named insured's behalf by a subcontractor.