Coverage extensions

Exclusions

Limit of insurance

Insuring Agreement

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 We will pay all sums an "insured" legally must pay as damages because of "bodily injury" or "property damage" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance, or use of a covered "auto".

We will also pay all sums an "insured" legally must pay as a "covered pollution cost or expense" to which this insurance applies, caused by an "accident" and resulting from the ownership, maintenance, or use of covered "autos". However, we will only pay for the "covered pollution cost or expense" if there is either "bodily injury" or "property damage" to which this insurance applies that is caused by the same "accident".

We have the right and duty to defend any "insured" against a "suit" asking for such damages or a "covered pollution cost or expense". However, we have no duty to defend any "insured" against a "suit" seeking damages for "bodily injury" or "property damage" or a "covered pollution cost or expense" to which this insurance does not apply. We may investigate and settle any claim or "suit" as we consider appropriate. Our duty to defend or settle ends when the Liability Coverage Limit of Insurance has been exhausted by payment of judgments or settlements.

Analysis:

 The business auto coverage form (BAP) ties liability coverage to an "accident", a term defined on the form. General liability coverage forms have used "occurrence" as the triggering event, but the BAP has no need to use such an omnibus term. The use of "accident" adequately conveys the purpose of the auto liability coverage to apply to unforeseen, unplanned, and unexpected events pertaining to the use, maintenance, or ownership of autos.

 Another part of the insuring agreement is coverage for "covered pollution cost or expense", a term that is defined in the auto form and that puts some limits on the coverage found under this agreement. For more information on this term, see Business Auto Definitions. However, it is important to note here that the insurer will only pay for the covered pollution costs if there is either bodily injury or property damage that is caused by the same accident that causes the covered pollution cost or expense.

 The insurer has the right and duty to defend any insured against a suit asking for the types of damages specified above. There is no intention on the part of the insurer "to defend any insured against a suit seeking damages for bodily injury or property damage to which the insurance does not apply". As a general rule, however, the duty to defend is said to be broader than the duty to pay damages. If the allegations of a complaint against the insured are potentially within coverage, even if they may be false or fraudulent, the insurer is ordinarily obliged to defend. If a complaint against the insured contains numerous allegations, some potentially within policy coverage and others that are not, the insurer will still usually be required to defend. In addition to expressing its right and duty to defend, the insurer also reserves the right to investigate and settle any claim or suit as it considers appropriate; the insurer's duty to defend or settle ends when the liability coverage limit of insurance has been exhausted by payment of judgments or settlements.

 The promises to pay damages and to defend any claim or suit asking for those damages are separate and independent promises. The insurer has a duty to indemnify and a duty to defend an insured. That is why defense costs are considered to be in addition to the limit of liability. For example, if the policy has a limit of liability of $300,000, this full amount is available for indemnification; an attorney's fee of $10,000 plus court costs of $2,000 will not reduce the limit of liability by the $12,000 figure. However, the insurer's duty to settle or defend does end when the limit of liability has been exhausted by payment of judgments or settlements

 Who Is an Insured

 The following are "insureds":

1. You for any covered "auto";

2. Anyone else while using with your permission a covered "auto" you own, hire, or borrow except:

a. The owner or anyone else from whom you hire or borrow a covered "auto". This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.

b. Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.

c. Someone using a covered "auto" while he or she is working in a business of selling, servicing, repairing, parking, or storing "autos" unless that business is yours.

d. Anyone other than your "employees", partners (if you are a partnership), members (if you are a limited liability company), or, a lessee or borrower or any of their "employees", while moving property to or from a covered "auto".

e. A partner (if you are a partnership), or a member (if you are a limited liability company) for a covered "auto" owned by him or her or a member of his or her household.

3. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability.

Analysis:

The named insured is an insured for any covered auto, that is, any auto described on the declarations page as covered; regardless of the symbol used—1 (any auto), 2 (owned autos only), 7 (specifically described autos), 8 (hired autos only), or whatever—the auto must be listed as a covered auto or the auto form will not consider the named insured as an insured under his own policy.

The second part of the "Who Is An Insured" section starts off with a very universal term—"anyone"; however, that term is quickly brought back within definite boundaries. First, the user of the covered auto has to be one with the permission of the named insured. A thief who takes the named insured's car on a joyride is not a permittee and so, not an insured under the named insured's auto form if an accident occurs. Second, the covered auto being used by the permittee must be one either owned, hired, or borrowed by the named insured. Nonowned autos, as described under the covered autos section of the auto policy, are not owned, not hired, and not borrowed; therefore, a driver using a nonowned auto, even on the business of the named insured, is not considered an insured under the named insured's BAP. Third, this part goes on to list some exceptions to the "insured" status and these should be noted.

One of the exceptions applies to any person using a covered auto while working in a business of selling, servicing, repairing, parking, or storing autos. But, the exception is stated not to apply to use in an auto business of the named insured's. For example, the auto form will not cover a car mechanic while road testing the named insured's car, or a parking lot attendant while parking the named insured's car, assuming neither of these persons is working in the named insured's business. However, if the mechanic or attendant is an employee of the named insured—perhaps the named insured's business has an incidental repair or parking operation—then the mechanic's or attendant's use of a covered auto in that auto business will be covered under the named insured's policy.

 Coverage Extensions

Supplementary Payments

 We will pay for the "insured":

1. All expenses we incur.

2. Up to $2000 for cost of bail bonds (including bonds for related traffic law violations) required because of an "accident" we cover. We do not have to furnish these bonds.

3. The cost of bonds to release attachments in any "suit" against the "insured" we defend, but only for bond amounts within our Limit of Insurance.

4. All reasonable expenses incurred by the "insured" at our request, including actual loss of earnings up to $250 a day because of time off from work.

5. All court costs taxed against the "insured" in any "suit" against the "insured" we defend. However, these payments do not include attorneys' fees or attorneys' expenses taxed against the "insured".

6. All interest on the full amount of any judgment that accrues after entry of the judgment in any "suit" against the "insured" we defend, but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.

These payments will not reduce the Limit of Insurance.

Analysis:

These coverage extensions are supplementary payments in that they do not reduce the limit of insurance available to the insured for the payment of a claim or lawsuit. The supplementary payments are rather self-explanatory and non-controversial. Note the repetitive use of the phrase "against the insured" when it comes to lawsuits. The insurer is making the point that these payments—like the defense duties—are for the insureds under the auto policy and not outside parties.

 Out-of-State Coverage Extensions

 While a covered "auto" is away from the state where it is licensed we will:

1.Increase the Limit of Insurance for Liability Coverage to meet the limits specified by a compulsory or financial responsibility law of the jurisdiction where the covered "auto" is being used. This extension does not apply to the limit or limits specified by any law governing motor carriers of passengers or property.

2.Provide the minimum amounts and types of other coverages, such as no-fault, required of out-of-state vehicles by the jurisdiction where the covered "auto" is being used.

We will not pay anyone more than once for the same elements of loss because of these extensions.

Analysis:

This provision of the auto coverage form's liability section is a two-part extension for accidents involving a covered auto that is outside the state in which it is licensed. The first part of the provision automatically increases the policy's liability limits to meet limits specified by either a compulsory or financial responsibility law in the jurisdiction where the covered auto is being used. If, for example, a covered auto is being driven in a Canadian province that requires a $200,000 limit, the insured's $100,000 limit is increased to $200,000 while the automobile is in that particular province. This extension does not apply to limits specified by any law governing carriers of passengers or property. In other words, the provision only extends to ordinary compulsory or financial responsibility laws and not to motor carrier laws.

 The second part of the provision says that the insurer will provide the minimum amounts and types of coverages required of out-of-state vehicles by the jurisdiction where the covered auto is being used. For example, if the named insured is driving his or her covered auto in a state that requires no-fault coverage, this form will provide such required coverage to the named insured even if he or she does have that coverage on his or her auto form.

The last paragraph of this coverage extension section of the BAP is something of an anti-stacking device. It is an attempt by the insurer to make sure it does not pay more than once for a covered accident.

 Exclusions

 This insurance does not apply to any of the following:

1.Expected or Intended Injury

"Bodily injury" or "property damage" expected or intended from the standpoint of the "insured".

 Analysis:

This exclusion should simply act as a reinforcement for the stipulation in the insuring agreement that damages for bodily injury or property damage must result from an auto accident, an unexpected or unforeseen event. Often, however, this "expected or intended" phrase is interpreted by courts as meaning that the exclusion does not apply unless the insured expects or intends the injury; in other words, even if the act is intended by the insured, the exclusion will not apply unless the insurer can show that the insured also intended the resultant injury.

 2. Contractual

Liability assumed under any contract or agreement.

But this exclusion does not apply to liability for damages:

a. Assumed in a contract or agreement that is an "insured contract" provided the "bodily injury" or "property damage" occurs subsequent to the execution of the contract or agreement; or

b. That the "insured" would have in the absence of the contract or agreement.

Analysis:

This exclusion confirms that liability coverage under this insurance policy is not meant to apply to a breach of contract. The liability coverage here applies to damages assumed by the insured under agreements that fit the definition of "insured contract"; see Business Auto Definitions.

The second part of the exception to this exclusion makes a contractual agreement irrelevant when it comes to the liability coverage of the insured; the vital point is that the insured's own negligence causes the accident and the damage.