It’s hard to imagine any commercial operation that does not have some type of automobile liability exposure. Some possible sources of loss are:
- Owned autos
- Leased autos
- Hired autos
- Certain types of mobile equipment
Even if the exposure is relatively simple, such as the office secretary driving her car to pick up supplies, the liability exposure is still significant because automobiles are capable of causing deadly results.
Of the various commercial automobile coverage forms available, the Business Auto Coverage Form is the one most frequently used. It is designed to respond to the needs of most commercial vehicle exposures and has numerous endorsements that allow it to respond to special circumstances or requirements.
The Insurance Services Office (ISO) Business Auto Coverage Form is designed for general use. Any commercial operation can use it to insure its vehicles. However, one of three other available ISO Coverage Forms may be more appropriate for use with certain operations.
The Business Auto Coverage Form also has more optional endorsements available than the other coverage forms, allowing for greater customization.
The ISO Business Auto Policy (BAP) consists of five basic forms:
- Common Policy Declarations – Note: This may be combined with the Business Auto Declarations.
- IL 00 17-Common Policy Conditions – Note: This form contains conditions common to all commercial lines of insurance. It is a mandatory part of most monoline and commercial multi-line policies.
- Business Auto Declarations
- CA 00 01-Business Auto Coverage Form
- Policy Cover Page or Jacket. – This form is designed by individual insurance companies for their own purposes and may include a table of contents or index to meet the requirements of some states.
CA 00 01-BUSINESS AUTO COVERAGE FORM
This is designed to address automobile exposures faced by a wide variety of commercial operations. The optional endorsements available should be examined carefully and used to tailor the coverage to meet the needs or requirements of specific operations. The other basic coverage forms should be considered if the operation involves motor carrier or auto dealer exposures.
The Business Auto Coverage Form consists of five separate sections:
- Section I-Covered Autos defines the types of autos to be covered based on symbols entered on the declarations.
- Section II-Liability Coverage explains the liability coverage provided. This includes all extensions, exclusions, and limits.
- Section III-Physical Damage Coverage explains the physical damage coverage provided. This includes all extensions, exclusions, limits, and deductibles.
- Section IV-Business Auto Conditions contains the loss conditions and the general conditions.
- Section V-Definitions provides the definitions of certain words and terms used throughout the coverage form.
Endorsements tailor the coverage forms to customize the coverage provided to respond to specific situations. Examples are those used only with certain types of businesses, such as farms or schools. Some cover additional insureds and others with a financial interest in the covered vehicle.
A few endorsements add coverage, such as a fellow employee or uninsured/underinsured motorists, while others redefine policy language or apply rating and premium calculation procedures. Another category clarifies or restates a provision or condition in the coverage form as it applies to a specific insured.
Underwriting motor carriers coverage starts with determining who the named insured(s) is and what the operation does. Management must be evaluated, especially the safety attitude.
The most important underwriting factor is evaluating the drivers who operate the vehicles. Driving records, education and training, periodic motor vehicle reports, and random drug and substance testing are some of the measures employers use to screen drivers. The insured must be in control of the drivers and have incentive programs as well as remedial action procedures in place.
The vehicles must be evaluated based on their make, model, age, value, and radius of operations. Vehicle maintenance programs, replacement schedule, types of safety devices and protection systems, such as theft alarms, and crime and environmental pollution issues must all be analyzed. Detailed loss history and associated information are very important. Loss frequency, severity, and total losses will often determine risk acceptability.
Rating is subject to the ISO rules in Division One, Automobile, of the Commercial Lines Manual. The premium computation is based on very specific criteria.