CA 00 25–AUTO DEALER COVERAGE FORM ANALYSIS

(October 2022)

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Section I–Covered Autos Coverages

A. Description of Covered Auto Designation Symbols

B. Owned Autos You Acquire After the Policy Begins

C. Certain Trailers and Temporary Substitute Autos

D. Covered Autos Liability Coverage

E. Garagekeepers Coverage

F. Physical Damage Coverage

Section II–General Liability Coverages

A. Bodily Injury and Property Damage Liability

B. Personal and Advertising Injury Liability

Section III–Act, Errors or Omissions Liability Coverages

A. Bodily Injury and Property Damage Liability

B. Exclusions

Section IV–Conditions

Section V–Definitions

Vehicle dealerships are unique because the lines between their general liability and automobile liability exposures blur and overlap in many areas. To address this, the Insurance Services Office (ISO) developed CA 00 25–Auto Dealers Coverage Form. It covers both exposures under a single coverage form while eliminating coverage gaps and overlaps. It covers premises liability, products liability, automobile liability, and physical damage to covered autos, as well as garagekeepers coverage for customers’ autos. A number of endorsements are available to broaden or restrict coverage.

Related Article: ISO Auto Dealers Coverage Form Available Endorsements and Their Uses

This analysis is based on the 10 13 edition, which is the initial edition of this coverage form. This form replaces the CA 00 05–Garage Coverage Form.

CA 00 25–AUTO DEALERS COVERAGE FORM ANALYSIS

CA 00 25 opens by defining the terms you or your as the named insured and we, us and our as the insurance company providing the coverage. Named insured is not defined. As a result, it means only the entities on the declarations.

SECTION I–COVERED AUTOS COVERAGES

Numerical symbols are used to describe which autos are covered and for what coverages. These symbols are defined in the Description of Covered Auto Designation Symbols.

The Auto Dealers Declarations contains spaces next to each of the business auto coverages in which symbols can be entered. The entry of a symbol means that the coverage applies. The entered symbol explains what types of vehicle have that coverage.

Related Article: CA DS 26–Auto Dealers Declarations

A. Description of Covered Auto Designation Symbols

21–Any Auto

This is the broadest symbol designation and has no limitations or restrictions. Vehicles defined as autos in this coverage form are covered, subject to certain exclusions and conditions. Because of the broad scope of the coverage provided, many insurance companies are reluctant to use this symbol. Even if a company uses it for liability, it may not do so for physical damage. No other symbol should appear in the same box when Symbol 21 is used.

Note: See Section VI–Definitions for the definition of auto.

22–Owned Autos Only

This symbol means that any auto the named insured owns is covered, including those it acquires after the inception date. In addition, any owned or non-owned trailer pulled by an owned vehicle is covered if this symbol is used with covered autos liability coverage.

Note: See Section V–Definitions for the definition of trailer.

23–Owned Private Passenger Autos Only

All private passenger type autos that the named insured owns are covered when this symbol is used. This includes any private passenger type vehicle it acquires after the inception date.

Note: The term private passenger type is not defined. Pickups, panel trucks and vans that are not used in business are rated as private passenger according to the ISO rating rules, but the coverage form itself does not define the term private passenger auto.

24–Owned Autos Other Than Private Passenger Autos Only

This symbol means that all autos that are not considered to be private passenger types are covered if they are owned by the named insured. Those that are acquired after the inception date are also covered. Similar to Symbol 22 above, the covered auto liability coverage provided is extended to non-owned trailers pulled by this type of owned vehicle.

Example: Paula's Pre-Owned Autos is insured under a CA 00 25–Auto Dealers Coverage Form. Paula's sells and services autos. A new mechanic takes a one-ton stake truck, visits several junkyards, and purchases some used parts and equipment. By the time he gets to the last one, the truck is already full, but he still has to pick up an engine block needed that day. The junkyard owner loads the engine block on one of his trailers and attaches it to Paula's truck. Because the trailer is attached to the truck, Paula's Auto Dealers Coverage Form will respond to any covered auto liability accident involving that trailer.

25–Owned Autos Subject To No-Fault

An owned auto that is licensed or garaged in a state where no fault coverage is available is covered for no-fault coverages but only if the particular auto is required to have such coverage. Coverage also extends to such autos acquired after the inception date.

26–Owned Autos Subject To a Compulsory Uninsured Motorists Law

This symbol means that any auto the named insured owns that is garaged or licensed in a state that mandates uninsured motorists coverage is covered. It also applies to any auto acquired after the inception date.

This symbol does not apply to vehicles licensed or operated in states that allow the named insured to formally reject uninsured motorists coverage.

Related Court Case: Test Drive Accident Spurs Coverage Dispute

27–Specifically Described Autos

Only autos specifically scheduled that have a premium charge are covered. Similar to Symbol 22 above, the covered autos liability coverage provided extends to any owned or non-owned trailer pulled by this type of owned vehicle.

28–Hired Autos Only

This symbol means that autos the named insured leases, hires, rents or borrows are covered. This symbol has a significant limitation. It does not include leased, hired, rented, or borrowed vehicles that are owned by an employee, partner, LLC member, or members of any of the preceding groups’ households.

29–Non-Owned Autos Used In Your Auto Dealership

This symbol means that autos the named insured uses in its business that it does not own, lease, hire, rent, or borrow are covered. Autos owned by employees, partners in the case of a partnership, members in the case of limited liability companies, or members of the preceding group’s households are included. Covered status exists only while those non-owned autos are used in the named insured’s auto dealership business.

Example: Paul recently started his job at The Friendly Dealer, was learning the ropes, and his boss asked him to make a run to the deli for lunch. The boss and several employees wrote down their orders. Paul called in the order and then headed out to pick it up. While driving back, a drink lid popped off, and he bent over to readjust it. At that exact moment, the car in front of him stopped, and Paul rammed it, setting off a chain reaction that eventually damaged six vehicles. The drivers brought claims against Paul and The Friendly Dealer upon learning that Paul was traveling on company business. Friendly's owner and his insurance company are still discussing whether the lunch run qualifies as part of the auto dealer’s business.

30–Autos Left With You for Service, Repair, Storage or Safekeeping

This symbol means that customer autos, including autos of employees and their household members, that are left with the named insured for service, repair, storage or safekeeping and for which a fee for the services provided is charged, are covered.

31–“Auto” Dealers Autos (Physical Damage Coverages)

This symbol is unusual because Item Six of the Auto Dealers Declaration is needed to explain it. The types of auto and interests covered are provided in Item six.

Manuscript Symbol

An additional manuscript symbol not mentioned in the Auto Dealers Coverage Form is available by adding endorsement CA 99 54–Covered Auto Designation Symbol. Symbol 32 is available for the Auto Dealers Coverage Form, and the autos considered covered must be listed and described on the endorsement.

Example: Jane’s dealership displays the first automobile it ever sold. It is still in working condition but is driven only in parades and commercials for the dealership. Because it is insured on an antique auto policy, it is not covered for physical damage coverage on Jane’s Auto Dealers Coverage Form. The insurance company agrees to provide symbol 21 for liability and symbol 32 for physical damage. CA 99 54–Covered Auto Designation Symbol is attached with the wording, “Except for the 1950 Antiquemobile, any auto and the interests in those autos described in Item Six of the declarations."

Related Court Case: Garage Liability Coverage Held Clearly Defined By Choice of Numerical Symbols

B. Owned Autos You Acquire After the Policy Begins

1. If Symbols 21–Any Auto, 22–Owned Autos Only, 23–Owned Private Passenger Autos Only, 24–Owned Autos Other Than Private Passenger Autos Only, 25–Owned Autos Subject to No-Fault, or 26–Owned Autos Subject to a Compulsory Uninsured Motorists Law are entered on the declarations, autos of the type described by such symbols that the named insured acquires during the policy period are also covered. This means that a newly acquired auto that does not match the symbol is not covered until the insurance company is notified.

Example: Lincoln Motors uses symbol 23 for covered autos liability coverages. When a one-ton stake truck is purchased during the policy year, there is no covered autos liability coverage for it until it is reported to the insurance company. When a Kia Soul is purchased during the policy year, it automatically has covered autos liability coverage and reporting it to the insurance company is not required.

2. When symbol 27–Specifically Described Autos is used, new autos acquired during the policy period are covered either if the insurance company covers all vehicles the named insured already owns or if the new vehicle replaces a vehicle already scheduled. In either case, the named insured must inform the insurance company of the acquisition within 30 days of the date it was acquired.

Example: Lincoln Motors uses symbol 27 for physical damage coverage. All vehicles that are scheduled are covered for comprehensive coverage, but not all have collision coverage. The Kia Soul and the one-ton stake truck both have comprehensive coverage for up to 30 days. Neither has collision coverage because not all vehicles on the schedule have collision coverage. Once reported to the company, the appropriate coverage can be added.

C. Certain Trailers and Temporary Substitute Autos

When covered autos liability coverage is provided, two additional categories of vehicles are added as covered vehicles.

1. Utility trailers having a load capacity of 2,000 pounds or less and designed for travel on public roads are covered but only while being pulled by a covered auto.

Note: There is no requirement that the utility trailer is owned. This means that covered autos liability coverage applies to a utility trailer the named insured rents to transport a piece of machinery as long as the load capacity is 2,000 pounds or less.

2. If the named insured's covered, owned auto is temporarily out of service for repair or service or due to breakdown, repair, servicing, loss or destruction, a non-owned, temporary substitute for it is covered but only if the named insured uses that substitute with the owner's permission.

Example: All of Greatful Motors' autos are insured under CA 00 25–Auto Dealers Coverage Form using Symbol 22–Owned Autos. Karl, one of the partners, is given the opportunity to drive a newly introduced electric car that the manufacturer would like Greatful to consider selling. Karl strikes a pedestrian but has no coverage under Greatful Garage’s coverage form because the electric car is not a substitute vehicle.

Note: Cars temporarily substituting for owned vehicles being repaired, maintained, or serviced are covered.

Example: All of Greatful Motors' autos are insured under CA 00 25–Auto Dealers Coverage Form, using Symbol 22–Owned Autos. Karl, one of the partners, returns his electric car to the manufacturer for repairs. The manufacturer provides him with a substitute vehicle until the repairs can be completed. When Karl strikes a pedestrian, coverage applies because the vehicle is a substitute for a covered vehicle.

D. Covered Autos Liability Coverage

1. Coverage

The insurance company pays amounts an insured is legally obligated to pay as damages because of bodily injury or property damage. The bodily injury or property damage must be caused by an accident. The accident must result from a covered auto’s being owned, maintained or used.

The insurer also pays for certain pollution costs and expenses this insurance covers when caused by an accident and resulting from the ownership, maintenance, or use of covered autos. It only pays covered pollution costs and expenses if there is covered bodily injury or property damage caused by the same accident.

Example: Greystoke Auto Dealers owns a shuttle that transports customers who have left their cars for service. The shuttle strikes an SUV as it exits the parking lot. The SUV is upended, falls over, and its gas tank ruptures and spews fuel all over the street, sidewalk, and the storefront of a neighboring restaurant. The city sues Greystoke for the expense of cleaning up gas residue, and the restaurant sues for the cost of removing gas smells from its awning. The pollution costs and expenses would be covered.

Now, let’s change this scenario slightly.

Example: Greystoke Auto Dealers owns a shuttle that transports customers who have left their cars for service. It strikes an SUV as it exits the parking lot. The shuttle driver gets his customers out of the vehicle and then rushes to remove a spare can of fuel from the shuttle before its damaged engine catches fire. He places it on the sidewalk for safekeeping. Later, forgetting it was there, he trips over it and falls. The can's loose lid allows five gallons of gas to spill onto the sidewalk and into a sewer drain. The city sues Greystoke for the expense of cleaning up gas residue. This loss is not covered.

The insurance company has the right and duty to defend any insured against suits seeking damages this insurance covers. The insurance company decides how to handle its obligation and has the right to decide what to investigate, whether the claim is valid, and whether settling the claim or contesting it is appropriate. Its obligation ends once an action is resolved by a settlement, a court award, or exhaustion of the limit of insurance that applies.

Note: This covered autos liability coverage is similar to that provided in CA 00 01–Business Auto Coverage Form with respect to ownership, maintenance, or use of covered autos.

Related Article: CA 00 01–Business Auto Coverage Form Analysis

2. Who Is an Insured

Insureds for covered autos are:

a. The named insured

b. Anyone else who uses a covered auto the named insured owns, hires or borrows with the named insured’s permission except:

• The owner or anyone else from whom the named insured hires or borrows a covered auto. This does not apply when the covered auto is a trailer connected to an owned covered auto.

Example: If the named insured rents a car from a rental agency, the rental agency is not considered an insured. However, when the named insured rents a utility trailer to move furniture, the trailer owner is considered an insured.

• The named insured's employees when an auto is owned by the employee or a member of his or her households

Example: If the named insured borrows an employee's car to pick a client up at the airport, the employee is not considered an insured.

• Anyone who is using a covered auto while working in the business of selling, servicing or repairing autos, unless it is the named insured's operation
• The named insured's customers. There are two exceptions:
• If the named insured's customer does not have other insurance, the customer is an insured but only up to the compulsory or financial responsibility limits required by law in the state where the covered auto is principally garaged.
• If the named insured's customer has other insurance but its limits are less than the compulsory or financial responsibility limits required by law in the state where the covered auto is principally garaged, the customer is an insured but only for the difference between the limits carried and the mandated limit.

Related Court Case: Dealer’s Garage Liability Insurance Did Not Cover Customer As "Insured" Who Carried Own Insurance

• The named insured's partners or members for a covered auto he or she, or a member of his or her household, owns.

c. Anyone who is liable for the conduct of an insured described above. Coverage is limited to only the extent of that liability.

d. An employee of the named insured while using a covered auto that is not owned, hired or borrowed by the named insured but only when using it in the named insured’s business or personal affairs

Example: Jim is the body shop manager for Marshall’s New Motors. Lana Marshall asks Jim to pick up her daughter from the airport. Jim takes his own auto and picks her up but, on the way to the Marshalls’ home, strikes a pedestrian at a crosswalk. The injured person sues Jim and Marshall Motors. Both qualify as insureds in this loss.

Note: CA 99 33–Employees As Insureds is necessary to provide this insured status under the BAP, but it is standard within this coverage form, so the CA 99 33 is not required.

3. Coverage Extensions

a. Supplementary Payments

The insurance company pays the following on behalf of the insured:

(1) All expenses the insurance company incurs.

(2) If a bail bond related to a covered accident is required, up to $2,000 is available to pay its cost. The bond could be for a traffic law violation if it is related to the covered accident. The insurance company is not required to furnish the bond.

(3) The cost of bonds needed to release attachments in a suit filed against the insured that it defends. The cost is limited to the amount of such bonds within the limit of insurance.

(4) Reasonable expenses incurred by an insured when requested to participate in any investigation or defense. Loss of earning is one of those expenses, but it is limited to the actual earnings lost due to time off work subject to $250 a day.

(5) All costs taxed against the insured in a suit filed against it that the insurance company defends. The exception is that attorney’s fee and attorney’s expenses taxed against the insured are not included.

(6) Interest accruing on the entire final judgment is covered. Once the insurance company offers to pay, deposits payment with the court, or pays its part of the judgment, any additional interest that accrues is not covered.

None of the supplementary payments reduces the limit of insurance. This means that the limits remain available to pay for the actual injuries or damages.

b. Out-Of-State Coverage Extensions

This section provides two important coverage extensions when an insured is away from the state where the auto is licensed. They essentially make the insurance provided comply with any state financial responsibility law, no-fault or other compulsory coverage. The two extensions are:

(1) The limit of insurance provided is automatically increased as needed to meet the limits required by a compulsory or financial responsibility law in the jurisdiction where the covered auto is being operated. An important note to this extension is that it does not apply to any law governing motor carriers, passengers or property.

Example: Percy’s auto dealer covered autos liability limit is $50,000. It complies with the financial responsibility laws of the state where the vehicle is licensed and garaged. However, that limit is inadequate when Percy drives across the state line into the next state that has a minimum limit requirement of $75,000. This extension automatically increases the limit to $75,000 while Percy drives in that state.

(2) The Auto Dealers Coverage Form provides the minimum amounts and types of other coverages required of out-of-state autos by the state where the covered auto is operated. One such coverage is no-fault.

Example: Percy’s state does not require no-fault coverage, but a neighboring state where Percy often travels does. This extension provides the coverage that state requires when Percy drives there.

Note: A statement here clarifies that the insurance company does not pay anyone more than once for the same elements of loss because of these extensions. In other words, it does not duplicate any coverage or allow damages to be collected more than once.

4. Exclusions

It is important to read these exclusions to determine what is excluded and also carefully consider any exceptions to them.

a. Expected or Intended Injury

Any bodily injury or property damage caused by an insured’s deliberate actions is excluded.

Note: This exclusion is intended to protect insurance companies from responding to damages or injuries the insured causes intentionally. It is in the public interest to prevent the insurance coverage from being used for gain, to injure competitors, as an instrument of revenge, or to cause any other deliberate harm. There is no ISO endorsement available to buy coverage for intentional acts or to delete this exclusion at the present time.

b. Contractual

Damages that result from liability the insured assumed in a contract or agreement are excluded. There are two exceptions:

• Coverage applies if the liability would have existed without the contract.

Example: Jerry Careful is always transferring risk away from him. When he buys a car from Great Auto Dealership, he requires that Great Auto sign a contract that if one of Great Auto’s employees causes an accident while test-driving Jerry’s car, Jerry would not be liable for the accident. This contractual liability is covered because the situation is already covered.

• Coverage also applies if the contract meets the definition of an insured contract. When the contract is an insured contract, coverage exists only if the loss occurred after the agreement had been made.

Note: There is no ISO endorsement available to buy back or delete this exclusion at the present time.

c. Workers Compensation

Coverage does not apply to any requirement or obligation the insured or its insurance company must assume due to any workers compensation, disability benefits, unemployment compensation, or similar law.

Note: This exclusion and the one that follows are intended to prevent double indemnification for an injury that should be covered under workers compensation or employers liability policies.

Insurers and brokers having to provide coverage on a variety of difficult, unusual or specialty workers compensation situations should refer to the Workers Compensation section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

d. Employee Indemnification and Employers Liability

Bodily injury to an employee that results from the actual employment or performance of duties that relate to the insured’s business is excluded.

Example: Maury worked as a mechanic for Lavid Motors. He specialized in brakes and sues Lavid when he develops asbestosis because asbestos was in the brake linings he worked on. Lavid’s insurance company denies coverage.

Bodily injury to the spouse, child, parent, brother or sister of the employee or the person described in the first section of this exclusion that is consequential to that person’s or employee’s bodily injury is also excluded.

Example: Maury’s wife helps to care for him. She injures her back when he falls and she attempts to lift him up. She sues Lavid Motors because her injury is a consequence of Maury’s injury. Lavid’s insurance company denies coverage.

The exclusion applies whether the insured is liable as an employer or in any other capacity, or whether the insured is obligated to share damages with or repay someone else who must pay damages because of the injury.

Note: This exclusion is also important because of the widespread use of contractors, subcontractors, independent contractors, or leased employees, and much of the uncertainty concerning who is responsible.

This exclusion has two exceptions. Coverage does apply to bodily injury to domestic employees who are not entitled to workers compensation benefits. Domestic employees are persons who perform household or domestic work primarily for a residence premises. The second exception is that this exclusion does not apply to liability assumed by an insured in an insured contract.

e. Fellow Employee

It is important to remember that employees are considered insureds. As a result, exclusions c. and d. could be circumvented if the injured employee could sue the fellow employee who actually caused the accident. This exclusion prevents that workaround. Bodily injury to a fellow employee of the insured that occurs as a result of or in the course of that employee’s employment is excluded. Bodily injury to the spouse, child, parent, brother, or sister of the fellow employee consequential to the fellow employee’s bodily injury is also excluded.

There are two ways to modify this exclusion. CA 20 55–Fellow Employee Coverage can be used to eliminate this exclusion entirely. CA 20 56—Fellow Employee Exclusions for Designated Employees/Positions can be used to eliminate this exclusion for injuries caused by certain employees or positions.

f. Care, Custody or Control

Property damage to or covered pollution cost or expense to property the insured owns, rents, or occupies, property loaned to the insured, property it holds for sale or transports, or that is in its care, custody or control is excluded unless such liability was assumed in a sidetrack agreement.

The Auto Dealers Coverage Form protects the insured for its negligence and tort liability to others, not to damages or injury to the insured or its property. As such, it reinforces the need for the insured to maintain its premises and properties in good condition and to use reasonable care to prevent damage or injury, including damage to property in its care, custody, or control.

Note: A sidetrack agreement involves the owners of a premises and a railroad with respect to a railroad sidetrack (a transfer or access track) on the insured's premises. The railroad allows the owner of the premises to use the sidetrack as long as it guarantees the railroad access to the sidetrack and agrees to certain conditions of property maintenance. It may also contain specified conditions of hold-harmless between the owner and the railroad.

g. Leased Autos

Covered autos leased or rented to others are excluded. The only exception is when a covered auto is rented to a customer while his or her auto is left with the named insured to be serviced or repaired.

h. Pollution

The term “pollutants” is defined later in this coverage form and is very important to this exclusion.

There is no coverage for any bodily injury or property damage that is due to pollutant discharge, dispersal, seepage, migration, release, or escape. This exclusion applies if the event actually happens but also applies if the bodily injury or property damage is because of a threat of an event or an allegation that the event happened.

This paragraph would exclude any and all auto-related pollutant events. However, the following three paragraphs modify this exclusion considerably and must be carefully reviewed.

(1) This paragraph explains that this exclusion applies when the pollutants are in between the place they were and the place they are going to be. The pollutants or the property that contains the pollutants must be in one of the following circumstances:

• Being in movement into or out of the covered auto
• Being transported or towed by a covered auto
• Being in the course or transit. The insured may be providing the transit, or the transit may be provided by others on behalf of the insured
• Being in or upon the covered auto while being treated, processed, stored, or disposed of.

This portion of the exclusion has an exception. The exclusion does not apply if the pollutants are fuels, lubricants, fluids, exhaust gases, etc., that are part of the normal electrical, hydraulic or chemical function of the covered auto. In order for the exception to apply, the pollutants must have been within an auto part designed by the manufacturer to hold, store, receive, or dispose of the pollutants prior to the accident.

(2) This paragraph explains that the pollution exclusion applies prior to the pollutant generating property being moved to where the insured will move it either into or onto a covered auto. This paragraph does not have the same exceptions that apply to paragraph a.

(3) This paragraph explains that the pollution exclusion applies after the pollutant generating property has moved from the covered auto to its final delivery. This paragraph does not have the same exceptions that apply to paragraph (1).

Paragraphs (2) and (3) of this exclusion do contain an important exception. The pollution exclusion does not apply if an accident occurs away from any owned or rented premises and the pollutants are not in or on a covered auto. This applies only if the property that generates the pollutant is upset, overturned, or damaged as a result of maintenance or use of a covered auto and the polluting event is caused directly by an upset, overturn, or damage.

Example: Paul, a sales representative with Miracle Motors, is driving an auto from the dealership when he loses control and crashes into the outside oil tank at Jimmy’s Convenience store. The tank ruptures and releases all of its contents. Because the tank is not on the dealership’s premises and the release is caused by damage to the tank, the pollution release is covered under Miracle's Auto Dealers Coverage Form.

Notes:

It is important to point out that this exclusion DOES NOT apply when a covered auto strikes another vehicle and the damages to that other vehicle result in a pollutant event.

Insurers and brokers that provide coverage on a variety of complex, unusual or specialty pollution situations should refer to the Environmental Risks section in The Insurance Marketplace, a publication of The Rough Notes Company, Inc.

CA 99 55–Pollution Liability–Broadened Coverage for Covered Autos–Auto Dealers Coverage Form provides a buyback for pollution coverage. It changes the pollution exclusion by excluding only liability the insured assumes under a contract or agreement.

Related Article: Auto Dealers Coverage Form Available Endorsements and Their Uses

Related Court Case: Absolute Pollution Exclusion Held Applicable To Allergic Reaction to Paint and Glue Fumes

i. Racing

There is no coverage for any auto while it is being used in, practicing or being prepared for any professional or organized racing, demolition contest, or stunts.

Note: Bear in mind that this exclusion applies only to professional or organized racing. Spontaneous racing activities are covered, although the expected or intended exclusion may be considered when spontaneous activities become dangerous.

Example: The three auto porters at Kinnley’s Auto dealership are becoming very competitive. It started when Kelly said she could move a car into position in 10 minutes, and then Tom said he could do it in nine, and then Jerry got it down to eight. The battle continued until Kelly lost control of a vehicle attempting to break the five-minute mark. The damage caused by Kelly’s action is covered even though she was competing. When the insurance company learns of the competition, they might argue that Kelly's actions should be excluded because she should have expected an accident to result from the speed.

j. Handling of Property

This exclusion works in conjunction with general liability coverage so that no duplication of coverage applies. This exclusion states that no coverage is in place for bodily injury or property damage resulting from the handling of property until that property has been physically moved to the point or place where the insured accepts it to be moved into or on the covered auto. The general liability coverage provides coverage until the property is moved to that point and after the property has been delivered. This exclusion states that covered autos liability coverage ends once the property is moved from the covered auto at the point where the insured makes the final delivery.

No coverage exists for bodily Injury or property damage connected to property prior to it being taken from the spot where an insured has taken control of it for placing that property in or on a covered auto. The barring of coverage then is reestablished at the point it is taken off or removed from a covered auto at the point an insured has made final delivery.

k. Movement of Property by Mechanical Device

Bodily injury or property damage caused when property is handled or moved by any type of mechanical device is excluded. There are two exceptions. Coverage still is granted for injury or damage related to moving property via hand truck or when handling property with a device/mechanism that is attached to a covered vehicle.

l. Defective Products

There is no property damage coverage when a product of the named insured’s is defective at the time that product is transferred, and as a result of that defect the property damage occurs.

Note: This is identical to the same-named exclusion in Section II – General Liability Coverages.

m. Work You Performed

Property damage to the named insured’s work or any part of it is excluded when it is the result of any part of the work itself or from any parts, materials or equipment that are used in connection with the work.

Note: This is identical to the same-named exclusion in Section II – General Liability Coverages.

n. Damage to Impaired Property or Property Not Physically Damaged

The insurance company does not cover property damage to impaired property or property that has not been physically injured when it is caused by a defect, inadequacy, or dangerous condition in either the named insured’s product or its work. Coverage also does not apply if the damage is caused by a delay or failure by the named insured or others who act on its behalf to meet contract terms and conditions.

However, this exclusion does not apply to loss of use of other property that arises out of the sudden and accidental physical injury to the insured’s products or work performed by the insured if such loss or damage takes place after it has been put to its intended use.

Notes:

This is identical to the same-named exclusion in Section II – General Liability Coverages.

There is no standard ISO endorsement currently available to buy back this coverage or to delete this exclusion.

o. Products Recall

There is no coverage for damages claimed for any loss, cost, or expense the named insured, or others incur for loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of the named insured’s product. There is also no coverage if the claims for damages are due to work the named insured performed or other property of which the named insured's work or product is a part when withdrawn, recalled or removed because of a known or suspected defect, deficiency, inadequacy or dangerous condition.

Note: This is identical to the same-named exclusion in Section II – General Liability Coverages.

p. War

This exclusion unequivocally bars coverage for either bodily injury or property damage related to war and similar military events. It is not affected by circumstances such as a formal declaration of war, whether the war is a civil uprising, or whether it involves government or civilian participants.

Note: The bottom line is that there is no coverage for loss related either directly or indirectly to war or warlike activity. This exclusion unequivocally bars coverage for either bodily injury or property damage related to war and similar activity.

q. Acts, Errors or Omissions

What happens when a named insured is responsible for an act, inaction or error which causes injury to another party or another’s property? As far as the Auto Dealers Coverage Form covered auto liability goes, nothing. Such incidents are not covered.

Note: Limited coverage may be found in Section III – Acts, Errors or Omissions Liability Coverages.

5. Limit of Insurance–Covered Autos Liability

This limit item applies only to accidents resulting from covered auto.

The most that is paid for the total of all damages resulting from all bodily injury and property damage in any one accident is the each accident limit on the declarations. This applies without regard to the number of covered autos, insureds, premium paid, claims made, or vehicles involved in the accident.

When damages and covered pollution costs or expenses are payable under this limit, they are not payable under Section II – General Liability Coverages or Section III – Acts, Errors or Omissions Liability Coverage.

Bodily injury, property damage and covered pollution cost or expenses that arise from exposure to or continuation of similar conditions are considered to be resulting from a single accident and therefore subject to a single limit of insurance.

A final statement in this limits item is that no party can receive duplicate payments for essentially the same loss under this coverage form and any medical payments, uninsured motorists or underinsured motorists coverage that is part of this coverage form.

Example: The two named insureds on the Auto Dealers Coverage Form are Smith, Inc. and John Smith, Smith Inc.'s owner. Smith, Inc. owns several private passenger vehicles that John uses for both business and pleasure. John causes a serious accident while using one of them on a personal errand. Because of the severity of her injuries, the injured party sues John individually for $500,000 and Smith, Inc. as the vehicle owner for $500,000. The Auto Dealers Coverage Form's limit is $500,000 Each Accident. The claimant is awarded $1,000,000, or $500,000 from each party named in the lawsuit, but the Auto Dealers Coverage Form pays only its $500,000 limit.

E. Garagekeepers Coverage

1. Coverage

a. The insurance company pays amounts the insured is legally obligated to pay as damages for loss or damage to either a customer's auto or its equipment that is left in the insured's care while attending, servicing, repairing, parking or storing it in the named insured's auto dealer’s operations.

Related Court Case: Dealership Acted Responsibly As Depositary of Owner's Automobile

There are three coverages options. The selection of the coverage is made on the declarations by displaying a limit next to coverage.

(1) Comprehensive Coverage

Coverage applies to any cause of damage to a customer's auto except for a collision with another object or an overturn of that auto.

(2)Specified Causes of Loss Coverage

This coverage applies only to loss or damage caused by or resulting from fire, lightning, explosion, theft, mischief, or vandalism.

(3) Collision Coverage

This coverage is very specific. The only covered loss or damage are those caused by the customer's auto's collision with another object or its overturn.

Note: Another object could be another vehicle as well as an animal, bird, person, tree, building or sign, to name a few.

b. The company has both the right and the duty to defend any insured against suits seeking these damages if coverage applies. It can investigate and settle claims and suits in the appropriate manner, but its duty to defend ends when the limit of insurance for the coverage that applies is exhausted by payment of judgments or settlements.

2. Who Is an Insured

The insured for loss or damage to customers’ autos and their equipment is the named insured. Its partners and members are insureds but only as related to the named insured’s auto dealer operation. Limited liability company managers are insureds while performing their duties as managers. Executive officers and directors are insureds but only within their duties as such. Stockholders are insureds but only for any liability that might be imposed because they are shareholders.

Employees of the named insured are insureds while acting within the scope of their employment. They are also insureds while performing a duty that is related to the named insured auto dealer operation.

3. Coverage Extensions

The insurance company pays the following supplementary payments for the insured. They apply to any claim or suit it defends and do not reduce the limit of insurance.

a. All expenses it incurs.

b. The cost of bonds needed to release attachments in a suit filed against the insured that it defends, but only the amount of such bonds within the limit of insurance.

c. Reasonable expenses if it asks the insured to participate in any investigation or defense. This includes actual loss of earnings up to $250 a day because of time taken off from work.

d. All costs taxed against the insured in a suit filed against it that it defends, except for attorney’s fees and expenses taxed against the insured.

e. Interest on the full amount of any judgment that accrues after it is entered in a suit against the insured that it defends. The duty to pay interest ends after the company offers the part of a judgment that falls within its limit of insurance.

4. Exclusions

a. Coverage does not apply to any of the following:

(1) Contractual

Liability that results from any contract or agreement wherein the insured accepts responsibility for a loss is excluded unless the insured would be liable for the loss without a contract or agreement.

(2) Theft

Coverage does not apply to loss due to theft or conversion caused in any way by the named insured, its employees, or shareholders.

(3) Defective Parts

Loss caused by or resulting from the use of defective parts or materials is excluded.

(4) Faulty Work

There is no coverage for loss caused by or resulting from the named insured's faulty work performed.

b. Loss to any of the following types of property is not covered:

(1) Sound equipment that is not permanently installed in the vehicle. Tape decks, compact disc players, and new types of sound reproducing equipment are examples.

(2) Media used to produce sound in sound reproducing devices. Compact discs, cassettes, and new types of media are examples.

(3) Equipment that is not permanently installed but is designed to receive sound. Citizens’ band radios, two-way mobile radios, telephones, or scanning monitor receivers, including their antennas, and any accessories are examples unless they are permanently installed.

Note: CA 99 59–Garagekeepers Coverage–Customers' Sound Receiving Equipment covers this type of equipment and essentially deletes exclusion (3).

(4) Equipment that is designed or used to detect, locate, or jam radar or any other speed detection devices.

Note: There is no reference to increasingly common and sophisticated computing, visual and/or navigational devices.

c. Coverage does not apply to loss or damage caused by or resulting from the following, regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

(1) War. This includes civil war and undeclared war.

(2) Warlike actions by military forces. This includes actions by any government, sovereign or other authority that uses military personnel or other agents to hinder or defend against actual or expected attacks.

(3) Action taken by a governmental authority to hinder or defend against insurrection, rebellion, revolution or usurped power and also the insurrection, rebellion, revolution, or usurped power.

5. Limits of Insurance and Deductibles

a. The most paid for each loss at each location is the limit on the endorsement schedule for the location for the coverages provided. This limit applies regardless of the number of customer’s autos, insureds, claims, suits or premium paid. The deductibles that apply to the loss must be subtracted from the amount claimed prior to applying the limit cap.

Note: An important point for the named insured to consider in selecting the limit is the total number of vehicles in its care at any one time and their associated values.

Example: A fire damages four customer vehicles at Handy’s Used Car Lot for total damages of $65,000. Because Handy’s Garagekeepers limit is $50,000, only $50,000 is paid.

The deductibles that apply to a loss must be subtracted from the amount claimed prior to applying the limit cap. Deductibles apply to loss involving collisions, other than collision coverage or, when selected, specified causes of loss (either all perils or theft/mischief/vandalism).

Example: Hail damaged 25 customers’ vehicles at Small Town Dealership. Small Town had a $100,000 limit with a $500 per-vehicle, $2,500 per-occurrence comprehensive deductible. The loss amounted to $110,000. This amount was reduced by the $2,500 per-occurrence deductible to $107,500, but the insurance company paid only the $100,000 limit.

b. The deductible for Garagekeepers Coverage Comprehensive or Specified Causes of Loss Coverages on the declarations is the most deducted for all loss in any one occurrence.

c. Depending on the nature of a given loss, the insurance company may have to settle a claim quickly for the entire amount, including the value of any deductibles that might apply. Doing so does not void the insured's responsibility to absorb the deductible. In these cases, the insured must reimburse the insurance company for the value of any deductible it paid.

F. Physical Damage Coverage

1. Coverage

The insurance company pays for loss to a covered auto, its equipment based on the coverages on the declarations and the symbols selected. When selected, the following coverage is provided:

(1) Comprehensive Coverage

This is loss or damage from any cause except situations where the covered auto collides with another object or when the covered auto overturns.

(2) Specified Causes of Loss

This is loss or damage caused by fire, lightning, explosion, theft, windstorm, hail, earthquake, flood, mischief, vandalism. Loss or damage caused to the covered auto that is being transported when the transport conveyance sinks, burns, collides, or is derailed is also covered.

Note: Although these are the most common losses that happen to auto, the causes are very specific, which means that many losses may not be covered, such as animals crawling into an auto, ash and other damage due to volcanic eruption, acidic bee droppings, glass cracking due to extreme heat and more.

(3) Collision Coverage

This is loss or damage caused when the covered auto collides with another object or overturns.

Note: "Another object" does not mean only another vehicle. It could be an animal, bird, person, tree, building, sign, and any item that can be struck.

b. Glass Breakage–Hitting a Bird or Animal–Falling Objects or Missiles

This item applies only if Comprehensive Coverage applies to the damaged covered auto.

The insurer pays the following losses under Comprehensive coverage:

• Glass breakage
• A loss that occurs when an animal or bird is hit
• A loss that occurs because of falling object or missile

When glass breakage is part of a collision loss, the insured has the option to have the loss paid as either collision or comprehensive.

Note: This item clarifies coverage. The three types of losses discussed could be called collisions because an object struck the vehicle. This is important because of the differences in deductibles and in coverage. When collision coverage is provided, its deductible is often significantly higher than the comprehensive deductible. In addition, there may be times when comprehensive is the only physical damage coverage carried on the auto.

2. Coverage Extension–Loss of Use Expenses

This is a conditional extension. It applies only if all of the following conditions are met:

• Hired Auto Physical Damage coverage applies
• An insured rented or hired a vehicle using a written contract or agreement
• The contract makes the insured legally liable for damage to the rented vehicle
• The vehicle rental does not include a driver

A payment of no more than $20 per day is provided for the loss of use of a rented vehicle but only if the loss was caused by Comprehensive, Specified Cause of Loss or Collision coverage for which a symbol 8 is entered on the declarations. This loss is capped at $600.

Note: CA 99 90–Optional Limits–Loss of Use Expenses can be used to purchase higher limits.

3. Exclusions

Editor’s note: Some exclusions are given titles for analysis purposes. These titles are not a part of the Auto Dealers Coverage Form.

a. Anti-concurrent Causation Exclusions

Coverage does not apply to loss or damage caused by or resulting from the following, regardless of any other cause or event that contributes in any way or in any sequence of events to the loss.

(1) Nuclear Hazard

This is an explosion of any weapon using atomic fission or fusion, or nuclear reaction, radiation or radioactive contamination, regardless of how caused.

(2) War or Military Action

This includes declared or undeclared war, civil war, and warlike action by a military force, including acts to defend or hinder an expected or actual attack by any government or authority employing military personnel or agents, as well as insurrection, rebellion, revolution, usurped power or any action to hinder or defend against these.

Note: Damage or loss involving nuclear or war-like activities is excluded even if other loss factors contribute to an incident. In other words, these losses are excluded regardless of how caused or whether or not they combine with any other cause of loss.

b. The insurance company does not pay for loss or damage to the following:

(1) Leased or Rented Autos

Covered autos leased or rented to others are excluded. The only exception is when a covered auto is rented to a customer while his or her auto is left with the named insured to be serviced or repaired.

(2) Racing

There is no coverage when a covered auto is being used in or practicing or being prepared for any racing, demolition or stunt activity that is professional or organized.

Note: Racing, demolition, or stunt activities that are spontaneous and totally unprofessional would be covered.

(3) Tapes, Records, Discs

Tapes, records, discs and similar property or devices that are designed for use with audio, visual, or data electronic equipment are excluded. This exclusion is extremely broad because of changes in media. Tapes and CD’s are excluded as well as DVD’s and equipment that can be attached to any media system within the auto.

Note: In this exclusion, ISO uses the term “data electronic” which is neither defined nor in common usage. The term is used to describe devices that are excluded and also to describe equipment for which any of these excluded items could be designed. Although it appears to be an all-inclusive term, its unclear meaning could make this exclusion ambiguous.

(4) Speed Detection Devices

There is no coverage for radar and laser jamming, detecting, eluding or disrupting equipment designed or used to detect speed.

(5) Electronic Equipment

Coverage does not apply to any type of electronic equipment that is used to receive, reproduce, or transmit audiovisual or data. This exclusion applies even if the equipment it is permanently installed.

(6) Other Equipment

This is a continuation of item (5) above because any accessory that is used with item (5) equipment is also not covered. Exclusions b. (5) and (6) do not apply to property that is designed to operate only from the auto’s electrical system and that at the time of loss meet any of the following criteria:

(a) The equipment is permanently installed in or on the covered auto

(b) While the equipment is not permanently installed, the housing unit from which it can be removed is permanently installed in or on the covered auto

(c) Any item that is considered integral to items described in (a) or (b) above

(d) Other electrical equipment that is required for the covered auto to operate or that monitors the operating system

c. False Pretense

When the named insured voluntarily gives a third party a covered auto there is no coverage if a loss occurs because the third party used a trick, scheme or another type of false pretense to obtain the covered auto. There is also no coverage if a loss occurs because the named insured acquires an auto from a seller with no legal title.

Example: Suburban Motors turns in two losses that are actually a single transaction. Charlie negotiated with Cindy to purchase her old Buick and use it as a down payment on a new model GMC. Cindy was a hard negotiator, but the deal was struck, and Charlie was content with the Buick. Unfortunately, Cindy’s check bounced, and the title on the Buick was discovered to be false because the Buick had been stolen a month earlier. Suburban wants to be compensated for the value of the model GMC. Unfortunately for Suburban, no part of this loss is covered.

Related Court Case: False Pretense Exclusion in Garage Policy Unambiguously Excluded Coverage

Note: CA 25 03–False Pretense Coverage covers operations that receive used vehicles for trade-ins. It covers the insured up to the specified limit for vehicles it acquires from customers who engage in false pretense.

d. Additional Exclusions

(1) Coverage does not apply to the named insured's expected profit, loss of market or resale value.

(2) The insurance company does not pay for loss to any covered auto that is stored or displayed at any location that is not on the declarations if the named insured has been using the location for 45 or more days.

Note: This means the named insured has a 45-day grace period for physical damage of autos at newly acquired locations. It also means that coverage applies to locations where vehicles are exhibited for short time periods.

Example: Kerry Motors sponsors activities at the Indiana State Fair and also exhibits seven vehicles as part of the Fair. Because the fair is less than 45 days, any physical damage loss that occurs would be covered. One year Kerry decides to keep using the location after the fair ended because of other activities taking place at the fairgrounds. That year Kerry used the location for 60 days. If a loss occurred during the final 15 days, Kerry would have had no coverage even if the autos at the location had only been at the location for a day. The time limit is based on the location use, not the time an auto is at the location.

(3) Collision coverage applies to a covered auto that is being moved from the point of purchase/distribution to its final destination but only if the distance between the two points is 50 miles or less.

Note: CA 25 02—Dealers Driveaway Collision Coverage is available for dealers with driveaway exposures that go beyond the 50-mile limitation.

(4) Specified Causes of Loss coverage does not apply when loss or damage to any covered auto is the result of the vehicle transporting it being upset or colliding with an object.

(e). Diminution of Value

Loss of a covered auto's value because it was involved in an accident is not covered.

Note: Diminution of Value is defined in Section VI–Definitions.

f. Other Exclusions

Coverage does not apply to loss or damage caused by and confined to wear and tear, freezing, mechanical, or electrical breakdown. There is also not coverage for blowouts, punctures, or other road damage to tires. This exclusion does not apply if the loss is the result of a total theft of the vehicle.

4. Limits of Insurance

a. The most paid for:

(1) All loss or damage to a single covered auto that is damaged or stolen is the lesser of:

(a) The actual cash value of that property. This value is established as of the date of the loss and not as of the date of adjustment.

(b) The cost to repair or replace with items that are considered like it in kind and quality

(2) Reproducing, receiving, or transmitting electronic equipment in a vehicle is a sublimit of $1,000. Equipment subject to this sublimit is permanently installed but in a place within or upon the auto that is not where the manufacturer normally installs such equipment. It is also subject to this sublimit if it is removable equipment and its permanently installed housing is in a place that is not where the manufacturer normally installs it. Any other items that are integral to the equipment described in this paragraph are also subject to the sublimit.

b. In the case of a total loss, adjustments are made for the auto's depreciation and physical condition to establish the actual cash value.

c. If repairing or replacing the auto increases its value, the insurance company does not pay for that increase.

Note: CA 99 28–Stated Amount Insurance appears to be a way around this limitation. However, for vehicles on the endorsement schedule, the limit for physical damage coverage is changed to the least of the actual cash value, the cost to repair or replace, or the limit specified. This means this limitation would still apply. In fact, this endorsement should be used cautiously because it could actually decrease the settlement amount.

d. Additional Provisions

(1) The most paid for all loss or damage at any one location is the limit for that location in Item six on the declarations, regardless of the number of covered autos damaged or that are involved in the loss. Similarly, the most paid for all loss in transit is the limit on the declarations for loss in transit, regardless of the number of covered autos damaged or that are involved in the loss.

(2) Quarterly or Monthly Reporting Premium Basis

When coverage is provided on a reporting basis, a penalty is imposed if the reports are not accurate. When a loss occurs, the last report is reviewed. If that report is less than the actual values at the location at the time of the report, a penalty is computed by dividing the reported value by the actual value. That percentage is then multiplied by the actual loss to compute the amount of loss to be paid.

Example: Merry Motors reports every month. The June report was $575,000. A $51,000 loss occurs in July. It is reduced to $50,000 because of the $1,000 deductible. Careful Insurance Company investigates and discovers that the amount Merry should have reported in June was $700,000. This means that instead of paying the $50,000 loss, Careful pays $575,000 ÷ $700,000 X $50,000 = $41,071.

If the first report is due but has not yet been made, the maximum paid is 75% of the location limit.

(3) Non-Reporting Premium Basis

There is also a penalty for underinsurance when the location is written on a nonreporting basis. The limit on the Declarations for the location value is divided by the actual value of the covered autos at the loss location at the time of the loss. That percentage, if less than 1.00, is multiplied by the loss amount to arrive at the penalized loss.

Note: The deductible is applied before applying any of the described penalties.

5. Deductible

The named insured must first pay the deductible amount shown on the Declarations toward any loss before the insurance company pays its portion of the loss. Comprehensive or Specified Causes of Loss Coverages can have a deductible for only theft and vandalism or for all perils. The per-loss deductible is capped at the maximum deductible indicated for that location on the declarations.

The collision deductible has only a per- loss deductible. There is no maximum.

SECTION II–GENERAL LIABILITY COVERAGES

A. Bodily Injury and Property Damage Liability

1. Coverage

a. The insurance company agrees to pay amounts the insured is legally obligated to pay as damages for bodily injury and property damage that this insurance covers, specifically such incidents connected to the auto dealer activities that are not auto related. It also has the right and duty to defend the insured against any suit that seeks those damages but only suits that seek damages that this insurance covers. It can investigate any loss and settle any claim or suit that results at its discretion, but the amount it pays as damages is limited as described under Paragraph F. Limits of Insurance.

The insurance company’s right and duty to defend ends when it uses up the limit of insurance that applies to pay judgments and settlements under Paragraph A. Bodily Injury and Property Damage Liability, Paragraph B. Personal and Advertising Injury Liability or Paragraph C. Locations And Operations Medical Payments. The insurance company does not have any other obligation or liability to pay sums or perform acts or services except for those specifically listed and described under Supplementary Payments.

The payments must actually be made before the obligation to defend ends.

Related Court Case: Defense Obligation Ended When Court Determined Insurer Did Not Have Duty to Indemnify For Contamination

Note: Section II is similar to a CGL policy. The coverage in this section does NOT respond to bodily injury or property damage related to the ownership, use, or maintenance of autos.

Example: Happy Motoring, Inc. is sued by a customer who severely injures her back in a fall.

Scenario 1: The injury occurs when she slips on a wet floor near the dealership’s entrance – eligible for coverage.

Scenario 2: The injury occurs when she trips while exiting an SUV on the dealership’s sales floor – ineligible for coverage.

b. Coverage applies to bodily injury and property damage subject to all three of the following:

· The accident takes place in the coverage territory.

· The bodily injury and/or property damage occur during the policy period.

Note: This means that the accident may or may not happen during the policy period and that the bodily injury or property damage may or may not take place in the coverage territory.

Example: Jared repaired Millie’s convertible in August. Neither of them realized that Jared installed the exhaust pipe incorrectly and it was piping the exhaust into the cabin of the vehicle. The accident was the incorrect installation. In October, Millie passed out while driving her vehicle in Mexico and struck two other vehicles, injuring her and the drivers of the other vehicles. The accident investigation uncovered Jared’s mistake. The loss is covered because the accident (the incorrect installation) took place in the coverage territory. Jared’s policy that is in effect on the day Millie passed out is the policy that will respond to the accident.

• Prior to the policy period, no insured (as found in items 1-4 in Section D) or employee who was authorized to give or receive notice of an occurrence or a claim was aware that the bodily injury or property damage had occurred.

Example: George was a partner at Polished Vehicles. He retires on 6/12/2022. On his last day, while working with a customer named Sweetie, he rolls over her instep with his very heavy desk chair. George forgets to mention this to his supervisor because Sweetie, even though limping out of his office, claims she is fine. Polished Vehicles changes to a new insurer on 6/20/2022. They are surprised to see a claim filed by Sweetie on 7/8/2022. The new insurer denies the claim, advising Polished that, because George had caused the loss, Polished Vehicles was aware of the potential claim. It must be submitted to the prior carrier.

If a prior knowledge claim as explained above is presented, any continuation, change, or resumption of such bodily injury or property damage claim during or after the policy period is also considered to have been known before the policy period.

Example: Sweetie’s husband files a claim for loss of consortium and expenses related to her loss of income and the need to hire extra help to aid with the children and her parents. Because this claim is related to Sweetie’s initial claim, it is also considered to have occurred in the prior year because of George’s knowledge of the initial accident.

c. Bodily injury or property damage that occurs during the policy period but that is unknown to an insured (as found in items 1-4 in Section D) or employee who was authorized to give or receive notice of an occurrence or a claim prior to the policy period to have occurred. This includes any continuation, change, or resumption after the policy period ends.

d. Bodily injury or property damage is considered known at the earliest date when an insured (as found in items 1-4 in Section D) or employee who was authorized to give or receive notice of an occurrence or a claim:

• Reports any part of any injury or damage to the current insurance company or any other company
• Receives a written or verbal demand or claim for damages
• First becomes aware in any other way that bodily injury or property damage either has occurred or has begun to occur

Related Court Case: Known Injury or Damage Not Excluded In Continuous or Progressive Damage Loss

2. Exclusions

This insurance coverage does not apply to any of the following, except as noted:

a. Expected or Intended Injury

Coverage does not apply to bodily injury or property damage that is either expected or intended by the insured. This exclusion contains an exception that covers bodily injury that results from the insured using reasonable force to protect persons or property. It does not cover intentional property damage, though.

Note: The primary reason for this exclusion is to keep the insurance company from becoming involved with non-accidental losses and is in the public interest. It ensures that the insured will not use the insurance coverage for gain, such as theft, to inflict injury on a competitor, as an instrument of revenge, or to cause any other intentional harm. This exclusion's wording continues to be challenged and interpreted by the courts, especially in cases where the action was intentional but the type and extent of injury or damage that resulted were not.

Related Article: Expected or Intended Injury Exclusion

Related Court Case: "Expected or Intended Injury" Exclusion Did Not Apply To Bar Patron's Injuries

b. Contractual Liability

There is no coverage for bodily injury or property damage when the insured has assumed liability in a written contract or agreement for such bodily injury or property damage. There are two exceptions:

• Liability the insured would have had without a contract or agreement
• Liability the insured assumed in an insured contract or agreement is covered. However, the bodily injury or property damage must occur after the contract or agreement is executed.

Note: A retroactive agreement is excluded because it unfairly manipulates coverage.

Example: Oops Auto Sales has extra space that it leases out to a gentleman who specializes in Upholstery Repairs. As part of their lease agreement, they agree to hold him harmless for any injuries to customers while in his part of the building. The agreement does not affect Oops’ Auto Dealer policy because it would be liable for such injuries regardless of the lease.

c. Workers Compensation and Similar Laws

There is no coverage for any requirement or obligation of the insured that is imposed by any workers compensation, disability benefits, unemployment compensation, or similar law.

Note: The intent of this exclusion and the Employers Liability exclusion is to eliminate the possibility of the insured being indemnified under this coverage form for an injury that workers compensation or employers liability policies cover.

Related Court Case: Employee Injury Exclusion Could Not Be Waived When Employer Failed to Carry Workers Compensation Insurance

d. Employee Indemnification and Employers Liability

Bodily injury to an employee that results from the actual employment or performance of duties that relate to the insured’s business is excluded.

In addition, bodily injury to a person that arises from that person not being hired or being fired or subject to negative employment-related practices is also excluded.

Bodily injury to the spouse, child, parent, brother or sister of the employee or the person described in the first two sentences of this exclusion that is consequential to that person’s or employee’s bodily injury is also excluded.

This exclusion applies whether the insured is liable as an employer or in any other capacity or whether the insured is obligated to share damages with or repay someone else who must pay damages because of the injury.

When an insured has assumed liability for such actions in an insured contract, the first sentence above does not apply.

Note: This exclusion is particularly important because of the widespread use of contractors, subcontractors, independent contractors, or leased employees, and much of the uncertainty with respect to who is responsible for injuries to those individuals.

Related Articles:

Stop Gap–Employers’ Liability Coverage

e. Damage to Property

The insurance company does not pay for property damage to:

(1) Property the named insured owns, rents, or occupies. Costs or expenses the named insured or any other party incurs to repair, replace, enhance, restore, or maintain such property for any reason are excluded. Costs to prevent injury to persons or damage to property of others are also excluded.

(2) Property that is loaned to any insured

(3) Property that an insured possesses with the intent to sell or to transport (including while it is being transported)

(4) Personal property in the insured's care, custody, or control

Example: Harry Car Pavilion is damaged by a fire. Part of the damage included a sales display of custom car waxing kits that were left there via an agreement with the product’s vendor. That property is not eligible for coverage under Harry’s policy.

Related Court Case: Care, Custody or Control Exclusion Held Applicable

Related Article: Care, Custody, or Control

Note: A coverage alternative for this exclusion is Inland Marine Insurance. Bailees Coverage is available to cover property of the insured’s customers or clients. Various forms of bailees coverage are available through ISO, the American Association of Insurance Services (AAIS), and company-specific forms, depending on the insured's needs and operations.

Related Articles:

AAIS Bailee Customers Floater Coverage–Dry Cleaners and Laundry Form

AAIS Miscellaneous Bailee–Processor Floater

ISO Bailees Customers Coverage Form

Paragraphs (1), (2), and (4) above do not apply to property damage (other than by fire) to a location (including its contents) that the named insured rents for seven or fewer consecutive days. A separate limit applies as described in Paragraph F–Limits of Insurance.

An exception is also made regarding any liability assumed under a sidetrack agreement.

Note: Railroad sidetrack agreements are covered contracts.

f. Pollution

Note: Although this pollution exclusion is similar to the CGL pollution exclusion, it is not identical due to the removal of one on-premises exception and one off-premises exception.

Pollutants are defined in the definitions section as irritants or contaminants that can be solid, liquid, gaseous, or thermal. Smoke, vapor, soot, fumes, acids, alkalis, chemicals, and waste are listed as examples. The term waste specifically includes materials that are intended to be recycled, reconditioned, or reclaimed.

(1) Coverage does not apply to any bodily injury or property damage that arises because pollutants have been discharged, dispersed, seeped, migrated, released, or if they have escaped. The events may have actually occurred, may have been alleged, or were threatened. The exclusion applies under the following circumstances:

(a) At or from any location, site, or premises that the insured ever owned, occupied, rented, or had loaned to it.

(b) At or from any location or site used to handle, store, dispose of, process, or treat waste. This applies regardless of who was involved with the waste-related activity.

(c) At or from any location or site where any insured is performing operations. This also applies to contractors and subcontractors working for any insured. This applies if the operations:

• Perform pollutant testing, monitoring, cleaning up, removing, containing, treating, detoxification, neutralization, response, or assessment in any way.
• Require that the pollutants be brought to the location or site by the insured, contractor, or subcontractor.

(d) That were transported, handled, stored, treated, disposed of, or processed as waste. This applies only if the insured or someone the named insured is legally responsible for was involved with the waste-related activity.

There are three exceptions:

• Bodily injury or property damage that arises out of the heat, smoke, or fumes from a hostile fire, but the exception applies only to item (1) (a) and the portion of item (3) that only related to pollutants brought onto the premises by such insured, contractor or subcontractor.

Example: A fire breaks out in a kitchen/break room in Grandiose Autos. The fire is put out, but not before heavily damaging a storage room that contained a variety of cleaning solvents. The fumes from the burning storage room sicken several customers who were cleared from the building when the fire was discovered. Treatment for their injuries would be eligible for coverage.

• Bodily injury that is sustained inside a building when the bodily injury is caused by smoke, vapor, fumes, or soot coming from equipment that heats water for the building's occupants. The water must be intended for only personal use. The exception applies only to item (1) (a).
• Bodily injury or property damage caused by the release of gases, fumes, or vapors from materials if those materials had been brought into the building as part of operations being performed by the named insured or by a contractor, or subcontractor who is acting on behalf of the named insured. An important part of this exception is that the injury or damage must be sustained within the building. This exception applies only to item (1) (c).

(2) Coverage does not apply to any loss, cost, or expense that arises out of any:

(a) Request, demand, order, or statutory or regulatory requirements the insured must comply with regarding the effects of pollutants. These may involve the insured or others testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing those effects.

(b) Claim or suit by or on behalf of a governmental authority for damages due to testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, responding to, or assessing the effects of pollutants in any way

Item f. (2). does not apply to any liability for property damage that the insured would have outside of any such governmental authority.

Related Court Cases:

Contaminant Clarified With Respect To Application of Pollution Exclusion

Pollution Claim by Insured for Damage to His Property by Former Tenant Held Not Covered

Pollution Exclusion Applied Although Toxic Waste Was Turned Over To Transporter for Disposal

g. Aircraft, Auto, or Watercraft

Coverage does not apply to bodily injury or property damage that arises out of owning, maintaining, using, operating, loading, unloading, or entrusting to others any aircraft, auto, or watercraft that any insured owns, operates, rents, or has loaned to it. This exclusion applies even if a claim alleges that any insured was negligent or engaged in wrongdoing in supervising, hiring, employing, training, or monitoring others.

This exclusion has three exceptions. It does not apply to:

• Watercraft on shore at locations the named insured owns or rents

Example: Amityville Autobarn was holding its Summerfun festival! They had several displays, including a small speedboat on a boat trailer that was parked on the Autobarn lot. The boat and trailer belong to Autobarn’s principal owner. Several kids climbed aboard the boat to play like pirates, and two kids fell off, suffering some severe cuts and broken limbs. Coverage applies to the injuries.

• Watercraft the named insured does not own that are less than 26 feet long and that are not used to transport people or property for a fee

• Liability assumed under any insured contract that applies to owning, maintaining, or using aircraft or watercraft

Example: Naomi charters a plane to fly in several out-of-state clients who want to discuss a large vehicle fleet deal. The charter company requires it to sign a hold-harmless agreement.

Related Articles:

CA 00 01–Business Auto Coverage Form Analysis

Aircraft Insurance Coverage Analysis

h. Defective Products

Coverage does not apply to property damage to any of the named insured's products when that damage is caused by a defect that either is in a product of the named insured or is in one of its parts. The defect must have existed at the time that product was transferred to another.

Note: CA 25 01–Broad Form Products Coverage eliminates this exclusion subject to a $500 deductible.

Example: Melody buys a Ford Taurus from John’s Fine Autos. On her way home, the engine bursts into flames. Melody escapes unharmed, but the Taurus is destroyed. An investigation of the loss reveals that a defect in the engine caused the fire, so Melody sues John’s Fine Auto for the loss. John must pay the claim itself because there is no coverage. However, if John purchased CA 25 01, the loss could be covered except for the $500 deductible.

i. Work You Performed

Property damage to the named insured’s work or any part of it is excluded when the damage is the result of any part of the work itself or from parts, materials or equipment that were used in connection with the work.

Example: Using the example above, further review of the engine revealed that it was not the engine that was defective but the work John’s mechanic had performed on the engine that was defective. Because the work on the engine was the reason for the Ford Taurus loss, there is no coverage for the loss, even if CA 25 01 had been purchased.

j. Damage to Impaired Property or Property Not Physically Damaged

Note: The key to understanding this coverage is that the definition of property damage considers the loss of use of the property as part of the definition that is not dependent on property actually being damaged.

Coverage also does not apply when the property damage is caused because the named insured or someone acting for the named insured fails to fulfill a contract or agreement or delays doing so.

The insurance company also does not cover property damage to impaired property or property that is not physically injured when property damage is caused by a defect, inadequacy, or dangerous condition in either the named insured’s product or its work.

There is an exception. When loss of use of other property that arises out of the sudden and accidental physical injury to the insured’s products or work performed by the insured occurs, there is coverage if such loss or damage takes place after it has been put to its intended use.

Note: There is no standard ISO endorsement currently available to buy back this coverage or to delete this exclusion.

Example: Perin is driving his tractor-refrigerated trailer unit when the engine light alerts him to a problem. He pulls the rig over and contacts the firm he is carrying for to come pick up the trailer unit as he awaits a tow. The trailer is picked up, and Perin’s tractor is towed to the truck stop, where investigation reveals that service work performed at Hector’s Tractors Sales had caused:

Scenario 1: the engine light to go on even though the engine was fine. Perin sues Hector’s for the revenue he lost by losing the refrigerated haul, the tow cost, and the service call. Hector’s has no coverage under his policy for the loss.

Scenario 2: the engine to overheat, and it would have blown except for Perin’s fast action. This loss could be covered.

k. Products Recall

There is no coverage for damages that are claimed for any loss, cost, or expense the named insured or others incur for the loss of use, withdrawal, recall, inspection, repair, replacement, adjustment, removal or disposal of the named insured’s product. There is also no coverage if the claims are for damages due to work the named insured performed or other property of which the named insured's work or product is a part when withdrawn, recalled or removed because of a known or suspected defect, deficiency, inadequacy or dangerous condition.

Note: Coverage does not apply, regardless of the party that initiates the withdrawal, recall, or removal. The expense and cost of the recall, repair, or removal is excluded.

l. War

This exclusion unequivocally bars coverage for bodily injury or property damage related to war and similar military events. It is not affected by circumstances such as a formal declaration of war, whether the war is a civil uprising, or whether it involves government or civilian participants.

Note: The bottom line is that there is no coverage for loss related either directly or indirectly to war or warlike activity.

m. Recording and Distribution of Material or Information in Violation of Law

Insurance coverage does not apply to bodily injury or property damage that arises directly or indirectly out of any act or omission that violates or is alleged to violate:

• The Telephone Consumer Protection Act (TCPA), including its amendments or additions
• The CAN-SPAM Act of 2003, including its amendments or additions
• The Fair Credit Reporting Act (FRCA). This includes any and all of its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA)
• Any other statute, ordinance, or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information.

Note: This exclusion does not state that the named insured or even an insured must be the violator. As a result, situations could arise where an insured or the named insured is not aware that its computers have been hacked to violate the act, and coverage still does not apply.

n. Personal and Advertising Injury

There is no coverage for any bodily injury that arises out of personal and advertising injury.

Note: Bodily injury that arises from personal and advertising injury is covered under B. Personal and Advertising Injury Liability.

o. Liquor Liability

The insurance company does not pay for bodily injury or property damage that any insured may be liable for because of any of the following:

• Causing or contributing to a person becoming intoxicated
• Furnishing alcoholic beverages to a person who is under the legal drinking age
• Furnishing alcoholic beverages to a person who is already under the influence of alcohol
• Any law that relates to the sale, gift, distribution, or use of alcoholic beverages

This exclusion does not apply if the named insured is not in the business of manufacturing, distributing, selling, serving, or furnishing alcoholic beverages.

Example: Annie is thrilled that her crew at Grateful Motors completed service on more than 50 vehicles that were brought in as part of a manufacturer’s recall. She throws a party and serves alcoholic beverages at no charge. Her newest mechanic overindulges, and on the way home, he slams into and demolishes a mailbox and streetlight. Annie’s Auto Dealers policy will respond to this loss.

The following exclusions do not apply to fire damage to premises that the named insured rents temporarily or occupies with permission of the owner.

c. Workers Compensation

d. Employee Indemnification and Employers Liability

f. Pollution

g. Aircraft, Auto, or Watercraft

h. Defective Products

i. Work You Performed

j. Damage to Impaired Property of Property Not Physically Damaged

k. Products Recall

l. War

m. Recording and Distribution of Materials or Information in Violation of Law

n. Personal and Advertising Injury

o. Liquor Liability

A separate limit of insurance for this coverage is available and described in Section II, Paragraph F. Limits of Insurance-General Liability Coverages.

B. Personal and Advertising Injury Liability

1. Coverage

The insurance company agrees to pay amounts the insured is legally obligated to pay as damages because of personal and advertising injury that this insurance covers. Specifically, such losses must be connected with the named insured’s auto dealer operations. Further, any offense must take place during the policy period, and it must take place in the covered territory.

The insurer has the right and duty to defend the insured against any suit that seeks those damages. That responsibility applies only to such suits that seek damages that this insurance covers. The insurance company makes the decision as to whether claims and suits are settled, investigated, or litigated.

a. The amount paid as damages is limited as described under Paragraph F–Limits of Insurance.

b. The defense’s right and duty to defend ends when the insurance company uses up the limit of insurance that applies by paying judgments and settlements under Items A, B and C. The insurance company is not obligated to pay any other sums or to perform any other acts or services. The only exceptions are those items specifically listed and described under Supplementary Payments.

2. Exclusions

The insurance coverage provided does not apply to any of the following, except as noted:

a. Knowing Violation of Rights of Another

The insurance company does not pay for personal and advertising injury that the insured causes or directs. This exclusion applies only when the insured knew that the act would violate the rights of another and result in personal and advertising injury and chose to act anyway.

Example: Grady decided to take a radical approach to selling cars and named his dealership Manly Used Cars. He pledged only to hire male salespeople and mechanics. He also placed a sign on the door stating that no women or children were permitted on premises. Any suits resulting from Grady’s action are not covered by this coverage because Grady was in violation of others’ rights.

b. Material Published With Knowledge of Falsity

Coverage does not apply when personal and advertising injury is caused because an insured publishes or has published information that is known to be false. The publication can be either oral or written.

This exclusion applies regardless of the way the material is published.

c. Material Published Prior to Policy Period

There is no coverage for personal and advertising injury when the material that caused the alleged injury was first published before the coverage inception date. The publication can be either oral or written. This exclusion applies regardless of the way the material is published.

Note: This exclusion does not specify the party that does the initial publication. The insured may publish the material during the policy period, but there is no coverage if the insurance company discovers that the material was published elsewhere prior to the policy period.

d. Criminal Acts

Insurance does not apply to personal and advertising injury that arises out of a criminal act that is either committed by the insured or done so at its direction.

e. Contractual Liability

There is no coverage for liability the insured assumes in a contract or agreement. There is one exception. This exclusion does not apply to liability the insured would have even if the contract or agreement didn’t exist.

Example: A celebrity agrees to host a fundraiser at Billy’s Auto Alliance. The celebrity insists on a written agreement that states that the dealer will not slander or libel the celebrity in any of the advertising about the event. This liability exists whether it is written into the agreement or not.

f. Breach of Contract

Coverage does not apply to personal and advertising injury that arises out of breach of contract. There is an exception. Coverage applies if the contract was an implied contact and the injury is related to an advertising idea of another used in the named insured's advertisement.

Note: An implied contract is much different from a written one because there is nothing in writing and not even a firm verbal understanding. As a result, it is more difficult to prove that a breach occurred.

Example: Paul owns Paul’s Equipment Dealership. Jessica draws a picture of equipment at school one day and her father, Jake, shows it to Paul, who jokingly says, “That would make a great advertisement.” Later in the year, Paul launches a new ad campaign, and Jake asks Paul for compensation because the equipment in the ad looks, to Jake, just like what Jessica drew. Paul refuses because he had paid an advertising company to develop the idea. Jake sues. This breach of contract is covered because the contract was only implied.

g. Quality or Performance of Goods–Failure to Conform to Statements

Personal and advertising injury that arises when goods, products, or services fail to meet the named insured's advertised statements of quality or performance is excluded.

Example: Franks Car Barn is sued by several customers who complain that its repair staff is incompetent and its service is horrible, even though Franks’ ads include the tagline “Best & Most Courteous Service in The Tri-State Area!” Coverage does not apply in this case.

h. Wrong Description of Prices

The insurance company does not pay for personal and advertising injury when the named insured’s advertisement states the incorrect price for goods, products, or services.

i. Infringement of Copyright, Patent, Trademark, or Trade Secret

Coverage does not apply to personal and advertising injury that arises from the copyright, patent, trademark, trade secret, or any other intellectual property rights infringement.

Note: There is no requirement that the named insured, an insured, or even someone acting on behalf of either does the infringing. All infringement is excluded.

There are two exceptions. This exclusion does not apply:

• When the named insured's advertisement infringes on copyright, trade dress, or slogan
• When use of another’s advertising idea in the named insured’s advertisement is considered infringement of intellectual property rights

Related Court Case: Insurer Is Obligated To Defend Copyright Infringement Claim

j. Electronic Chatrooms or Bulletin Boards

Personal and advertising injury that arises out of an electronic chatroom or bulletin board the insured owns, hosts, or controls is excluded.

Note: It is important to note that coverage applies for personal and advertising injury related to posting on chatrooms and bulletin boards as long as the insured did not control, host, or own them.

k. Unauthorized Use of Another's Name or Products

The insurance company does not pay for personal and advertising injury that arises when the named insured uses the Internet to try to mislead another’s customers or potential customers. This exclusion applies when the misleading is caused by unauthorized use of the name or product of another party in the named insured's email address, domain, or metatag.

Example: Michael of Michael’s Vehicles was not pleased with the attention the new NewTownAutoOnline.com website was generating, so he developed a website named NewTownAutoOnline.net that brought visitors directly to his website. When NewTownAuto Online sued Michael for this deceptive approach, Michael had no insurance coverage.

l. Pollution

Coverage does not apply to personal and advertising injury that arises out of the actual, alleged, or threatened discharge, dispersal, seepage, migration, release, or escape of pollutants at any time.

Note: This is an absolute exclusion. It does not have any exceptions.

m. Pollution Related

Coverage does not apply to any loss, cost, or expense that arises out of:

• Any request, demand, order, or statutory or regulatory requirement that any insured or others test for, clean up, treat, respond to, or assess the effects of pollutants in any way
• Any claim or suit by or on behalf of a governmental authority because of testing for, cleaning up, treating, responding to, or assessing the effects of pollutants in any way

Note: Personal and advertising injury coverage was never intended to pay for any pollution damages or cleanup costs. This exclusion clarifies that there is no coverage for any pollution exposure that may arise out of this coverage form’s personal and advertising injury wording.

n. War

There is no coverage for bodily injury or property damage caused directly or indirectly in any way by war, undeclared war, and civil war, including warlike action by a military force. This exclusion also applies to actions a government takes to prevent or defend against an expected or actual attack by any government or other authority that uses military personnel or agents. It also applies to rebellion, revolution, insurrection, or unlawful seizure of power and the action the government takes to prevent or defend against any of these.

o. Recording and Distribution of Material or Information in Violation of Law

Insurance coverage does not apply to personal and advertising injury that arises directly or indirectly out of any act or omission that violates or allegedly violates:

• The Telephone Consumer Protection Act (TCPA), including its amendments or additions
• The CAN-SPAM Act of 2003, including its amendments or additions
• The Fair Credit Reporting Act (FRCA). This includes any and all of its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA).
• Any other statute, ordinance or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information

Note: This exclusion does not state that the named insured or even an insured must be the violator. As a result, situations could arise where an insured or the named insured is not aware that its computers have been hacked to violate the act, and coverage still does not apply.

Related Court Case: Commercial Liability Policy Obligated To Respond To TCPA Violations

p. Employment-related Practices

Coverage does not apply to personal and advertising injury to:

• A person that arises out of any refusal to employ that person, terminating that person's employment, or other types of employment-related acts, omissions, practices, or policies
• A family member of that person due to his or her bodily injury for any of the employment-related practices described above

This exclusion applies:

· Whether the event that caused the injury described above occurs before, during, or after that person's employment

· Whether the insured may be liable as an employer or in any other capacity

· To any obligation to share damages with or repay another party that must pay damages because of the injury

To summarize, there is no coverage for personal and advertising injury for the causes and reasons listed for any employee or non-employee.

q. Acts, Errors or Omissions

What happens when a named insured is responsible by an act, inaction or via error which causes injury to another party or another’s property? As far as the Auto Dealers Coverage Form goes, nothing. Such incidents are not covered.

C. Locations and Operations Medical Payments Coverage

1. Coverage

a. The insurance company pays certain medical expenses for bodily injury an accident causes. The accident must result from the named insured’s auto dealer operation. Coverage applies if the accident occurs in the coverage territory and during the policy period.

Note: Exclusion f. below removes coverage for incidents that occur away from the named insured’s premises. This is more restrictive than similar coverage under a CGL Medical Payments.

b. The expenses must be incurred within one year of the date of the accident.

Example: Medical expenses incurred by a customer, whose jaw is struck and broken when a car salesperson surprises her by electronically raising an SUV’s tailgate, are covered.

c. Payments are made without regard to fault but do not exceed the limit of insurance. The insurance company pays reasonable expenses for first aid rendered at the time of the accident. It also pays necessary medical, surgical, x-ray, dental, prosthetic devices, ambulance, hospital, professional nursing, and funeral services.

2. Exclusions

The following describes a variety of situations when expenses due to bodily injury are not covered:

a. Workers Compensation and Similar Laws

Coverage does not apply to any person, whether or not employed by any insured if benefits for bodily injury are payable or must be provided under workers compensation, disability benefits, or similar laws.

b. Any Insured

Coverage does not apply to any insured.

Note: Under CGL, volunteers are insureds and would be subject to this limitation. However, volunteers are NOT insureds under the Auto Dealers Coverage form, so injuries to volunteers would be covered:

Example: Barney’s Motortown is, for the fourth year, hosting a Charity Pig Roast. One of the volunteer cooks slips and falls onto one of the charcoal grills. The expenses to pay for treating her burns are covered under Barney’s policy.

c. Hired Person

There is no coverage for persons who are hired to do work for or on behalf of any insured or for any tenant of any insured.

d. Injury on Normally Occupied Premises

The insurance company does not pay medical expenses of persons injured on that part of the premises that the named insured owns or rents and which that person normally occupies.

e. Athletic Activities

There is no coverage for any person injured while practicing for, instructing, or participating in any physical exercises, games, sports, or athletic contests.

f. Injury Away From Auto Dealer Locations

The insurance company does not pay medical expenses of persons injured when that person is not at a location that is owned, rented or used specifically for the named insured’s auto dealer operations.

Note: This differs from the CGL medical payments coverage that provides medical payments off premises coverage when due to named insured operations.

Example: Makey called emergency service when his brand-new vehicle suddenly stopped on the highway. The tow truck arrived, and Makey was injured when he got in the way of the two individuals placing the vehicle on the truck.

Scenario 1: Great Cars, Inc., the dealership, sent its own tow truck. Makey is not eligible for medical payments because the injury happened off premises.

Scenario 2: Ray’s Tow truck responds to the call. Makey is eligible because Ray’s is covered under a CGL and the injury was due to Ray’s operations.

g. Coverage A Exclusions

The insurance company does not pay for any bodily injury that is barred from protection under Coverage A.

D. Who Is an Insured

The declarations list different types of entities. Who is an insured is based on the type(s) of entities selected.

1. If the named insured is an individual, the named insured is an insured.

Note: The individual’s spouse is NOT an insured.

2. If the named insured is a partnership that named insured is an insured. The named insured's partners and their spouses are also insureds. However, the partners and their spouses are insureds only based on their involvement in auto dealer operations.

Example: Mr. Winterfill and Mr. Stork are partners in Wintry Stork Autos. Both partners and their spouses are insureds with respect to the conduct of the dealership. However, none of them are insureds under this coverage form for any personal exposures or for any other business activities.

Related Court Case: Partnership Personal Conduct Is Distinguished From Business Activity

3. If the named insured is a limited liability company, the named insured is an insured. Members of the company are insureds but only when conducting the named insured's auto dealer business. The named insured's managers are also insureds but only when performing specific duties as such.

4. If the named insured is any other organization, the named insured is an insured. The executive officers and directors are insureds while performing their duties as such. Stockholders are insureds but only in their very limited capacity as stockholders.

5. Employees are insureds within the narrow range of activities within the scope of their employment or while conducting the named insured's auto dealer business. Executive officers and managers are not considered employees. However, employees are not always insureds.

a. Employees are not insureds for bodily injury or personal and advertising injury:

• To the named insured, its partners, or members of an LLC
• To other employees. This restriction applies only when those co-employees are acting within their employment boundaries or conducting the named insured’s business.
• To consequential loss spouse or a relative of any co-employee sustains because of injuries to a co-employee described in the prior bullet item
• Where an obligation exists to share damages with or repay others for damages because of injury described in any of the preceding bullet items
• When the applicable incident is connected to the providing of or the failure to provide professional health care services

Example: Orion, a customer at Harry’s Used Autos, doesn’t see a pit that is used for servicing cars. He falls and severely cuts his leg. Janet, the mechanic, is also an EMT, so she immediately applies a tourniquet until an ambulance arrives. The ambulance is delayed by heavy traffic, and by the time Orion gets to a hospital, his leg is infected and, eventually, has to be amputated. Orion sues the shop and Janet for improper emergency treatment. This loss is denied because Janet is not considered an insured due to this exception.

b. Employees are not insureds for property damage to property owned, occupied, used by, rented to, or to property that is in the named insured's physical custody.

6. Any newly formed or acquired organization (auto dealer operation) qualifies as a named insured if no other similar coverage is available to it. This applies only if the named insured either owns or has a majority interest in the organization. The newly formed or acquired organization cannot be a partnership, joint venture, or limited liability company.

a. This provision provides coverage for not more than 90 days after the organization is formed or acquired or until the end of the policy period, whichever comes first.

b. Coverage does not apply to bodily injury or property damage that occurred before the organization was acquired or formed. Neither does coverage apply to personal and advertising injury that arises out of an offense that is committed before the organization was acquired or formed.

No party is an insured with respect to conduct of any current or previous partnership, joint venture, or limited liability company that is not shown on the declarations as an insured.

E. Supplementary Payments

The insurance company pays the following on behalf of the insured:

1. All expenses the insurance company incurs.

2. The cost of bonds needed to release attachments in a suit that is filed against the insured and which the insurance company defends, but only the cost for the amount of such bonds that are within the limit of insurance.

3. Reasonable expenses incurred by an insured if the insurance company asks him or her to participate in any investigation or defense. One expense is the insured’s actual loss of earnings because of time taken off from work, but this expense is capped at no more than $250 per day.

4. All costs that are taxed against the insured in a suit filed against it that the insurance company defends. The exception is that attorney’s fee and attorney’s expenses taxed against the insured are not covered.

5. Interest that accrues to the total amount of any judgment is covered. Once the insurance company offers to pay, deposits payment with the court, or pays its portion of the judgment, any additional interest that accrues on any remaining portion of the judgment is not covered.

None of these payments reduces the limit of insurance. This means that the full limit of insurance is available to pay for the actual injuries or damages.

F. Limits of Insurance–General Liability Coverages

1. The most the insurance company pays are the Limits of Insurance on the declarations, subject to other items in this section. The limit applies regardless of the number of insureds, claims made, suits brought, or the number of parties that make claims or bring suits.

Examples: Sarah and her husband Roger are partners operating under the name Harmony Towne Autos. A prospective customer is injured, and she sues Sarah and Roger. The Auto Dealers Coverage Form responds and defends each as if he or she is the only insured. However, the limit applies to each accident, not to each person.

a. The General Liability Aggregate Limit is the most the insurance company pays for the total of damages for Paragraph A (bodily injury or property damage), damages under Paragraph B (personal and advertising injury), and medical expenses under Paragraph C.

Example: Gilligan’s Great Buys has another big claim when a mishap occurs while a first-grade class is taking a tour. Gilligan’s has an Auto Dealer Coverage Form with a $1,000,000 each accident limit. While touring, a gas tank that was being welded exploded and injured a dozen schoolchildren. The subsequent claims filed for damages for bodily injury amount to $5,000,000. The $1,000,000 each accident limit is the only amount that applies to those claims, subject to the general liability aggregate limit.

However, no coverage is granted for incidents of bodily injury or property damage under Paragraph A if they occur away from a named insured’s auto dealer location and involve that named insured’s products or work.

b. The Products and Work You Performed Aggregate Limit represents the maximum amount available under Paragraph A. That maximum applies to any given incident that takes place away from a named insured’s auto dealer location and involves that insured’s products or work.

Related Court Case: Aggregate Limit Held Applicable To Products and Completed Operations Combined

Example: An Auto Dealers Coverage Form with a $3,000,000 products-completed operations aggregate limit sustains eight products claims for eight different injuries to customers in a single policy year from the use of the named insured's products. All losses are covered, occur during the policy period, and total $4,000,000. The CGL Coverage Form responds only up to the $3,000,000 aggregate limit.

2. The Personal and Advertising Injury Limit is the most paid under the policy’s Paragraph B, Personal and Advertising Injury. It applies to such injury that is experienced by any one person or organization. Any such payments are capped by the policy’s General Aggregate Limit.

Example: Gilligan’s Great Buys is insured by an Auto Dealer’s Coverage Form that has a $1,000,000 personal and advertising injury limit and a $2,000,000 general aggregate limit. A covered personal and advertising injury claim for $2,000,000 arises. Coverage applies for only the $1,000,000 personal and advertising injury limit.

3. The Locations and Operations Medical Payments Limit represents the maximum available for payments of medical expenses due to all bodily injury that arises out of any one accident. This is subject to the General Liability Aggregate Limit.

4. The Auto Dealer Coverage Form’s General Liability Bodily Injury and Property Damage Liability Each Accident Limit is the maximum available for responding to all damages related to a single accident eligible for coverage under the form’s Paragraph A. Bodily Injury and Property Damage Liability.

Any payment made under this section bars duplicate payments from under the form’s Covered Autos Coverage and also from the Acts, Errors Or Omissions Coverage.

5. The Damage To Premises Rented To You Limit is the most paid under Paragraph A for damages because of property damage to any one premises the named insured rents. This includes damage by a fire involving premises the named insured rents or temporarily occupies with the owner's permission.

6. This section also clarifies how the aggregate limits of insurance apply. They apply separately to each consecutive annual period and to any remaining period of fewer than 12 months. This begins with the coverage inception date on the declarations, unless extended after issuance for any additional period of fewer than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

Note: The General Liability Aggregate applies only to Section II–General Liability. It does not apply to Section I-Covered Autos Coverages.

Example: The original 12-month policy period ran from January 1 to January 1. During the second policy period, the insured requested extending the policy period to July 1 to match its accounting year. The limits applied separately to the first annual 12-month policy period of January 1 to January 1. They also applied separately to the second policy period that was extended an additional six months, from the original January I expiration date to the new July 1 date. From that point forward, the annual 12-month period of July 1 to July 1 has a separate set of limits. If a short-term policy was issued in place of the six-month extension, it would have had its own set of limits. Because the original policy period was extended, the original limits applied to both the original period and the extension period.

Note: The General Liability Aggregate applies only to Section II–General Liability. It does not apply to Section I-Covered Autos Coverages.

7. A deductible of $500 applies for property damage that results from work performed by the named insured on an auto.

SECTION III–ACTS, ERRORS OR OMISSIONS LIABILITY COVERAGES

A. Coverage

The insurance company agrees to pay amounts the insured is legally obligated to pay as damages that are related to acts, errors and/or omissions that are connected to auto dealer activities. Such incidents have to occur within the applicable coverage territory and policy period.

Example: Lindsey’s Luxury Wheels is sued by an irate customer who bought an expensive, late model used car from the dealer. Several months after the purchase, the car is seized and returned to the original owner. Lindsey’s sales manager failed to get all of the proper paperwork to claim legal ownership of the car. This loss is eligible for coverage.

When suits seek damages from the insured that the insurance covers, the insurance company has the right and duty to defend that insured. It has the right to investigate any loss and settle any claim or suit that results at its sole discretion, but the amount paid as damages is limited as described under Paragraph E –Limits of Insurance. The right and duty to defend ends when the limit of insurance that applies to pay judgments and settlements is exhausted. The insurance company is not obligated to pay any other sums or to perform any other acts or services except as specifically listed and described under Supplementary Payments (Paragraph D).

B. Exclusions

The insurance coverage provided is not valid for the following circumstances:

1. Criminal, Fraudulent, Malicious, Dishonest or Intentional Acts

Insurance is not available when damages are the result of deliberate or criminal actions of any insured. Excluded incidents are those involving crimes, dishonesty, fraud, intentional or malicious activities, mistakes, or omissions. The exclusion excludes loss that is related to any insured knowingly and recklessly disobeying laws or regulations.

Example: Let’s look at another situation at Lindsey’s Luxury Wheels. This time, it is sued when dozens of vehicle owners who brought in their vehicles to have repairs made in accordance with a manufacturer’s recall, find out that no repairs were made….but the garage received service reimbursements from the manufacturer. This loss would not be covered.

The exclusion has an innocent insured exception. Any insured who is free of any complicity in such acts is covered. The innocent insured must not have committed, participated in or agreed with the excluded actions. In addition, the innocent insured must not have remained passive after receiving knowledge of the actions.

Example: The manager of Lindsey’s was a very trusted employee. Patty and Bill, Lindsay’s owners, allowed him to operate without any supervision. When the lawsuit is brought by the irate owners, Patty and Bill request coverage from their insurance carrier and receive it because they were oblivious to the manager’s actions. The manager is not covered for his actions.

2. Bodily Injury, Property Damage or Personal and Advertising Injury

Bodily Injury, Property Damage and Personal and Advertising Injury are ineligible under this portion of the Auto Dealer Coverage Form.

3. Profit Gain

Claims that involve amounts that can be categorized as unjustified profits to any insured are ineligible for coverage.

4. Contractual Liability

There is no coverage for liability the insured assumes in a contract or agreement. There is one exception. This exclusion does not apply to liability the insured has without a contract or agreement.

5. Noncompensatory Damages

This portion of the Auto Dealer Coverage Form provides coverage against claims or suits that seek valid compensation for measurable loss. Any amounts that fall outside such damages are not eligible for payment, including punitive, exemplary awards of forms of relief (equitable or injunctive).

Example: Shady Haze Inc. was sued by a group of customers for improperly executing contracts that resulted in auto lenders voiding warranties for purchased cars. A court, along with compensatory damages, also levied a punitive award of $150,000 for their willful acts. The punitive award is not eligible for reimbursement.

6. Quality or Performance of Goods–Failure to Conform to Statements

Damages attributable to goods, products, or services failing to meet the named insured's advertised statements of quality or performance are excluded.

7. Recording and Distribution of Material or Information in Violation of Law

Insurance coverage does not apply to any act, error, or omission that arises directly or indirectly out of any act or omission that violates or allegedly violates:

• The Telephone Consumer Protection Act (TCPA), including its amendments or additions
• The CAN-SPAM Act of 2003, including its amendments or additions
• The Fair Credit Reporting Act (FRCA). This includes any and all of its amendments plus related acts such as the Fair and Accurate Credit Transactions Act (FACTA).
• Any other statute, ordinance or regulation that prohibits or limits sending, transmitting, communicating, printing, disseminating, disposing of, transmitting, or distributing material or information

Note: This exclusion does not state that the named insured or even an insured must be the violator. As a result, situations could arise where an insured or the named insured is not aware that its computers have been hacked to violate the act, and coverage still does not apply.

8. Discrimination

The insurance company does not pay for damages relating to any activities that illegally harm the civil rights of other parties, including harming the rights of persons who hold protected status or characteristic as established by governmental decree (laws, rules, or statutes) on any level.

Besides violating rights of persons based on protected status, the exclusion also applies in cases based upon another’s race, national origin, marital status, age, sexual orientation or condition (physical or mental), are also excluded.

9. Bankruptcy or Insolvency

Loss caused by the named insured’s arranging insurance with any risk-taking entity that becomes bankrupt, insolvent, or otherwise financially impaired is not covered. This exclusion also applies to insurance placement with entities that are sold or which are placed in receivership.

Exception-coverage still applies to losses in situations where, at the time of insurance placement, the entity held an A.M. Best Company, Inc. rating of at least “B+.”

Example: Baby Steps Used Cars specializes in drivers with a troubled credit history. It knew that insurance would be a problem for them, so it arranged for force-placed automobile coverage for any that needed to borrow money for the purchase. Coverage was issued with Trying to Help Insurance Company, a C+ rated company. When Trying to Help went bankrupt and resulted in unpaid losses, Baby Steps was not covered when its clients sued it.

C. Who Is an Insured

The declarations lists different types of entities. Who is an insured is based on the type(s) of entities selected.

1. The named insured is always an insured.

Note: This differs from other “who is an insured” provisions in that the spouse of an individual named insured is NOT an insured.

2. If the named insured is a partnership that named insured is an insured. The named insured's partners and their spouses are also insureds. Their status as insureds is limited to their involvement in auto dealer operations.

3. If the named insured is a limited liability company, the named insured is an insured. Members of the company are insureds but only when conducting the named insured's business. The named insured's managers are also insureds but only when performing specific duties as managers.

4. If the named insured is any other organization, the named insured is an insured. The executive officers and directors are insureds while performing their duties as such. Stockholders are insureds but only in their very limited capacity as stockholders.

5. Employees, excluding any applicable executive officers and managers, are insureds within the narrow range of activities within the scope of their employment or while conducting the named insured's auto dealer business.

6. Any newly formed or acquired organization (auto dealer operation) qualifies as a named insured if no other similar coverage is available to it. This applies only if the named insured either owns or has a majority interest in the organization. The newly formed or acquired organization cannot be a partnership, joint venture, or limited liability company.

a. This provision is limited to not more than 90 days after the organization is formed or acquired, or until the end of the policy period, whichever comes first.

b. Coverage does not apply to acts, errors, or omissions that occurred before the organization was acquired or formed.

No party is an insured with respect to conduct of any current or previous partnership, joint venture, or limited liability company that is not on the declarations as an insured.

D. Supplementary Payments

The insurance company pays the following on behalf of the insured:

1. All expenses it incurs.

2. The cost of bonds needed to release attachments in a suit that is filed against the insured and which the insurance company defends, but only the cost for the amount of such bonds that are within the limit of insurance.

3. Reasonable expenses if the insurance company asks the insured to participate in any investigation or defense. One expense is the insured’s actual loss of earnings because of time taken off from work, but this expense is now capped at more than $250 per day.

4. All costs that are taxed against the insured in a suit filed against it that the insurance company defends. The exception is that attorney’s fee and attorney’s expenses taxed against the insured are not covered.

5. Interest that accrues to the total amount of any judgment is covered. Once the insurance company offers to pay, deposits payment with the court, or pays its portion of the judgment, any additional interest that accrues on any remaining portion of the judgment is not covered.

None of these payments reduces the limit of insurance. This means that the full limit of insurance is available to pay for the actual injuries or damages.

E. Limits of Insurance and Deductible

1. The most the insurance company pays is the Aggregate Limit for Acts, Errors or Omissions that appears on the declarations. This aggregate applies regardless of the number of insureds, claims made, suits brought, number of parties that make claims or bring suits or number of acts, errors or omissions.

2. All damages related to Acts, Errors or Omissions may only be paid under this section. Neither the Section I – Covered Auto Coverages nor the Section II – General Liability Coverages Limits will respond to such claims or losses.

3. A deductible, appearing in the policy’s Declarations, applies to any payment made under this portion of the policy. Therefore, applicable payments are in excess of the given deductible amount. However, the deductible does not affect the limits that apply to any eligible loss.

Depending upon circumstances, the insurer either may fully or partially pay the deductible. In such cases, the named insured is obligated to pay such amounts back to the insurance company.

4. This section also clarifies how the aggregate limits of insurance apply. The “Acts, Errors or Omissions” Aggregate Limit applies separately to each consecutive annual period and to any remaining period of less than 12 months. This begins with the coverage inception date on the declarations, unless extended after issuance for any additional period of fewer than 12 months. If that occurs, the additional period is treated as part of the last preceding period for the purpose of determining the limits of insurance.

SECTION IV–CONDITIONS

A. Loss Conditions

1. Appraisal for Physical Damage Loss

If the insurance company and the named insured fail to agree to the amount of a loss, either may demand an appraisal. When this occurs, each party selects a competent appraiser, both of whom then select a competent and impartial umpire. Each appraiser separately states the actual cash value and amount of loss. If the two appraisers do not agree, they submit their differences to the umpire. When any two of the three agree, that decision is binding on all parties. The insurance company and the named insured each pay the cost of the appraisers and share the expense of the umpire and costs of the appraisal equally.

Even when the insurance company participates in the appraisal process, it still retains the right to deny the claim.

2. Duties In The Event of Accident, Claim, Offense, Suit, Loss or Acts Errors or Omissions

The insurance company is not obligated to provide any coverage under this coverage form unless the named insured fully complies fully with the following duties:

a. When there is an accident, offense, act of error or omission or if a claim, suit, or loss is presented, the named insured is expected to act. First, it must provide either the insurance company or its authorized representative with prompt notice of how, when and where the event occurred along with the names and addresses of any injured persons and the name of and the address of the involved insured(s). If witnesses are known, their names and addresses should also be provided.

b. The named insured and the involved insured must not commit the insurance company to any payment, obligation, or expense. However, the insured can make any commitments it wants at its own expense. The named insured and the insured involved must cooperate with the insurance company during its investigating or settling of the claim or defending of the suit. Copies of all documents the company requests must be provided along with all necessary authorizations that are required in order for it to obtain medical records or other pertinent information. The involved insured must submit to examination by a physician the company chooses as long as it is reasonable and at the company's expense.

c. The named insured has additional duties in case of a physical damage loss to a covered auto or its equipment. It must notify the police promptly if the loss is due to theft. In other loss situations and within reason, the named insured must protect the covered auto from further damage and record the expenses incurred to do so because they can be considered when the claim is settled. The insurance company must be able to inspect the damaged auto and obtain information about the loss before the auto is repaired or disposed of. If the company requests, the named insured must agree to be examined under oath and sign any statement of answers.

Related Court Case: Insured's Lack Of Cooperation Not Enough to Prejudice Insurer

3. Legal Action Against Us

Legal action cannot be brought against the insurance company by any party until all coverage form terms have been complied with.

In addition, under liability coverage, no action can be taken until the insurance company either agree that the insured has an obligation to pay a third party or a court determines that such an obligation exists. The insurance company cannot be brought into any action that is taking place to determine the insured’s liability.

4. Loss Payment–Physical Damage Coverages

The insurance company decides the method it will use to settle a physical damage loss. It can:

a. Pay to repair or to replace the damaged or stolen property

b. Return the stolen property but bear the expense of returning it. It also pays for any damages the auto incurred due to the theft.

c. Take all or any part of the damaged or stolen property based upon it appraised or agreed value. Any payment made includes any required sales tax.

5. Transfer of Rights of Recovery Against Others To Us

If the insurance company makes any payments to a party under this coverage form, any rights that party may have to recover from another automatically transfer to the insurer. The party that was paid must do everything necessary to secure the company's rights to recover and is not permitted to hinder or to impair those rights.

Related Court Case: Subrogation Right of Insurer Held Not Enforceable Against Officer of Insured Corporation

B. General Conditions

1. Bankruptcy

The insurance company’s obligations under this coverage form continue even when the insured or its estate becomes bankrupt.

2. Concealment, Misrepresentation or Fraud

Coverage is void in any case of fraud by the named insured at any time relating to this coverage form. It is also void if the named insured or any insured at any time intentionally conceals or misrepresents material facts relating to this coverage form, the covered auto, the named insured’s interest in the covered auto, or any claim made under this coverage form.

Example: Placebo Motors is covered by an Auto Dealers Coverage form by Acme Casualty. Acme turns down a loss alleging the theft of a dozen vehicles from Placebo’s lot. In its investigation, the insurer finds that the cars alleged to have been stolen were sold by a used car dealer who is a relative of Placebo’s owner.

3. Liberalization

Any revision of this coverage form that broadens or provides additional coverage without an additional premium charge automatically applies to this coverage form. It is effective on the date that the coverage is effective in the named insured’s state.

4. No Benefit to Bailee–Physical Damage Coverages

If a party, such as a bailee, holds or transports property for a fee and requires an assignment of coverage, the insurance company does not recognize that assignment, regardless of any other provision in this coverage form.

5. Other Insurance

a. Regarding covered auto coverage, this insurance is primary if the named insured owns the covered auto. Otherwise, this insurance is excess over any other insurance that can be collected. Coverage for a trailer is based on the vehicle to which it is attached. When the trailer is attached to the named insured's covered auto, coverage for the trailer is primary. However, coverage is excess when the trailer is attached to a motor vehicle the named insured does not own.

b. Under hired auto physical damage coverage, a covered auto the named insured leases, hires, rents or borrows is treated as though it is an owned covered auto. The one exception is that an auto with a driver supplied is not a covered auto.

c. This coverage is always primary when liability is assumed in an insured contract. This supersedes the provisions of paragraph 5.a above.

d. Except for the provisions of e. below, this form’s general liability and acts, errors or omissions protection responds to eligible losses on a primary basis. However, when other sources of coverage are also primary, coverage is provided on a shared basis. The share is determined according to the proportion of protection provided by each source.

e. Regardless of the items above, this form responds on an excess basis when the other source of coverage involves:

• Fire insurance on premises that the named insured either rents or is occupying temporarily
• Liability insurance owned by the named insured which covers that insured for property damage to rented premises (the rental has to be for a temporary rental)
• Loss involving the very limited amount of coverage available for aircraft or watercraft
• Primary coverage that specifically protects against acts, errors or omissions by the named insured

f. The insurance company pays only its share when any other insurance covers the loss on the same basis, regardless of whether that coverage is on a primary or excess basis. Its share is the proportion that this limit of insurance bears to the total of the limits of all coverage forms and policies that apply on the same basis.

6. Premium Audit

a. The initial premium paid is an estimate based on the exposures the named insured stated at inception. The insurance company calculates the final premium based on the insured's actual exposures. Once that is done, the estimated premium is subtracted, and the first named insured either is billed for the additional amount owed or receives a refund if it is overpaid. The billing statement states the date on which the additional premium is due.

b. When coverage is issued for longer than a one-year term, the premium is calculated annually based on the insurance company's rates in effect at the beginning of each annual period.

7. Policy Period, Coverage Territory

Only bodily injury, property damage, and losses that occur during the policy period are covered. Only offenses of personal and advertising injury and acts, errors or omissions that are committed during the policy period are covered. Only covered pollution cost or expense that arises from accidents that occur during the policy period is covered. The occurrence, offense, acts, errors or omission, or accident must take place within the coverage territory. The coverage territory is the United States of America, its territories and possessions, Puerto Rico and Canada.

As an exception to the coverage territory, worldwide coverage is provided:

• If the covered private passenger auto is leased, rented or hired for a period of less than 30 days. Worldwide territory does NOT apply to any such situations where a driver is supplied with the auto.
• For bodily injury, property damage or personal and advertising injury when caused by an insured who is a permanent resident of the territory described above but who is temporarily outside that territory when the loss takes place.
• For personal and advertising injury that is committed electronically. This includes internet related activity.
• When bodily injury or property damage is caused by one of the named insured’s products sold for use in one of the coverage territories indicated above

However, worldwide coverage applies only if the original suit for damages is brought in a described coverage territory.

With regard to losses related to work performed by the named insured, the coverage territory is restricted to the United States of America, its territories and possessions, Puerto Rico and Canada.

With regard to bodily injury, property damage, covered pollution cost or expense, coverage is provided for any covered autos that are in transit between the United States of America, its territories, and possessions, Puerto Rico and Canada. Transit losses are also eligible.

Example: Anyplace, Anytime Inc. was sued by a customer from Canada. The car he purchased from their Ohio location was received with serious body damage. The damage occurred while the car was unloaded off a train car. The damages are eligible for coverage.

8. Two or More Coverage Forms or Policies Issued By Us

Except for coverage forms or policies issued specifically as excess, if this coverage form and any other coverage form or policy issued to the insured by the insurance company or any of its affiliates apply to the same accident, the most paid for the total limit of insurance under all the coverage forms or policies is not more than the highest applicable limit of insurance under any one coverage form or policy.

SECTION V–DEFINITIONS

Defined words are used throughout the coverage form. Read these definitions carefully because these are not dictionary definitions but are statement of how the particular word or term is meant to be interpreted within the coverage form. The definitions can be very lengthy and give or take away coverage.

A. Accident

The term accident, when used in this coverage form, includes continuous or repeated exposure to the same condition, which results in bodily injury or property damage.

Note: The word accident is never actually defined. Therefore, the definition of accident is that which is found in a commonly used dictionary. That agreed upon definition is then expanded to include continuous and repeated exposure to the same condition causing the injury or damage.

B. Act, error or omission

This is any act, error, or omission that is committed by an insured as part of the named insured’s auto operations that arise from any of the following:

1. The breaking of laws when transacting auto loans or leases, specifically regarding sharing accurate information about loan or lease contract terms. Laws may be local, state, or federal (such as the Truth in Lending and Consumer Leasing Acts).

Example: Vehicle Fiesta Ltd., after numerous customer complaints, is fined by state authorities for failing to properly explain financial penalties regarding the mileage restrictions of their leases. Vehicle Fiesta’s insurer responds to the fines after an investigation reveals that the errors were not intentional.

2. When the insured provides incorrect vehicle mileage to a consumer in violation of standards of local, state or federal law. This applies only if such incorrect information is provided during the selling or leasing of an auto from the named insured’s dealership.

3. The insured acting as an insurance agent to assist a customer in obtaining non-liability auto coverage, gap/lease protection (when outstanding loan obligation exceeds car value at the time of total loss), credit life or credit disability insurance when sold along an auto purchase. However, such acts only meet the definition of acts, errors, or omissions when covered persons are, within the applicable jurisdiction, acting as validly licensed insurance agents or brokers at the time that an act, error, or omission occurs.

Example: Vehicle Fiesta Ltd. sells a car and an insurance policy to Jenna. Several weeks later, Jenna is struck and seriously injured in an intersection accident where the other driver ran a red light. Jenna finds out she did not have adequate Underinsured Motorists Coverage, and she sues Vehicle Fiesta. Because the allegation involves liability insurance, the incident does not qualify as an act, error, or omission.

4. A defect in a title when the title is part of the selling or leasing of an auto at the named insured’s auto dealership.

Note: The only covered acts, errors or omissions are those that involve activities at the named insured’s auto dealer operations.

C. Advertisement

This is a published or broadcasted notice to the general public or specific market segments concerning the named insured's goods, products, or services to attract customers or supporters. Published notices include material placed on or in the Internet and other electronic forms of communication. Websites are not considered an advertisement. However, notices on websites that provide information about the named insured's goods, products, or services in order to attract customers or supporters are.

D. Auto

An auto is a land motor vehicle, trailer, or semitrailer.

E. Auto Dealer Operations

All operations that are considered either necessary or incidental to the running of an auto dealership. The use, ownership, and maintenance of locations that are part of the dealership are covered. Adjoining access ways to the dealership, including portions of roads are considered part of the auto dealership operations.

F. Bodily injury

The term bodily injury, when used in this coverage form, is expanded to be not only injury to the body but also sickness or disease that a person sustains. Death that results from bodily injury, sickness, or disease is also considered bodily injury.

Note: The term bodily injury is not actually defined, but it is expanded.

G. Covered pollution cost or expense

This term covers all costs or expenses that result from the following:

1. A response to or assessment of the effects of pollutants by the insured or others. It must be done because of a request, demand, order or statutory or regulatory requirements. Examples of such responses and assessments are testing for, monitoring, cleaning up, removal, containing, treating, detoxifying, or neutralizing.

2. A claim or suit that is brought by or for a government entity relating to damages from a response to or assessment of the effects of pollutants. Examples of such responses and assessments are testing for, monitoring, cleaning up, removal, containing, treating, detoxifying, or neutralizing,

This term then reproduces the entire Pollution Exclusion but substitutes the words “cost or expense” for “bodily injury or property damage.” In this way, the covered cost or expense tracks with the type of limited pollution coverage provided.

Refer to the Covered Auto Section I h. Pollution exclusion for the wording.

H. Customer's Auto

Any motorized vehicle, trailer, or semitrailer that meets the following criteria:

• Designed for land use
• Is in the possession of the named insured to be stored, kept safe, repaired or serviced
• Is in the possession of the named insured for a lawful purpose

The vehicle is a customer auto even when:

• The owner of the vehicle is unaware that the named insured has possession of the vehicle
• The vehicle is owned by an employee or his or her household member. This applies only if the named insured is being paid for the services being provided on that vehicle.

I. Diminution in value

This is the loss of market value that is solely due to an accident. This loss of value can be actual or perceived.

Related Court Case: Value of Automobile Disputed In Court

J. Employee

The term employee is not actually defined, but it is expanded. When the term employee is used in this coverage form it means not just individuals who are employed directly but also includes those workers who are under a leasing contract. The term employee is not expanded to include temporary workers.

K. Executive Officer

This is a person who occupies any officer position that the named insured's charter, constitution, by-laws, or similar governing documents creates.

L. Impaired Property

This is a tangible property that is not the work the named insured performed or the named insured’s product that cannot be used or is less useful because of either of the following:

• The named insured’s defective, deficient, inadequate, or dangerous product or work was incorporated into it.
• The named insured did not satisfactorily complete the terms of a contract or agreement.

In order to be considered impaired, it must be capable of being restored to use by repairing, replacing, adjusting, or removing the named insured's product or the work it performed, or when the named insured fulfills the terms of the contract or agreement.

M. Insured

Any party qualifying as an insured under Who Is An Insured meets the definition of insured. Coverage applies to each insured as though that insured is the only insured when a suit is brought against them, or a claim is made against them. The only exception to this is that the limit of insurance does not apply per insured.

N. Insured contract

All of the following are considered insured contracts:

1. Leases of premises

2. Sidetrack agreements

3. Easement or license agreements. However, any contract that involves construction or demolition operations that are on or within 50 feet of a railroad is not an insured contract.

4. Obligations that are required by ordinance when the purpose of the contract is to indemnify a municipality. However, this does not apply to any work being done for the requesting municipality.

5. The portion of a contract or agreement that relates to the named insured’s auto operations business, including any municipal indemnification in connection with work being done for the municipality, where the named insured assumes the tort liability of another party. The tort liability must be to pay for bodily injury or property damage to a third party or organization. Tort liability is liability the named insured would have had without a contract or agreement.

6. Elevator maintenance agreements

7. The portion of an auto rental or lease contract or agreement the named insured or an employee enters into that relates to the named insured’s auto dealership. Any obligation the named insured or its employee has to pay for property damage to the auto is not considered an insured contract.

These contracts or agreements are not considered insured contracts:

• Ones that pay an architect, engineer or surveyor for damages due to making maps, drawings, opinions, designs and related activities or from giving or failing to give directions or instructions

• Ones that indemnify any party for fire damage to locations rented or loaned to the named insured
• Ones that pertain to loaning, leasing or renting an auto to the named insured or its employees if done so with a driver
• Ones that hold a party that is in the business of transporting property by auto for hire harmless for the named insured’s use of covered autos over routes or territories that a public authority authorizes it to serve
• Ones that indemnify a railroad for losses that result from any construction or demolition taking place within 50 feet of any railroad property if it affects any railroad bridge, trestle, track, road-bed, tunnel, underpass or crossing

O. Leased worker

A worker the named insured leases from a labor-leasing firm to work in its business. It requires an agreement between the leasing firm and the named insured but does not require that it be in writing. Temporary workers are not considered leased workers.

P. Loading or Unloading

This is handling property beginning when it is moved from the place where it is accepted onto or into a watercraft, auto, or aircraft. It continues while it is in or on the watercraft, auto, or aircraft. It ends when the property is delivered from the aircraft, auto, or watercraft to its final destination. Property moved by mechanical devices is not considered being loaded or unloaded unless the device is attached to a watercraft, auto, or aircraft or if the device is a hand truck.

Q. Loss

Only direct and accidental loss or damage is considered a loss. Garagekeepers Coverage is broadened to include any resulting loss of use.

R. Personal and Advertising Injury

This is any injury that arises out of one or more of the following offenses.

1. False arrest, detention or imprisonment

Note: These offenses apply far beyond law enforcement activities. Impeding the progress of a shoplifter is an example of detention and imprisonment. Not allowing persons to leave an area, for whatever reason, is another example of imprisonment.

2. Malicious prosecution

Note: Repeated reports to authorities about a neighbor’s conduct can be considered malicious prosecution.

3. When an owner, landlord, or lessor of a premises wrongfully evicts, enters, or invades the rights of a person who occupies that premises. The owner, landlord, or lessor may actually commit the wrongful act(s), or someone who acts on behalf of the owner, landlord, or lessor may commit them.

Note: This offense focuses on the relationship between the landlord and the tenant. A landlord may believe that because he owns the property, he has the right of access to all of it at any time and can force tenants to leave at will. However, thanks to various state laws, tenants have protected rights of occupancy.

4. The publication of slandering or libeling a person or organization. Also, publication of material disparaging a person's or organization's goods, products, or services. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.

5. The publication of material that violates a person's right of privacy. The publication can be either written or oral and can take place using any form of communication, including the Internet and other electronic forms.

6. Another party’s advertising idea being used in the named insured’s advertisement

7. The named insured's advertisement that infringes on another party’s copyright, trade dress, or slogan

S. Pollutants

Pollutants are irritants and contaminants. They can be solid, liquid, gas, or thermal. Examples are smoke, vapor, soot, fumes, acids, alkalis, or chemicals. Waste is another example, and the term includes property to be disposed of, as well as property to be recycled, reconditioned, or reclaimed.

Note: This definition is consistent in all ISO coverage forms.

T. Products

Any goods or products the named insured makes or sells in an auto dealership business or that are made or sold in an auto dealership the named insured acquires. Warnings or instructions that are given or that should have been given are also considered products.

U. Property damage

Damage to tangible property is property damage. Loss of the use of tangible property is also property damage.

V. Suit

The definition of suit is not limited to only civil proceedings alleging damages. It also includes any arbitration or alternative resolution proceedings as long as the insurance company consents to them. All allegations must be due to covered bodily injury, property damage, covered pollution costs or expenses and acts, errors or omissions.

W. Temporary worker

A temporary worker is neither a leased worker nor an employee. The named insured uses these workers as substitutes for permanent employees or to help out in short-term situations. They are furnished by others and not actually hired by the named insured. The named insured must understand that temporary workers are not considered an insured. For this reason, temporary workers should not drive any company vehicles or use their vehicles for company business.

X. Trailer

The definition of trailer includes semitrailers as well as small utility trailers.

Y. Work you performed

This type of work extends beyond the named insured’s work but also that which any other party performed on the named insured's behalf. The definition is also warnings or instructions that were given or that should have been given.