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What is included under the key benefits of compulsory coverage?
What is included under the key benefits of compulsory coverage?
No-fault coverage means benefits are only paid if the insured is at fault.
No-fault coverage means benefits are only paid if the insured is at fault.
False
What type of coverage is essential for high-value vehicles like buses and cranes?
What type of coverage is essential for high-value vehicles like buses and cranes?
Comprehensive coverage
The S.E.F.No. 20 Loss of Use Endorsement extends coverage for losses beyond _____ .
The S.E.F.No. 20 Loss of Use Endorsement extends coverage for losses beyond _____ .
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Match each type of coverage with its description:
Match each type of coverage with its description:
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What is the mandatory minimum limit for third-party liability coverage in common law provinces?
What is the mandatory minimum limit for third-party liability coverage in common law provinces?
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Premiums for physical damage coverage are based exclusively on the type of vehicle insured.
Premiums for physical damage coverage are based exclusively on the type of vehicle insured.
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Name one regulatory requirement for commercial vehicles regarding liability limits in Canada.
Name one regulatory requirement for commercial vehicles regarding liability limits in Canada.
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The three primary coverage types in commercial auto insurance are Third-Party Liability, Accident Benefits, and __________.
The three primary coverage types in commercial auto insurance are Third-Party Liability, Accident Benefits, and __________.
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Match the following types of automobiles with their respective insurance categories:
Match the following types of automobiles with their respective insurance categories:
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Which of the following vehicles are excluded from passenger transport for compensation coverage?
Which of the following vehicles are excluded from passenger transport for compensation coverage?
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Car pooling is considered compensated transport under the exclusion.
Car pooling is considered compensated transport under the exclusion.
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What must be listed for taxis, ambulances, and employee transport to obtain coverage?
What must be listed for taxis, ambulances, and employee transport to obtain coverage?
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Transporting passengers increases __________ exposure significantly.
Transporting passengers increases __________ exposure significantly.
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Which statement about Educational Program Transport is true?
Which statement about Educational Program Transport is true?
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Match the following terms with their corresponding descriptions:
Match the following terms with their corresponding descriptions:
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Endorsement forms are required to remove the passenger transport exclusion.
Endorsement forms are required to remove the passenger transport exclusion.
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What type of transport does S.E.F.No. 6c and 6f cover?
What type of transport does S.E.F.No. 6c and 6f cover?
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Which provinces automatically include Accident Benefits in their standard policy?
Which provinces automatically include Accident Benefits in their standard policy?
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Accident Benefits are optional in all provinces in Canada.
Accident Benefits are optional in all provinces in Canada.
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What type of benefits does a government-provided Accident Benefits coverage typically include?
What type of benefits does a government-provided Accident Benefits coverage typically include?
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In provinces without government plans, Accident Benefits are added through the Standard Garage ________.
In provinces without government plans, Accident Benefits are added through the Standard Garage ________.
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Match the following provinces with their Accident Benefits coverage type:
Match the following provinces with their Accident Benefits coverage type:
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What is one benefit provided under Accident Benefits in case of a fatality?
What is one benefit provided under Accident Benefits in case of a fatality?
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Technicians at Optima, Inc. do not test-drive vehicles after repairs.
Technicians at Optima, Inc. do not test-drive vehicles after repairs.
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Which types of vehicles does Loss or Damage coverage apply to at Optima, Inc.?
Which types of vehicles does Loss or Damage coverage apply to at Optima, Inc.?
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Which deductible applies for total loss due to fire, lightning, or entire vehicle theft?
Which deductible applies for total loss due to fire, lightning, or entire vehicle theft?
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The standard deductible for collision is capped at $500 per vehicle.
The standard deductible for collision is capped at $500 per vehicle.
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What is required for coverage under the Co-Insurance Basis?
What is required for coverage under the Co-Insurance Basis?
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The endorsement used for specific owned vehicles requiring individual coverage is known as _______ endorsement.
The endorsement used for specific owned vehicles requiring individual coverage is known as _______ endorsement.
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Match the following coverage options with their description:
Match the following coverage options with their description:
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What is the penalty for missed reporting of the Average Basis for coverage?
What is the penalty for missed reporting of the Average Basis for coverage?
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The S.E.F. No. 73 Excluding Financed Automobile Endorsement allows coverage for vehicles insured elsewhere.
The S.E.F. No. 73 Excluding Financed Automobile Endorsement allows coverage for vehicles insured elsewhere.
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What is the purpose of a separate endorsement for leased vehicles?
What is the purpose of a separate endorsement for leased vehicles?
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What are contracted vehicles?
What are contracted vehicles?
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Employers are not liable for employee actions during work duties.
Employers are not liable for employee actions during work duties.
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What increases liability risk for employers regarding employee-owned vehicles?
What increases liability risk for employers regarding employee-owned vehicles?
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Non-owned automobiles include employee-owned vehicles and ________ automobiles.
Non-owned automobiles include employee-owned vehicles and ________ automobiles.
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What is the purpose of S.E.F. No. 94 coverage?
What is the purpose of S.E.F. No. 94 coverage?
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Match the following categories with who is covered under a non-owned automobile policy:
Match the following categories with who is covered under a non-owned automobile policy:
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Coverage for non-owned automobiles applies to personal use.
Coverage for non-owned automobiles applies to personal use.
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Contracted vehicles are used in business without ________.
Contracted vehicles are used in business without ________.
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Study Notes
Introduction to Commercial Automobile Exposure (CAIB 3)
- This is a course on commercial automobile exposure.
- It covers insuring owned automobiles.
- Also, it covers private insurers in Alberta, Ontario, and Atlantic provinces
Insuring Owned Automobiles - Introduction
- Key insurance types for automobiles: owned, non-owned, garage risks.
- Automobile insurance in Canada varies across provinces.
- Provided by private insurers and government insurance plans.
Private Insurers - Coverage in Alberta, Ontario, and Atlantic Provinces
- Standard Policy Forms (SPFs) are used:
- SPF No. 1: Owner's Form
- SPF No. 4: Standard Garage Automobile Policy
- SPF No. 6: Standard Non-Owned Automobile Policy
- Standard Endorsement Forms (SEFs) modify coverages
- Ontario's Unique Adaptation: Ontario Motorist Protection Plan (OMPP)
Compulsory Government Insurance Plans - British Columbia, Saskatchewan, Manitoba
- Compulsory government insurance plans cover British Columbia, Saskatchewan, and Manitoba.
- Coverage occurs with vehicle registration, including:
- Third-party liability: $200,000 (BC, SK, MB)
- Accident benefits, included in all three provinces
- Physical damage: Deductibles vary ($400-$500).
- Private insurers offer excess coverages, including increased liability limits, additional accident benefits, and reduced physical damage deductibles.
Quebec's Unique System
- Quebec has a unique system for personal injury coverage through its government plan.
- Property damage and non-Quebec bodily injury claims rely on private insurers.
- Quebec Policy Forms (QPFs/QEFs) are equivalent to SPFs/SEFs.
- Brokers face challenges navigating dual insurance sources for clients.
Need for Separate Insurance Policies for Commercial Automobiles
- Special exposure for business-used automobiles requires separate insurance.
- Auto coverage is excluded in general liability and property policies.
- Separate commercial automobile policies are necessary for:
- Bodily injury and property damage liability
- Accident benefits
- Physical damage coverage for owned/used automobiles.
Insuring Owned Automobiles - S.P.F. No. 1 Owner's Form Overview
- Purpose of SPF No. 1 Owner's Form: Coverage for automobiles owned by businesses.
- Applicable for private passenger, commercial, and public automobiles.
- Types of automobiles insured: private passenger, commercial, and public automobiles.
S.P.F. No. 1 Owner's Form - Commercial and Public Vehicle Regulations and Premium Considerations
- Regulatory requirements for commercial vehicles: provincial and federal regulations, along with US requirements.
- Premiums for physical damage coverage depend on vehicle value, and public vehicles have increased premiums due to passenger hazard and continuous use.
Summary of Coverages - Overview
- Commercial auto insurance coverages are similar to private vehicle insurance, with core coverage areas.
- Three primary coverage types: third-party liability, accident benefits, and physical damage.
- Understanding each coverage area is important for brokers.
Third-Party Liability Coverage
- Mandatory minimum limit: $200,000 in common law provinces.
- Purpose: Covers bodily injury and property damage to third parties.
- Importance of higher liability limits: Inadequate minimums may not cover extensive damages.
- Additional coverage options exist via SEFs. Public buses have higher limits.
Accident Benefits Coverage
- Compulsory coverage in most provinces (except Newfoundland)
- Key benefits: medical expenses, rehabilitation costs, funeral expenses, death benefit, loss of income.
- No-fault coverage: Benefits are paid regardless of fault.
- Increased limits are available in Ontario.
Physical Damage Coverage - Overview and Options
- Physical damage losses are a significant portion of claims payments.
- Types of available coverage include Collision or Upset and Comprehensive coverages.
- Specific coverage for high-value vehicles is essential; standard deductibles apply.
Physical Damage - Additional Coverage for Loss of Use
- Loss of use by theft: Standard coverage for substitute vehicle rental (up to 30 days).
- S.E.F. No. 20 Loss of Use Endorsement extends coverage to other losses beyond theft, including options for rental, taxi, or public transportation.
Excluded Uses of Insured Automobiles
- Excluded uses in SPF No. 1 Owner's Form: Renting or leasing the insured vehicle to others (unless endorsed).
- Employee use exemption: Use by an employee on employer business, even with compensation, does not qualify as renting or leasing.
- Increased exposure: Rented/leased vehicles face higher risk and are excluded from standard coverage.
Rented or Leased Automobiles - Lessor's Exposure
- Lessor's exposure types: short-term rentals (≤30 days) and long-term leases (>30 days).
- Policy issued in lessor's name, protecting rental businesses.
- Important endorsements exist: S.E.F. No. 5c (short-term) and S.E.F. No. 5 (long-term). Leases are treated as owned by lessee.
Optional Coverages for Long-Term Leased Automobiles
- Optional coverages for lessors protect against lessee default or dishonest acts
- S.P.F. No. 8 - Standard Lessor's Contingent Automobile Policy, covering lessor's risk if the lessee fails to maintain required insurance.
- S.E.F. No. 5d - Conversion Coverage Endorsement, covering losses from lessee's dishonesty (theft, embezzlement).
Rented or Leased Automobiles - Lessee's Exposure (Short-Term, Individual)
- Coverage options for individual lessees: Full coverage purchase from the lessor if the lessee does not have a personal automobile policy.
- Option 2: S.E.F. No. 27 Endorsement for legal liability for damage to non-owned automobiles; adds physical damage coverage and eliminates the need for purchasing this coverage separately from the lessor.
Rented or Leased Automobiles - Lessee's Exposure (Short-Term, Business)
- Coverage options for business lessees: S.P.F. No. 6 (Standard Non-Owned Automobile Policy) provides third-party liability for business-rented vehicles and includes accident benefits.
- S.E.F. No. 94 (Legal Liability for Damage to Hired Automobiles) covers physical damage to rented vehicles.
Exclusion for Transporting Explosives and Radioactive Materials
- Exclusion for carrying hazardous materials (explosives or radioactive materials) applies to vehicles transporting these items.
- Coverage exclusions apply unless policy endorsed appropriately.
- Relevant endorsements include S.E.F. No. 4a and S.E.F. No. 4b for permission to carry explosives and radioactive materials, respectively.
Exclusion for Vehicles Used for Passenger Transport
- Exclusion for passenger transport for compensation: No coverage when a vehicle is used as taxis, public omnibus, livery services, jitneys, or sightseeing conveyances.
- Additional premium typically required to insure transportation of passengers.
Analyzing the Exclusion: Non-Compensated Passenger Transport
- Exceptions to "Passenger for Compensation" exclusion include carpooling, occasional cost-sharing for business or events, domestic staff transport, client/customer transport, or educational program transport.
Amending the Exclusion: Endorsements for Passenger Transport Coverage
- S.E.F. No. 6a for taxis, ambulances, and employee transport (specific business activities must be listed).
- S.E.F. No. 6b for school bus coverage (for school-related activities only).
- S.E.F. No. 6c & 6f for public passenger vehicles (6f combines passenger hazard and road liability), and S.E.F. No. 22 (covers damage to passengers' property).
Miscellaneous Endorsements for Automobiles with Attached Equipment
- Unique exposures for automobiles with attached equipment: automobile exposure on public roads; job site exposure with potential liability for equipment operation.
- Endorsements to address these exposures: S.E.F. No. 30 for excluding operation of attached machinery; S.E.F. No. 31 for non-owned equipment.
Underwriting Commercial Automobile Insurance - Scheduled Basis and Fleet Basis Overview
- Scheduled basis: individual listing for each vehicle in the policy; allows different coverages per vehicle based on needs.
- Fleet basis: applicable to businesses with multiple vehicles (typically 4+); offers rate advantages for covering multiple vehicles under a single policy .
Fleet Policy Issuing Methods - Scheduled and Blanket Basis
- Scheduled automobiles: each vehicle is listed with details, changes reported.
- Blanket basis (S.E.F. No. 21b): covers all owned or leased vehicles; insured provides a schedule of vehicles; advance premium charged with annual adjustment.
Monthly Reporting and Retrospective Rating for Fleets
- Monthly reporting basis (S.E.F. No. 21a): Ideal for businesses with variable vehicle usage.
- Premiums based on reported usage (e.g., receipts or mileage).
- Monthly reports adjust premiums accordingly.
- Retrospective rating: Premiums set within a pre-agreed range, adjusted based on loss ratio to encourage loss prevention.
Case Study - Optima, Inc. (Automobile Dealership)
- Business overview: sells >1,200 vehicles annually, with approximately 400 vehicles for customer selection.
- Employee vehicle use, sales staff use dealership vehicles; customer storage,vehicles awaiting repair stored outdoors in a designated lot area; indoor overnight parking; quality control: Technicians test drive each vehicle after repairs.
Section C - Loss or Damage to Owned Automobiles Overview
- Purpose of coverage: Physical damage coverage for vehicles owned by the business, including service loaners and tow trucks (licensed or unlicensed).
- Scope of coverage: Coverage options available for all owned vehicles (or specific vehicles as chosen) with the use of S.E.F. 80 endorsement.
Coverage Options and Deductibles for Owned Automobiles
- Four coverage options: Subsection 1 (Collision or Upset), Subsection 2 (Comprehensive), Subsection 3 (Specified Perils), and Subsection 4 (Specified Perils Excluding Theft).
- Deductible application: Standard deductible minimum $250 per vehicle for collision; occurrence-based deductible for other damages; no deductible for total loss due to fire, lightning, or entire vehicle theft.
Rating of Physical Damage Coverages - Overview
- Collision or Upset (Subsection 1): Premiums based on total payroll.
- Subsections 2,3, and 4 (comprehensive and specified perils): Premiums vary by insurance limit, considering maximum exposure for physical damage. Specific coverage options exist for Optima, Inc. (monthly average basis and co-insurance).
Monthly Average Basis - Reporting and Penalties
- Coverage set based on maximum inventory value; Provisional premium with monthly inventory reports to adjust premiums.
- Penalties for missed reporting: Liability limited to the last filed report, first-time and subsequent misses capped at 75% of policy/insured amount.
Co-Insurance Basis and Additional Endorsements
- Co-insurance basis: Insured must purchase coverage for at least 80% of the actual cash value of all owned vehicles.
- Under-insurance penalty applied if the insured amount is less than 80%.
Exclusions Specific to Garage Risks - S.P.F. No. 4 Standard Garage Automobile Policy
- Conversion and Embezzlement Exclusion: No coverage for loss due to conversion, embezzlement or theft, from lawful possession. Solution: Use separate endorsement for leased vehicles.
- Voluntary Parting with Ownership: Excludes losses from voluntary transfers of ownership. Solution: Use dealer's false pretence coverage.
- Open Lot Theft Exclusion: No coverage for partial theft from open lots (e.g., stolen hubcaps), except for entire vehicle theft and use S.E.F No. 74 open lot pilferage
- Other exclusions may exist.
Section D - Uninsured Motorist Coverage Overview
- Purpose of coverage: Protects against injury or death from accidents involving uninsured or unidentified vehicles (e.g., hit-and-run).
- Provincial support funds: BC, Saskatchewan, Manitoba, and Ontario have government-run funds to cover such claims. Other provinces (Alberta, Northwest Territories, Yukon, and many US states) have industry-managed funds or lack funds.
Payment Limits and Conditions
- Payment limits: Coverage capped at minimum statutory limits in the accident's jurisdiction.
- Liability requirement: Payment only applies if the uninsured party would be legally liable for the accident. (Canada: $200,000; U.S. examples vary)
Coverage Availability Across Provinces
- Automatic coverage in government insurance provinces (BC, Saskatchewan, Manitoba, and Ontario) includes uninsured motorist coverage within accident benefit plans.
- Most other provinces include Uninsured Motorist Coverage as a separate policy. Some jurisdictions reclassify this as liability separate from accident benefits.
Bailee Role and Responsibility
- Optima, Inc., as a bailee for hire: legally obligated to exercise ordinary care for customer vehicles.
- Examples: Locking vehicles overnight, ensuring care during test drives or repairs.
Coverage Scope and Situational Examples
- Section E - Legal Liability for Damage: Protects against liability claims for physical damage to customer vehicles in Optima's care, custody, or control.
- Situations: parked, inside garage, servicing, test drives, or towing.
Legal Liability Requirement for Payment Under Policy
- Payment requires legal liability.
Legal Liability Example - Negligence Leading to Liability
- Example: Fire due to employee negligence. Employee's lighted cigarette accidentally vaporizes gasoline, leading to garage liability.
Coverage Options - Collision or Upset
- Collision or upset coverage: Covers losses resulting from collisions or upsets while moving customer vehicles, considering high-value vehicles ($15,000 - $75,000) and on-site vs off-site vehicles. Deductibles apply per collision or upset loss.
Coverage Options - Specified Perils (Excluding Open Lot Pilferage)
- Specified perils coverage: Covers risks like fire, theft, and explosions. Excludes perils unlikely to cause liability (e.g., lightning, hail, civil commotion). No deductible applies for covered losses.
Key Exclusions in Section E - Customer Automobile Coverage
- Theft from open lot exclusion: No coverage for theft from open lots, except for entire vehicle theft.
- Contents exclusion: Coverage limited to vehicle and its equipment; excludes items within the vehicle or trailer. Implications for garage operators.
Rating Considerations for Customer Automobile Coverage
- Selecting coverage limits: Optima must choose an amount that covers potential losses for all customer vehicles in a single occurrence.
- Specifying maximum customer vehicles: Policy requires a stated maximum number of customer vehicles on-site. Co-insurance penalty applies if loss occurs and more vehicles are present.
Other Endorsements for Garage Risks
- S.E.F. No. 77: Replaces specified perils with comprehensive damage coverage ("loss from any peril other than collision or upset").
- Includes open-lot pilferage, deductibles, and waivers for legal liability proof before payment.
Miscellaneous Endorsements - S.E.F. No. 71 & S.E.F. No. 76
- Removes coverage for owned, hired, or leased vehicles, if coverage is through another S.P.F. (e.g., S.P.F. No. 1). Reduces premium costs, and broad-form endorsement removes restrictions on pleasure use for those who aren't employees, allowing coverage for non-business use.
Coverage Customization, Flexibility, and Statutory Conditions
- Coverage customization: Garage risks vary greatly, so coverage should reflect specific needs.
- Statutory conditions: Relevant to all automobile insurance policies and influenced by provincial legislation. Brokers should be familiar with and understand these.
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Description
Test your knowledge on the key aspects of commercial auto insurance, including coverage types, limits, and regulatory requirements in Canada. This quiz will cover essential definitions and concepts that are crucial for understanding insurance for high-value and commercial vehicles.
