CAIB 3 Commercial Insurance Instructor Slides PDF

 One-Minute Review Students have two minutes to write a One-Minute Review (1-3 sentences) of the most important thing you learned in the course so far, in the chat window. Remember the Forgetting Curve! What are the 8 key features of Coverage A? (/8)  Section A: Bodily Injury &...

 One-Minute Review Students have two minutes to write a One-Minute Review (1-3 sentences) of the most important thing you learned in the course so far, in the chat window. Remember the Forgetting Curve! What are the 8 key features of Coverage A? (/8)  Section A: Bodily Injury & Property Damage Key Features of Coverage A: Bodily Injury and Property Damage to a Third Party. (1) Coverage is provided for bodily injury and property damage to a third party. (2) Payment is made for “sums the insured is legally obligated to pay.” (3) Insurer is liable for compensatory damages only. (4) Coverage is provided for losses which occur during the policy period. (5) Injury or damage caused on an occurrence basis. (6) Loss or damage caused in territory of coverage. (7) Insurer has right of duty to defend. (8) Insurer has right to a) investigate any claim and 2) duty to defend any claim.  Chapter 3 The Commercial Automobile Exposure Section 1 Insuring Owned Automobiles  Learning Topics Automobile Insurance – Not Uniform Insuring Owned Automobiles – S.P.F. No. 1 Owners Form Underwriting Commercial Automobile Insurance  Automobile Insurance - Not Uniform Three (3) ways auto insurance is provided: 1) Private Insurer 2) Compulsory Government Insurance Plans 3) Other 1) Private Insurers Alberta, Ontario and Atlantic Canada insure vehicles through private insurers. Standard Policy Forms (S.P.F.s) in the chapter include: ○ S.P.F. No 1: Owners Form ○ S.P.F. No 4: Standard Garage Automobile Policy ○ S.P.F. No 6: Standard Non-Owned Automobile Policy Standard Endorsement Form (S.E.F.’s) amend the S.P.F.  Automobile Insurance - Not Uniform 2) Compulsory Government Insurance Plans British Columbia, Saskatchewan and Manitoba all have compulsory insurance. Third Party Liability Accident Benefits Physical Damage British Columbia $200,000 Included Optional Saskatchewan $200,000 Included $500 deductible Manitoba $200,000 Included $400 deductible In BC and Saskatchewan you can purchase optional physical damage through a private insurer. This allows for the following: ○ Increased third party liability limits. ○ Additional accident benefits. ○ Reduced physical damage deductible.  Automobile Insurance - Not Uniform In BC and Saskatchewan you can also purchase optional physical damage through a private insurer. This allows for the following: ○ Increased third party liability limits. ○ Additional accident benefits. ○ Reduced physical damage deductible. 3) Other In Quebec motorist have to purchase auto insurance via: ○ Personal injury coverage through the Provincial Government compensation plan of $50,000 minimum. ○ Q.P.F./Q.E.F. which is the same as an S.P.F. or S.E.F.  Types of Automobiles Insured 1) Automobiles of the private passenger type. Vehicles that are of the private passenger type though used for commercial or business purposes. 2) Commercial vehicles (trucks and delivery automobiles) Vehicles that are used to transport goods of the insured or goods of others. Above vehicles are subject to Provincial regulations and if they operate throughout Canada, Federal regulations too. Provincial needs minimum $200,000 liability and Federal is $1,000,000. 3) Public automobiles (buses and taxis) Due to the increased passenger exposure rates for liability coverage are higher than other vehicles.  Summary of Coverages 1) Third Party Liability Common Law Provinces require minimum of $200,000 third party liability (TPL). Provides payment for damages for bodily injury or property damage caused to a third party. Agents are encouraged to sell the S.E.F. No. 44 Family Protection Endorsement ○ Covers injury or death when caused by: 1) An underinsured motorist or 2)An uninsured motorist. ○ The endorsement increases the amount of legal liability to same limits as under their personal policy. ○ Payment on claim will be limited to difference in liability coverage from at fault motorist to policy limits.  Summary of Coverages 2) Accident Benefits Coverage is compulsory in all Provinces except Newfoundland. Coverage is paid regardless of fault. If person is killed or injured in accident above pays for the following: ○ Reimbursement of reasonable medical expenses. ○ Rehabilitation costs, funeral expenses. ○ Death benefits. ○ Loss of income.  Summary of Coverages 1) Physical Damage Options for physical damage include. ○ All Perils ○ Collision or Upset ○ Comprehensive ○ Specified Perils When insured against theft loss of use for $25-$30/day is included automatically for 30 days max. If above not enough insured can purchase S.E.F. No. 20 “Loss of Use Endorsement.” ○ Pays for rental of a substitute automobile. ○ Pays for taxicabs or public means of transportation. ○ Coverage commences immediately when damage to vehicle makes it unusable.  Summary of Coverages Rented or Leased Automobiles – Lessor’s Exposure. A) Short-term (30 days or less) S.E.F. No. 5c “Permission to Rent or Lease Endorsement.” ○ Above extends the policy to lessors when insured automobiles are rented or leased for periods less than 30 days. B) Long-term (more than 30 days) S.E.F. No. 5 “Permission to Rent or Lease Endorsement.” ○ Provides permission to rent or lease automobile on a long term contract.  Summary of Coverages Rented or Leased Automobiles – Lessee’s Exposure (Short-term) 1) When rented in the name of an individual coverage can be purchased from. The lessor An Endorsement – S.E.F. No. 27 Legal Liability for Damage to Non-Owned Automobiles Endorsement ○ Coverage is restricted to the insured and spouse. ○ Coverage is for the same perils as the S.P.F. No. 1. ○ No more than one automobile may be rented or leased by insureds or their spouses at any one time. ○ Coverage is normally restricted to certain types of automobiles. ○ Coverage provided is subject to a maximum amount in any one occurrence.  Summary of Coverages Optional Coverages These coverages are purchased when automobiles are leased on a long term contracts. A) S.P.F. No. 8 Standard Lessor’s Contingent Automobile Policy. Policy indemnify the lessor for loss incurred as a direct result of lessee’s failure to effect or maintain the automobile insurance required by the lease contract. B) S.P.F. No. 5d – Conversion Coverage Endorsement. Policy covers losses caused by dishonest acts of the lessee which, results in the loss of the automobile to the lessor. Example: Lessee sells the vehicle does not pay the lessor the above policy would pay lessor.  Summary of Coverages Rented or Leased Automobiles – Lessee’s Exposure (Short-term) 1) When rented in name of the company coverage can be purchased in the following ways: The lessor Endorsement S.P.F. No. 6 Standard Non-Owned Automobile Policy ○ Attaches an accident benefits rider to the form for coverage. S.E.F. No. 94 Legal Liability for Damage To Hired Automobiles Endorsement. ○ This covers physical damage to a vehicle.  Create a “How” question Students take two minutes to create a “How” question based on the concepts covered so far, in the chat window. No question is too simple! Remember the Forgetting Curve!  Exclusions 1) “The automobile is used to carry explosives, or to carry radioactive material for research, education, development or industrial purposes, or for purposes incidental thereto.” Following endorsements can be used to provide coverage for above: S.E.F. No. 4a Permission to Carry Explosives Endorsement S.E.F. No. 4b Permission to Carry Radioactive Material Endorsement.  Exclusions 2) “The automobile is used as a taxicab, public omnibus, livery, jitney or sightseeing conveyance or for carrying passengers for compensation or hire.” Following endorsements can be used to provide coverage for above: Definition: Public omnibus ○ A bus which serves several purposes at once. Example one that transports people and freight. Definition: Livery ○ A vehicle that is rented to others. Definition: Jitney or sightseeing conveyance. ○ A jitney is a bus. An example is a double decker bus.  Analyzing the Exclusion Following uses of vehicles is not considered carrying passengers for compensation or hire: Use by insured for carriage of another in return for the former carriage later. Occasional and infrequent use automobile for carriage of a person who shares the cost of the trip. Use of vehicle for carriage of a temporary or permanent domestic servant of the insureds. Use of vehicle for carriage of clients or customers or prospective clients or customers. Occasional and infrequent use of an automobile for the transportation of children to or from activities conducted as part of an educational program.  Amending the Exclusion S.E.F. No. 6a Permission To Carry Passengers for Compensation Endorsement ○ Used on vehicles such as: Vehicles used to transport employees. ○ The above will allow a business to carry passengers for compensation. S.E.F. No. 6b Revised School Bus Endorsement ○ Permission to insured to carry passengers for hire or compensation. ○ Coverage applies when bus is being used for school purposes. S.E.F. No. 6c Revised Public Passenger Vehicle Endorsement ○ Permission to use their vehicle to carry passengers for compensation or hire.  Miscellaneous Endorsements Vehicles with attached equipment can use the following endorsements for coverage.  Miscellaneous Endorsements A) S.E.F. No. 30 Excluding Operation of Attached Machinery Endorsement. Above endorsement excludes TPL (Section A) and Accident Benefits (Section B) for machinery used in: ○ Well drilling, spraying, welding, excavation or hoisting. Value of attached machinery can be covered under Section C. Liability for damage caused when using machine can be covered under a CGL. B) S.E.F. No. 31 Non-Owned Equipment Endorsement Usd to insure third party liability arising from use of attached equipment. Attached equipment includes the following: ○ Tank(s), pump(s), meter(s), apparatus, machinery, equipment owned by others.  Underwriting Commercial Automobile Insurance 1) Scheduled Basis Each automobile is specifically scheduled or stated on policy. Description and value of each automobile is stated on the policy. 2) Fleet Basis Automobile A fleet is four or more vehicles under common ownership or control. Under a fleet owner may obtain ○ Improved coverages. ○ Competitive and lower rates. Following methods can be used to insure under fleet. ○ Scheduled Automobiles. ○ Blanket Basis Automobiles under S.E.F. No. 21b  Underwriting Commercial Automobile Insurance S.E.F. No. 21a Monthly Reporting Basis Fleet Endorsement Insurer agrees to calculate the premium on receipts of mileage as reported on monthly basis.  Section 2 Insuring Other Business Automobile Exposures  Learning Topics S.P.F. No. 6 Standard Non-Owned Automobile Policy S.P.F. No. 4 Standard Garage Automobile Policy Miscellaneous Endorsements  S.P.F. No. 6 Standard Non-Owned Auto Policy Insuring Agreement The S.P.F. No.6 insures the third party liability of business owners. Automobiles Covered A non-owned vehicle is one which: ○ A) Owned by an employee, or Employers are responsible for torts committed by employees during course of their duties. Example: Pizza delivery vehicle.  S.P.F. No. 6 Standard Non-Owned Auto Policy B) A hired automobile, or ○ Definition: A vehicle hired or leased from others with or without drivers, used in the insureds business. ○ These vehicles could include busses leased on a long term contract for the transportation of workers. C) Operated under contract for the insured. ○ Includes automobiles operated in business of insured which they do not own. ○ Example: Trucking company contacts another companies vehicle for their contract as they do not have enough vehicles. The above is covered under the non-owned policy while used for their work.  S.P.F. No. 6 Standard Non-Owned Auto Policy Persons Covered The following persons are covered under the S.P.F. No. 6 ○ Named Insured ○ Partners ○ Officers or employees who drive a non-owned vehicle.  S.P.F. No. 4 Standard Garage Automobile Policy Types of Garage Risks Businesses engaged in selling, repairing or servicing automobiles need a garage policy. These include the following: ○ Automobile Dealer. ○ Repair Garages. ○ Service Stations. ○ Storage Garages. ○ Parking Lots.  S.P.F. No. 4 Standard Garage Automobile Policy Garage Risks Excluded By Other Liability Policies The CGL policy excludes two significant exposures of a garage risk: ○ A) Bodily injury or property damage arising out of the ownership, use or operation by or on behalf of any insured of any automobile. ○ B) Coverage for personal property in the care, custody or control of the insured. ○ The S.P.F. No. 4 is intended to cover the above.  S.P.F. No. 4 Standard Garage Automobile Policy Analyzing Policy Coverages There are 5 insuring agreements Section A Third Party Liability Section B Accident Benefits Section C Loss of or Damage to Owned Automobile Section D Uninsured Motorist Coverage Section E Legal Liability for Damaged to a Customers Vehicle.  S.P.F. No. 4 Standard Garage Automobile Policy 1. Section A – Third Party Liability Liability coverage is provided for losses arising out of the operation of: ○ A) Owned Automobiles; and, Coverage is for pleasure and business use of owned vehicles by an employee. ○ B) Non-Owned Automobiles. These are vehicles owned by customers or others.  S.P.F. No. 4 Standard Garage Automobile Policy 1. Section A – Third Party Liability Exclusions: ○ Loss or damage to property carried in or upon an automobile owned or driven by any persons insured by this section… Damage to customers property is not insured if a) located in automobile owned by insured or b) located in vehicle driven by insured at time of loss. ○ Loss of damage to a customers automobile. Loss or damage to customers vehicle when driven by insured or employee is excluded.  S.P.F. No. 4 Standard Garage Automobile Policy Rating Third Party Liability Coverages ○ A) Owned Automobiles. Rating is based on payroll or total salaries of employees. Surcharge applies for a) dealer plates and b) service vehicles. ○ B) Customers’ Automobiles Two rate tables for determining premium Table 1: No road testing, pick-up or delivery of customers’ vehicles. Table 2: Testing, pick-up and delivery of customers’ vehicles.  S.P.F. No. 4 Standard Garage Automobile Policy Additional Coverage Endorsements ○ S.E.F. No. 44 Family Protection Endorsement Provides additional benefits to named insured and other insured person against a motorist who does not have enough insurance or is uninsured to pay a claim.  S.P.F. No. 4 Standard Garage Automobile Policy 2. Section B – Accident Benefits Above are paid regardless of fault. People covered under above could include: Pedestrians, employees, partners. Coverage usually includes: ○ Medical, rehabilitation and funeral costs (Except Newfoundland). ○ Other expenses. ○ Death benefits and loss of income. ○ Payments. Rating ○ Premium is determined per the following: Drive Customers' Automobiles – Flat Rate Per Employee. “Active” Owned Automobiles – Standard Owners Form Rate.  S.P.F. No. 4 Standard Garage Automobile Policy 3. Section C – Loss of or Damage to Owned Vehicles This section will cover automobiles owned by a dealer and being held for sale by it. Also covers damage to vehicles driven by staff members. Four coverage options available under above section. Subsection 1 Collision or Upset Subsection 2 Comprehensive Subsection 3 Specified Perils Subsection 4 Specified Perils Excluding Theft  S.P.F. No. 4 Standard Garage Automobile Policy Rating of Physical Damage Coverages. Subsection 1 is based on the insured’s entire payroll. Subsection 2, 3 and 4 is based on the limits of insurance requested. Coverage for above subsections can be arranged on the following: A) Monthly Average Basis Insured selects an amount of insurance for the max value of owned automobiles at any one time. Provisional premium is charged and monthly values need reporting to insurer to make sure correct premium is charged. If insured doesn’t report monthly and claim occurs limited to last filed amount. If report is delinquent, insurer not liable for more than 75% of the limit of liability.  S.P.F. No. 4 Standard Garage Automobile Policy Coverage for above subsections can be arranged on the following: B) Co-Insurance Basis ○ Under Subsection 2, 3 and 4 company required to purchase no less than 80% of the actual cash value of the vehicles. ○ The 80% co-insurance is waived if damage to only 1 vehicle.  S.P.F. No. 4 Standard Garage Automobile Policy Exclusions (1) Caused by conversion, embezzlement, theft or secretion by any person in lawful possession of the automobile under a mortgage, conditional sale, lease or other similar written agreement. (2) Cause by the voluntary parting with title or ownership, whether or not induced to do so by any fraudulent scheme, trick, device or false pretense. (3) Under subsection 2 or 3, for loss or damage by theft from any open lot or unroofed space, owned, rented or controlled by the insured except theft of an entire automobile.  S.P.F. No. 4 Standard Garage Automobile Policy 4. Section D – Uninsured Motorist Coverage Conditions of above coverage: ○ Maximum amount payable is the minimum statutory limits in area of accident. (Example: $200,000) ○ Coverage is available only if such other party would be legally liability for loss.  S.P.F. No. 4 Standard Garage Automobile Policy 5. Section E – Legal Liability for Damage to a Customer’s Automobile while in the Care, Custody and Control of the Insured. If customer leaves vehicle at garage the garage assumes the role of a Bailee. A Bailee for hire is required to exercise ordinary care over the goods of others entrusted to them.  S.P.F. No. 4 Standard Garage Automobile Policy Section E provides coverage needed to protect dealership for damage to cars entrusted to them. ○ Parked on the lot awaiting servicing. ○ Located inside the garage awaiting servicing or further servicing. ○ During servicing. ○ Being driven on or away from the dealership. ○ During a hook-up for towing purposes or while being towed. Garage must be legally liable before payment made under policy. Limits of coverage: ○ This is determined by the dealership. ○ They need to determine what their expose  S.P.F. No. 4 Standard Garage Automobile Policy Rating: Factors that are used for the rates under Section E include: ○ If there is an “off premises exposure” ○ The value insured, the amount of the deducible and payroll. Exclusions: Theft from any open lot or unroofed space owned, rented or controlled by the insured, except theft of entire vehicle. ○ S.E.F. No. 75 Open Lot’ Pilferage Endorsement – Customer Automobiles will cover above. To clients contents of automobiles or trailers.  S.P.F. No. 4 Standard Garage Automobile Policy Other Endorsements: S.E.F. No. 77 Legal Liability For Comprehensive Damage To Customer’s Automobiles Endorsement (Including Open Lot Pilferage) ○ Above endorsement will cover theft from an open lot.  Gap Exercise Students have one minute to think of a concept they find they do not clearly understand. Take time this week to do some extra studying on that concept, and bring any questions to the next class! Believe it or not, this is a reviewing exercise!  Key Terms None  Your Assignment Please refer to your IGO assignment in your student portal and use information from the Chapter 3 slides to answer the question. You can submit your IGO activity to your facilitator or ask questions in class. For an explanation of the slide information and an answer to the activity, please check out the “IGO Answers” videos in your student portal. Please ask questions if you need to! What are the 5 Insuring Agreements under the S.P.F. No. 4 Standard Garage Automobile Policy (/5)