PERSONAL TO COMMERCIAL LINES TRANSITION
Compare and contrast how different exposures are covered under both departments
Commercial liability is a much more difficult item for new folks to wrap
their arms around, as there are plenty of quirks to limit coverage … .
By Marc McNulty, CIC, CRM
Like many agencies across the country, ours recently had to face the challenge of replacing valued team members due to retirements. Specifically, we had two commercial lines account managers retire this year after long tenures with our agency.
Fortunately, in each case, we were approached by experienced personal lines account managers who sought the challenge of growing professionally by transitioning to our commercial lines department. While both account managers had over a dozen years’ experience in the insurance industry, their experience had not included any previous commercial lines work.
This left us with some training to undertake.
While there is no doubt high-level overlap between the two departments, there were several key areas that immediately jumped out to me as training commenced. I would like to share some of those thoughts to assist anyone who may be working with those who are undertaking such a transition (or completing the move themselves).
By no means is this an exhaustive comparison; however, it will hopefully provide some starting points for meaningful conversations during training.
Auto coverage
One of the first concepts that is foreign to personal lines account managers is that of commercial auto symbols and automatic coverage.
For example, personal lines folks are familiar with the 14-day grace period that appears in the Personal Auto Policy for newly acquired autos. In other words, if a client purchases a new car over the weekend to replace one that has full coverage on it, the client is automatically covered—for up to 14 days.
In fact, there are proprietary carrier endorsements that extend this period beyond 14 days, but we won’t get into that now. The point is that the client needs to report the vehicle to us (or the insurance carrier) within the 14-day period so that coverage remains uninterrupted.
So how does this work under the business auto policy? It depends on the symbol that is entered on the auto policy declarations.
Following is language from the CA 00 01 11 20 under the Owned Autos section:
- If Symbols 1, 2, 3, 4, 5, 6 or 19 are entered next to a coverage in Item Two of the Declarations, then you have coverage for “autos” that you acquire after the policy period begins of the type described for the remainder of the policy period.
Therefore, there is automatic coverage if one of these symbols is listed next to the corresponding coverage part.
However, a cursory glance at the first two pages of the Business Auto form tells us that there are more symbols than those just mentioned—especially symbols 7 through 9.
The Owned Autos section continues by noting that if symbol 7 is entered next to a coverage item, an auto that is acquired after the start of the policy period will be covered provided:
The insurance company already covers all autos owned by the insured; or
The vehicle replaces one that was previously owned and had the same coverage.
Coverage applies for up to 30 days after the auto is acquired.
The form also provides coverage for leased or rented vehicles, as long as several stipulations are met:
- An “auto” that is leased or rented to you without a driver, under a written agreement for a continuous period of at least six months that requires you to provide primary insurance covering such “auto”, will be considered a covered “auto” you own.
This leaves us with symbols 8 and 9. Also, what if a vehicle is leased for less than six months, such as for a three-day business trip?
Symbol 8 is for hired autos—meaning autos that are leased, hired, rented or borrowed—whereas symbol 9 is for non-owned autos, which are autos not owned, leased, hired, rented or borrowed but are used in connection with the insured’s business. This includes autos owned by employees of the insured company.
Personal lines account managers know all too well that the personal auto policy typically provides coverage for rental cars during vacations. However, it is crucial that the appropriate symbols be listed on a business auto policy—specifically symbol 1 or 8—if a business owner needs to rent a vehicle on a short-term basis.
Building and personal property coverage
Anyone who sells or services homeowners policies knows that Coverage Bon the form applies to detached other structures located on the covered resi-dence premises. This provides the insured with a blanket limit of insurance to cover garages, sheds, or any other structures that are secondary to the dwelling.
Of course, certain exclusions apply, but Coverage B provides a set limit of insurance for such ancillary structures that can be replaced for up to the limit of insurance shown on the homeowners policy declarations. This coverage is useful because it eliminates work associated with determining potential replacement values for each additional structure on the premises.
Let’s flip over to commercial lines.What if we have a commercial building,such as a manufacturing facility, that contains a couple of small storage out-buildings on the premises? There is no automatic coverage for these types of other structures on the Building and Personal Property coverage form (CP 00 10).
The form states that building coverage applies to buildings or structures described in the declarations and details what is included within this definition (e.g., completed additions, fixtures, permanently installed machinery, etc.). There are some carve-backs for newly acquired or constructed buildings, as well as non-owned detached trailers, but otherwise all buildings to be covered should be listed on the policy declarations.
Then we have the issue of contents coverage. Homeowners policy forms state that personal property owned or used by an insured is covered while it “is anywhere in the world.” The CP 00 10 10 12 notes that business personal property is covered so long as it is:
[L]ocated in or on the building or structure described in the Declarations or in the open (or in a vehicle) within 100 feet of the building or structure or within 100 feet of the premises described in the Declarations, whichever distance is greater.
The form then extends coverage for newly acquired business personal property (up to $100,000), property off pre-mises (up to $10,000), outdoor property (for specific property types and specific perils), and business personal property temporarily in portable storage units (up to $10,000).
In short, business personal property needs to be either associated with a covered location or covered appropriately otherwise (e.g., increased limit for property in portable storage units).
Liability coverage
Finally, let’s explore the issue of liability coverage. The homeowners policy provides personal liability coverage for occurrences that aren’t specifically excluded. One of these exclusions is professional liability.
This situation was discussed in our training, when one of the account managers asked when an account should be quoted on a businessowners package (BOP) versus a standard commercial package. As discussion ensued, we re-viewed how a BOP or a package may provide general liability coverage, but separate coverage may be needed for product liability or professional liability.
Commercial liability is a much more difficult item for new folks to wrap their arms around, as there are plenty of quirks to limit coverage (such as a limitation to a designated premises) or exclude it (such as personal and advertising injury exclusion or a product liability exclusion).
Then there’s the concept of the general liability schedule of hazards and the rating basis needed for each … not to mention premium audits.
And we haven’t even begun to touch professional liability, employment practices liability, directors and officers liability, fiduciary liability, or cyber liability!
In any event, take your time to compare and contrast how different exposures are covered under both departments, as this can prove to be helpful in the learning process. After all, personal lines and commercial lines both fall under the property and casualty insurance umbrella and—if the individual is already licensed—he or she may recall some long-forgotten commercial lines concepts from the pre-licensing classes.
The author
Marc McNulty, CIC, CRM, is a principal at The Uhl Agency in Dayton, Ohio, and has been with the agency since 2001. He divides his time among sales, marketing, technology and operational duties. You can reach Marc at marcmcnulty@uhlagency.com
