Q Our insured is a business which repairs audio and visual equipment. A video camera belonging to a customer was stolen in a burglary. Damage to the property exceeds the $500 deductible. The customer has off-premises coverage available subject to a $250 deductible (which the carrier has paid). Naturally, my insured feels responsible and doesn't want the customer to have to turn it in to his insurance company.
CP 00 10 06 95-Building and Personal Property Coverage Form, has an extension of coverage of up to $2,500 for personal property of others in the insured's care, custody and control.
CP 00 90 07 88-Commercial Property Conditions contains the Other Insurance clause in question. The company first denied the claim on the basis of Condition G.1. When I pointed out that it clearly referred to other insurance the insured had, they denied it on the basis of G.2.
I am of the opinion that G.2. may be interpreted only in the light of G.1. Both of them refer to other policies of the insured. I believe G.2. applies to instances such as when the insured has both an EDP floater and a personal property coverage. In that case the personal property coverage under CP 00 10 would be excess to the EDP. It is to prevent double recovery on the part of the insured, not to prevent claims under the $2,500 extension of coverage.
In fact, is not the purpose of the extension for claims such as this so the insured won't have his or her customer caught in the middle when something like this occurs?
A First, the usual disclaimer. The Rough Notes Company, Inc., is not legal counsel and we cannot give legal advice. What we can do is offer some things to think about with regard to your question and one possible interpretation of the coverage forms.
Look first at provision G. Other Insurance, in CP 00 90 07 88-Commercial Property Conditions:
G. OTHER INSURANCE
1. You may have other insurance subject to the same plan, terms, conditions and provisions as the insurance under this Coverage Part. If you do, we will pay our share of the covered loss or damage. Our share is the proportion that the applicable Limit of Insurance under this Coverage Part bears to the Limits of Insurance of all insurance covering on the same basis.
2. If there is other insurance covering the same loss or damage, other than that described in 1. above, we will pay only for the amount of covered loss or damage in excess of the amount due from that other insurance, whether you can collect on it or not. But we will not pay more than the applicable Limit of Insurance.
We have discussed the Other Insurance clause with a number of insurance personnel. There exist two strong opinions. One set believes, as does your insurer, that there is no coverage for the following reason:
Item #1 of the condition specifically refers to other insurance the insured has on the item that is the subject of the loss. However, item #2 does not. It is a separate and distinct item, not tied to item #1 by a conjunction or preface. It says, "if there is other insurance covering the same loss or damage, other than that described in 1. above... " and thus does not limit item #2 specifically to other insurance of the insured--but rather to any other insurance. So its use has some merit to deny this claim.
In another opinion:
G.1. relates to other insurance carried by the insured provided such other insurance is subject to the same terms as the Commercial Property coverage part.
G.2. relates to a "different kind" of insurance carried by the insured (e.g., inland marine coverage) and to insurance carried by another party.
This interpretation seems to complement Property Not Covered in CP 00 10, where item k. "excludes" coverage for property that is covered under another coverage form of this or any other policy in which it is more specifically described, except for the excess of the amount due (whether you can collect on it or not) from that other insurance.
The intent, as correctly stated, is to prevent the insured, as well as the insured's customer, from claiming payment more than once for the same loss, under two or more policies or coverages.
According to this set of opinions, item #2 is an extension of item #1 and not separate from it. Those with this view also point out that the wording in item #2 "...whether you can collect on it or not..." specifically refers to insurance that the insured controls because the word "you" obviously refers to the insured.
Thus there is some credence to both opinions. The application of this provision does not appear to be clear among insurance personnel. At the very least, it would appear that an ambiguity exists.
Look now at the actual coverage extension in CP 00 10 regarding Property of Others:
5. Coverage Extensions
...you may extend the insurance provided by this Coverage Part as follows:
b. Personal Effects and Property of Others
You may extend the insurance that applies to Your Business Personal Property to apply to:
...(2) Personal property of others in your care, custody or control.
The most we will pay for loss or damage under this Extension is $2,500 at each described premises. Our payment for loss of or damage to personal property of others will only be for the account of the owner of the property.
The coverage extensions are extra coverages that are granted in addition to the stated limits of insurance. Payments made under this extension are to the property owner directly (in this case, the insured's customer). However, there are no waivers of any contract conditions or provisions (such as the Other Insurance condition) in this coverage extension. Again, clarity is needed regarding the Other Insurance condition.
If the Other Insurance condition is determined to include any available insurance (the insured's or the insured's customer), the $2,500 would be available should the insured's customer either have no insurance or if the customer's other insurance is inadequate. In those cases, the insured's policy would provide coverage.
Q In an argument with a colleague, I insist that semitrailers owned by the insured (over 2,000 lbs. GVW) must be declared and listed in Item 3 of the Commercial Auto Declarations in order for liability coverage to apply even if Symbol 1 is used for liability.
He believes that all trailers are covered automatically while attached to owned, scheduled power units. Let's ignore for now the exposures generated by parked owned trailers and owned trailers being used by other parties with their own power units.
It is my opinion that all autos owned at each policy inception must be reported to the insurer and scheduled in Item 3. The fact that newly acquired autos are covered for liability only "for the remainder of the policy period" if Symbol 1 is present, seems to add weight to my position (no coverage from renewal policy if newly acquired auto is not reported and scheduled.)
Would you please provide your opinion on this issue?
A First, the usual disclaimer. The Rough Notes Company, Inc., is not legal counsel and cannot give legal advice. What we can do is offer some things to think about with regard to your question and one possible interpretation of the coverage forms.
We will start with an explanation of what Symbol 1 means from PF&M:
1=ANY "AUTO." Symbol 1 is the broadest of all the symbols providing coverage for any "auto." This symbol may be used for liability only. Because of the degree of protection this symbol offers, however, many insurers use it judiciously.
When symbol 1 is used, ALL "autos" are covered for liability purposes. So now look at the ISO definition of "auto" from CA 00 01-Business Auto Coverage Form:
"Auto": a land motor vehicle, trailer, or semitrailer designed for travel on public roads; this definition does not include "mobile equipment."
So, for liability purposes, semitrailers are covered--whether scheduled or not--when Symbol 1 is used. For that reason and the concerns you noted, many insurers are very cautious when using Symbol 1. It is not unusual for an insurer to have restrictions and acceptability requirements when using Symbol 1, if it is used at all by that insurer.
From a premium standpoint, the Business Auto coverage form is auditable. Look at policy condition #6:
6. Premium Audit
a. The estimated premium for this Coverage Form is based on the exposures you told us you would have when this policy began. We will compute the final premium due when we determine your actual exposures. The estimated total premium will be credited against the final premium due and the first Named Insured will be billed for the balance, if any. If the estimated total premium exceeds the final premium due, the first Named Insured will get a refund.
b. If this policy is issued for more than one year, the premium for this Coverage Form will be computed annually based on our rates or premiums in effect at the beginning of each year of the policy.
So, if the insured chooses Symbol 1 but does not report and schedule all of the vehicles at policy inception for liability purposes, the insurer has the right and the ability to make a charge for any covered vehicle on audit.
Again, Symbol 1 is very broad and a great deal of care should be used when this coverage approach is selected; and the agent, broker, underwriter or insurer will need to spend extra time determining and evaluating the multitude of potential exposures when used.
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