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 the question presented and one possible interpretation of some of the coverage forms.
Q We read with interest the article in the March 1999 issue of Rough Notes titled, "ISO's commercial auto multistate program changes." Our particular interest was Endorsement CA 20 55--Fellow Employee Coverage.
This endorsement can be put on a commercial automobile policy for the purpose of deleting the fellow employee exclusion for all employees of the employer. We're wondering whether this accomplishes anything. Under the commercial automobile policy you also have exclusion 3 which excludes any obligation the insured has under the workers compensation laws, and exclusion 4 which excludes employee indemnification and employers liability. Exclusion 4 excludes bodily injury to an employee of the insured arising out of or in the course of his/her employment by the insured.
We would like to have a clarification of the benefit of deleting the fellow employee exclusion as we feel this is an exposure that some employers would like to have covered.
A Your question is an interesting one. The new Endorsement CA 20 55--Fellow Employee Coverage deletes only the Fellow Employee exclusion. It does not amend any other exclusion in the commercial auto policy. So what real coverage would this endorsement give back to an insured?
As you pointed out, it would not provide protection for bodily injury for employer's liability or injury that is covered by workers compensation law.
However, it would appear that there may be both defense and possible coverage with this endorsement under the following circumstances:
A liability claim is made against an insured for damage or injury resulting from negligent entrustment when allowing an unfit or unlicensed employee to operate a vehicle.
A liability claim is made against an insured for damage or injury resulting from negligent training, instruction, guidance, warning or other similar type direction provided by one employee to another in the operation of a vehicle.
A liability claim is made against an insured for damage or injury resulting from negligent or faulty repair or maintenance of a vehicle by an employee causing injury or loss to a fellow employee.
Q I recently advised a client (a municipality) that certain of the things that they attach to their truck from time to time, such as: snow plow, dump box, and salt spreader--should be insured on the Inland Marine policy instead of relying upon their commercial auto policy. The auto policy makes no specific mention of physical damage coverage for these things, EXCEPT that the description of two of the trucks in the declarations includes the letters "W/Plo" (with plow). They have four plow attachments which are worth about $7,000 per item. The other attachments are of about the same value.
I believe that the insurer should pay for a plow damaged while attached to one of these two trucks; but, that they would probably refuse to pay for theft of or damage to a plow if not attached. Also, there would be no physical damage coverage for the other types of attachments at any time.
A Let's start with the ISO's CA 00 01--Business Auto Coverage Form, under SECTION III - PHYSICAL DAMAGE COVERAGE
A. Coverage, where it states:
"1. We will pay for "loss" to a covered "auto" or its equipment . . . "
Unfortunately, no clear definition of "its equipment" is provided. So we do not have resolution in the policy form itself as to whether there is coverage for detachable items like the ones you mentioned, (snowplows and the like) when not attached to the vehicle. We would agree with you that there would most likely not be physical damage coverage when not on the vehicle.
It is not clear if optional items (like snowplows or other add-on equipment not permanently attached) are covered with the auto--even when they are--if they are not specified in the description and the cost has not been added to the value of the auto for rating purposes. The consensus has normally been that there is no physical damage coverage for detachable equipment that is not in the description of the auto.
If the equipment is permanently attached, it is clearly a part of the auto. Refer to the following description found in the Business Auto Policy:
" ... However, self-propelled vehicles with the following types of permanently attached equipment are not "mobile equipment" but will be considered "autos:"
a. Equipment designed primarily for:
(1) Snow removal;
(2) Road maintenance, but not construction or resurfacing; or
(3) Street cleaning;
b. Cherry pickers and similar devices mounted on automobile or truck chassis and used to raise or lower workers; and
c. Air compressors, pumps and generators, including spraying, welding, building cleaning, geophysical exploration, lighting or well servicing equipment."
But, be very cautious whenever there is permanently attached equipment. Although clarification has been made in the business auto policy that this equipment is covered as an auto, the physical damage valuation process is not as clear. When a vehicle has been modified or altered by attaching such equipment, the value of the attached equipment for rating, underwriting and claims handling purposes cannot normally be determined from the "book value" of the vehicle. This results in a great deal of paperwork, documentation, and a complicated valuation process. Consideration should be given to a physical damage coverage that specifically addresses the uniqueness of this type of vehicle with permanently attached equipment such as a stated amount endorsement (CA 99 28), inland marine coverage or the like.
The policy does address certain specific equipment as not covered:
"4. We will not pay for "loss" to any of the following:
a. Tapes, records, discs or other similar audio, visual or data electronic devices designed for use with audio, visual or data electronic equipment.
b. Any device designed or used to detect speed measuring equipment such as radar or laser detectors and any jamming apparatus intended to elude or disrupt speed measurement equipment.
c. Any electronic equipment, without regard to whether this equipment is permanently installed, that receives or transmits audio, visual or data signals and that is not designed solely for the reproduction of sound.
d. Any accessories used with the electronic equipment described in Paragraph c. above."
This whole issue of detachable and permanently attached equipment from a physical damage standpoint is a touchy one. It is dealt with differently by individual insurers and there do not seem to be any clear-cut rules.
Can such items be covered by an auto policy? Yes, but, that may not offer the insured the best physical damage protection unless dealt with accurately. On behalf of the insured, an agent must make sure that the description is accurate on the auto policy (in some cases, insurers require serial numbers and so forth) and that the value of the equipment has been addressed in a manner that will not complicate the claims handling process. Each insurer will have its own method of dealing with the issue. The auto policy will need to be reviewed carefully upon issuance to make sure that the equipment has been properly addressed.
If the equipment is permanently attached, consider using either the endorsement CA 99 28--Stated Amount Insurance or an inland marine policy for physical damage coverage.
If the equipment is detachable, serious consideration should be given to covering with an inland marine floater. It this manner there is no doubt regarding the physical damage coverage. The item is scheduled and a limit is set. This eliminates the possibility of no coverage in an auto policy if the insured forgets to describe it with the covered auto; if the insured moves the equipment from one vehicle to another, or places it on a temporary substitute. It also protects the insured if the equipment is not attached to a covered auto and the garage or structure housing the equipment catches fire, is blown away by a tornado or if theft of the equipment occurs. *
©COPYRIGHT: The Rough Notes Magazine, 1999