CLASSIFYING RISK

By Linda D. Ferguson, CPCU

THE PERILS OF PARKING LOTS

When a separate charge is required,
there are three options to consider

Parking lots are places of great convenience and potential danger.

One beautiful morning, a young woman left the department store in a suburban shopping center. She could almost see her childhood home as she walked through the parking lot. A few days later, after her family reported her missing, her body was discovered in the trunk of a car at another parking lot in town.

A young boy was shopping with his father. In the parking lot, the child pulled away from his dad's hand--for just a minute--into the path of an ongoing car. The child survived and fully recuperated but the father postponed his presidential bid for a few years.

A mother was angry. Having received what she thought was bad treatment in a store, the mother took out her frustration on her young daughter when they reached their car. All of this was recorded on the security cameras located in the store's parking lot and soon the entire nation witnessed the shocking incident.

What one thing do all of these have in common? All happened in private parking lots.

The exposures to accidents are extremely high in parking lots. If those individuals had parked in public facilities or on the street, the coverage would have been somewhat limited, but private lots are not protected by sovereign immunity. The owners are responsible for acts of negligence that occur on the premises. The question for the courts to determine is whether the owner of the lot is negligent. That is for another column; for now we'll just agree that because courts have ruled both ways the owner must be sure liability coverage is available should a lawsuit occur.

Since there is an exposure to loss and coverage is desired, a premium must be charged--or maybe not.

According to ISO General Liability Rule 26, B.1 (i), parking areas are included, at no additional charge, unless a charge is made for parking AND the primary classification is not based on gross receipts. This means that if an office building, which is based on area, has a parking lot available to clients and no charge is made for its use, then there is no additional charge for the parking lot. However, if the office provides parking but charges a fee, then a charge must be make for the parking lot.

On the other hand, if the occupancy is a restaurant which is based on gross receipts, and a charge is made for parking, there is no additional charge since the charge for parking would just be added into the receipts for the restaurant.

What classification should be used in the situation where a separate charge is to be made? There are three options to consider.

Parking - private - 46622

This classification is an area-based code and is used for off-street parking for a restricted clientele and not open to the general public. Fees may or may not be charged, parking attendants may be in attendance and there may be gates to restrict entry. This can be located next to the primary premises or at a distance since there is not a requirement as to proximity to the main premises. This code is rated based on area.

Parking - public - open air - 46604

This is parking that is open to the general public. In general, a fee is charged but that is not a requirement. This could be a parking lot area that provides priority parking to the customers of the primary business but is also available for the general public due to excess capacity. This code is rated based on gross sales.

Parking - public - not open air - 46603

This is more of a parking structure but is open to the public. A fee is standard but not required. The only difference between this code and the 46604 is that this one is in a building while 46604 is not.

Now, we need to back up and find one more exception. The ISO General Liability Rule 26. A states that if a classification footnote requires a separate charge to be made, that overrules other comments in the rules. So even if Rule 26.B.1(i) says that the parking charge is included, if the classification footnotes say to charge for parking lots, then a parking lot charge must be made.

A good example of a classification that requires a parking area charge is code 67635 Shopping Centers - buildings, or premises not occupied by the insured (lessor's risk only). This class has a footnote that parking areas must be separately rated and charged for. The classification to use depends on whether the shopping center tenant or shopping center owner is responsible for the parking area. If the shopping center owner is responsible, then code 46607 Parking - public - shopping centers - maintained by the insured (lessor's risk only) is used. If a tenant is responsible for the parking then code 46606 Parking - public - shopping centers - maintained by lessee (lessor's risk only) is used.

The shopping center parking codes explain in the footnotes that the codes are based on the total area of the parking lot, including all access roads. The only parts of the lots that are not to be included are the areas that are restricted to pickup and delivery trucks. This makes sense since people seem to find ways to incur damage in just about any part of the parking lot that is open to pedestrian and automobile traffic.

Parking lots are places of great convenience and potential danger. Whenever a large number of people on foot and in cars come together, the mixture can be serious. Add to that mixture some impatience and minds on shopping lists, and it can become tragic. How does the owner of the parking lot enter into this equation? With proper loss prevention measures such as security cameras, proper lighting, appropriate traffic control and lane markings and appropriate security guard service, it is hoped that they will never have to learn. *