3-5 Commercial Auto
Most businesses use some type of auto in their operations. For some, the use is incidental, such as a
contractor driving to and from a job site. For others, the use is essential, such as furniture delivery.
Obviously, the more an auto is on the road, the greater the exposure, or chance of loss and therefore,
the greater the premium.
This module is designed to help you become more familiar with auto coverages, how commercial autos
are rated, and the exposures that an underwriter evaluates.
Commercial Auto Definition:
A land motor vehicle or trailer designed for use on public roads (including trailers)
Any other land vehicle subject to a compulsory insurance law
Mobile equipment is NOT a commercial auto: Farm equipment, forklifts, bobcats, bulldozers and other
vehicles not designed for use over public roads. Also included are mobile chassis with permanently
attached pieces of heavy equipment designed specifically for movement of that equipment. Exempted
are vehicles with snow plows attached and street cleaning vehicles. These are considered “autos”.
For a vehicle to be properly insured on a commercial auto policy, it must be registered in the company’s
name (or individual for a sole proprietor).
Definition of Insured:
You, meaning the corporation, partnership or sole proprietor listed as the named insured.
Anyone else using a covered auto with your permission. There are some exceptions for family members
and employees if they own the vehicle in question. These situations can be addressed by specific
endorsements.
Commercial Auto Coverages:
BI/PD: The definitions for bodily injury, property damage and accident match those of the CGL. The
bodily injury or property damage must result from the ownership, maintenance or use of a covered
auto. We will discuss what a covered auto is in a later section.
UM/UIM: Uninsured and underinsured motorist coverage is similar to the same coverages found in the
Personal Auto Policy, as are PIP, Med Pay and Towing. UM/UIM is mandatory in most states. In others, it
may be rejected, but must be done so by signing a specific form, and the form normally must be signed
with each renewal. (Key Concept) This is an area where enormous E&O exposures exist. It is vital that
each agent maintain an auto “checklist” both for new business and renewals, which includes verification
of the acceptance/rejection and collection of the signed rejection form.
Physical Damage Coverages:
Comprehensive, collision and specified causes of loss apply similarly as they do with Personal Auto
Policies.
Commercial Auto Rating and Classification:
There are several factors used to determine classification and rating of a commercial auto. Listed below
are the factors needed to accurately complete the Auto Acord app. (Key Concept) You will need to
understand and be able to apply these factors to properly write auto coverage.
Weight and Type of Vehicle: Vehicle types are either private passenger or some form of commercial
truck (including vans). Weights are classified as light, medium, heavy and extra heavy, based on the
GVW.
Private Passenger Auto: A typical sedan, SUV, coupe or non-commercial van.
Light Trucks-Pick-up trucks and commercial vans up to 10,000 lbs. GVW
Medium Trucks-Box trucks and commercial vans up to 20,000 lbs. GVW
Heavy Trucks- Large box type and other non-semi-trucks up to 45,000 lbs. GVW
Extra-heavy Truck - Large box type and other non-semi-trucks over 45,000 lbs. GVW
Heavy Truck Tractors- Semis up to 45,000 lbs. GVW
Extra-Heavy Truck Tractors- Semis over 45,000 lbs. GVW
Service or Utility Trailers – Load capacity up to 2,000 lbs.
Trailers- Load capacity over 2,000 lbs.
Semi-Trailers
Use of Vehicle: These classifications are based on the degree of “over-the-road” exposure according to
how the vehicle is normally used.
Service Use: Typically assigned to vehicles used primarily to transport workers and supplies to
and from job sites. It is assumed that the vehicle is parked most of the time. An example is an
electrical contractor’s truck.
Retail Use: Reserved for vehicles used for deliveries to residences, such as flower delivery or
furniture delivery. It contemplates frequent use on ever-changing routes.
Commercial Use: All other vehicles, such as commercial delivery trucks (to businesses).
Radius of Operation: This is the distance normally travelled from the place of business. The
classifications fall from 0-50 miles (local), 51-200 miles (intermediate), and over 200 miles (long
distance). A typical contractor or local delivery truck would normally have a local radius. Regional
contractors and route wholesalers (such as beer distributors) would typically have an intermediate
radius. Long haul freight by semi-tractor is a typical class for long-distance.
Special Industry Classifications: The last classification and rating factor applies to special classes, such as
dump trucks and trailers, concrete trucks, and food delivery.
Garaging Address: The garaging address determines the rating territory for each unit. For large fleet
schedules, such as with a large contracting firm, you may have units garaged at multiple addresses.
Symbol Values:
For each coverage selected on the Commercial Auto Policy, the insured will select a Symbol, which
determines which vehicles are included for that coverage. The following are the most common symbols
used. (Key Concept) You will need to understand these symbols and apply them properly in order to
complete the Auto Acord app.
Symbol 1- Any Auto
Any owned, non-owned, or hired auto. Typically, carriers will only allow this
symbol for Liability coverage. It is the preferred liability symbol, since it covers any auto and leaves no
auto liability gaps for a business. (Key Concept) Most agency advocates recommend choosing symbol 1
for liability on all commercial auto risks. However, some carriers do underwrite the use of this symbol
and may only allow it where it is warranted. For example, a small contractor with 3 owned autos and no
formal auto safety or loss control program would probably not be granted symbol 1 on liability.
Symbol 2- Owned autos only. An alternative to symbol 1. Used for liability, UM/UIM and other
coverages. A good choice for Physical Damage coverage if you are going to carry this on all autos, as it
automatically applies the coverage to newly acquired autos.
Symbol 3-Owned Private Passenger Autos Only: Can be used by entities which strictly use private
passenger autos, such as a mobile computer repair service with a fleet of autos (Best Buy’s Geek Squad).
Note that the insured would need to include symbols 8 and 9 for the use of any hired or non-owned
units.
Symbol 4- Owned Autos other than Private Passenger: Could be used by a commercial trucking outfit.
Note that the insured would need to include symbols 8 and 9 for the use of any hired or non-owned
units.
Symbols 5 and 6 apply to UM/UIM, PIP and Med Pay in those states where the coverage is required and
you cannot reject it.
Symbol 7- Specifically Described Autos. Typically used for Physical Damage coverage when some units
will not have the coverage, such as older units.
Symbol 8- Hired Autos. Extends selected coverage to autos the insured leases, hires, rents, or borrows,
but NOT those belonging to an employees or partner
Symbol 9- Non-owned Autos. Extends coverage to the same group of autos which ARE owned by
employees or partners and used for the business. Typically, only liability coverage is extended to Hired
and Non-Owned autos. However, hired car physical damage can be purchased for additional premium.
Other Items:
For commercial auto risks, you will need to supply a complete list of drivers with dates of birth and
driver’s license numbers. Driving records and years of driving experience will be evaluated by
underwriting. In addition, you must determine whether or not the insured has a formal fleet safety
program. This is important for risks with 5 or more units, and will affect how the risk is underwritten.
Who Is an Insured?
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The named insured for a covered auto.
A permissive user of a covered auto (employees)
Who is not an Insured?
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The owner of a Hired Auto
An employee in their own auto
A partner/member in an auto they own
Important Endorsements:
CA 99 17 Individual Named Insured: This is designed for sole proprietors, partners and LLC members
when the car they drive (covered auto under the Business Auto Policy) is their personal car (registered
in their name). In other words, they do not also have a Personal Auto Policy on that vehicle. This
endorsement provides the insured’s family the same protection as if the auto had been covered under a
Personal Auto Policy. Specifically, family members of the individual named in the endorsement are also
insureds under the Business Auto Policy when operating the subject vehicle. In addition, physical
damage coverage for non-owned private passenger autos is provided (when the insured rents a car for
non-business purposes). The individual sole proprietor, partner or member is scheduled on the
endorsement.
CA 99 10 Drive Other Car Coverage: This is designed for officers, partners, or employees who are
furnished a company car (registered in the company’s name) and it is the only vehicle available to that
individual (the individual does not own a separate vehicle covered under a Personal Auto Policy). With
this endorsement, liability and physical damage coverage are extended to hired and non-owned autos
(rental car) for this individual. However, this coverage is only provided for the listed insured and his/her
spouse, not for other family members.
CA 99 16 Hired Auto Specified as Covered Auto You Own: This extends liability and/or physical damage
to autos owned by owners or employees and used in the business. Specific autos are scheduled. CA 99
33 should also be used.
CA 99 33 Employees as Insureds: Extends liability coverage to all employees whose autos are listed on
the CA 99 16.
CA 20 01 Lessor-Additional Insured and Loss Payee: Effectively turns a leased auto into a covered auto
rather than a hired auto. This makes the insured’s auto coverage primary. The lease agreement must
require that the insured’s auto coverage be primary in order for this to be effective.
CA 99 47 Employee as Lessor: Adds the scheduled auto (which is owned by an employee and leased to
the business) as a covered auto and the employee who leases it as an insured.