With the increasing use of electronic consumer equipment in vehicles—from televisions and DVD players to GPS systems and satellite radios—it is likewise increasingly important that agency CSRs and producers fully understand what types of equipment are covered and not covered, and under what circumstances.
Essentially, most electronic equipment that isn’t designed exclusively for the reproduction of sound should be covered under the “Coverage for Excess Sound Reproduction Equipment, Audio, Visual & Data Electronic Equipment, Tapes, Records, Discs and Other Media” PP 03 13 endorsement or, for the business auto program, the “Audio, Visual and Data Electronic Equipment Coverage” CA 99 60 endorsement.
On a positive note, the 2005 edition of the ISO Personal Auto Policy will automatically cover much of this equipment without endorsement if permanently installed. To read an updated annotated PAP, visit the “Personal Lines” section of the VU Research Library.
For more information on electronic equipment and GPS systems, click here.
Autos for Business and Additional Insureds
Some employers of individuals who use their personal autos for business want to be named as additional insureds on their personal auto policies (PAPs). However, many companies refuse to do this on the basis that they don’t want the broader exposure or that the business owner has no insurable interest.
Actually, there’s no need to name the business as an AI on the PAP, although there could be a need for a PAP endorsement similar to a “do nothing” endorsement in the business auto program. Under the ISO PAP, there is no need to add an AI endorsement to the policy since the employer is already covered if it is legally liable for the employee’s negligence.
The employer is an omnibus liability insured because of the following policy definition of an insured for liability coverage: “For ‘your covered auto,’ any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.”
While the employer is an insured under the PAP under most circumstances, there are still two potential problems. First, businesses are used to seeing such confirmation in the form of an AI endorsement. ISO has such an endorsement under the Business Auto Policy that effectively does nothing but confirm what the policy already says. Perhaps the time has come for a similar endorsement in the PAP program.
Second, note that the employer is an insured “only with respect to legal responsibility for acts or omissions of” the PAP insured. While the vast majority of claims would involve vicarious liability, typically under the principle of respondent superior, it is conceivable that the employer could have some direct liability and, thus, no coverage under the PAP— unlikely but not impossible.
For more information, click here.
Profit and Overhead When Insureds Repair Their Own Damage
Your insured is a contractor. He wants to repair insured damage to his own building to ensure that the job is done right. Or, let’s say he negligently causes damage to a customer’s property that is covered by his CGL policy and wants to make repairs himself. Is the insurer obligated to pay an amount that includes profit and overhead for the work done by its insured?
In two recent claims submitted to VU’s “Ask an Expert” service, the adjusters refused to pay for profit and overhead in one direct damage claim and profit in a liability claim. One cited a violation of the principle of indemnity because the insured would profit from the loss. The other simply stated that paying for these components was against public policy.
However, most courts have ruled that a contractual provision can supersede such principles if the outcome is positive to society. From the standpoint of minimizing the likelihood of potential fraud, the adjusters’ positions are understandable. However, from a contractual standpoint, there is nothing in most commercial property or CGL forms that prohibit paying profit and overhead. In fact, if these components are not paid, you can make a case that the insured continues to suffer a loss in the form of an opportunity cost.
To peruse the opinions of the VU faculty and learn more about the opportunity cost concept, click here.
Bill Wilson (bill.wilson@iiaba.net) is Big “I” director of Virtual University, an online learning center for agents and brokers.
