An agent who has been working in insurance for seven years has always been under the impression that with regard to auto physical damage, “other than collision” and “comprehensive” coverage are the same.
Q: Recently, it was suggested to me that OTC is a named-peril coverage, while comprehensive is all-risk. Are OTC and comprehensive different coverages?
Response 1: Under ISO forms, the concept of comprehensive coverage applies to only the business auto policy, so I assume you’re referring to the personal auto policy. The PAP has never provided comprehensive coverage—as far back as 1986, it has provided collision and OTC protection under Part D – Physical Damage.
The reason someone told you OTC coverage is a named-peril coverage is likely because the ISO policy lists causes of loss under collision in order to specifically note that they are not classified as collision losses, but rather OTC losses. However, this wording does not limit OTC losses to the 10 named perils. The list merely serves to remove these perils from the collision classification so the carrier can’t classify any loss caused by the named perils as collision losses, which generally carry a higher deductible.
So, OTC coverage should apply to anything that isn't a collision and is not otherwise excluded by the policy. The definition of “collision,” on the other hand, specifically excludes the 10 listed perils. If OTC coverage was a named-peril protection, there would be little need for some of the specific exclusions listed under Part D.
The only auto policy in the ISO world that uses the concept of comprehensive coverage is the BAP, in which the insured has the option to purchase collision and a choice of two non-collision coverages: comprehensive, which provides coverage for anything that happens to the vehicle other than damage that is classified as collision; or specified causes of loss, which is just as the name suggests—a short list of six named perils. The BAP goes on to state that certain perils are not considered collision and are covered if the insured carries comprehensive coverage, including glass breakage, loss caused by hitting a bird or animal, and loss caused by falling objects or missiles.
Even though the word “comprehensive” is not and has not been used in the PAP for at least 30 years, the concept is within the protection provided by the PAP's OTC coverage.
Response 2: The ISO PAP uses OTC language, while the BAP uses the word “comprehensive.” Many PAP carriers also use the word “comprehensive” in their policies.
The ISO PAP reads as follows:
PART D - COVERAGE FOR DAMAGE TO YOUR AUTO
A. We will pay for direct and accidental loss to "your covered auto" or any "non-owned auto", including its equipment, minus any applicable deductible shown in the Declarations. If loss to more than one "your covered auto" or "non-owned auto" results from the same "collision", only the highest applicable deductible will apply. We will pay for loss to "your covered auto" caused by:
1. Other than "collision" only if the Declarations indicates that Other Than Collision Coverage is provided for that auto.
2. "Collision" only if the Declarations indicates that Collision Coverage is provided for that auto.
If there is a loss to a "non-owned auto", we will provide the broadest coverage applicable to any "your covered auto" shown in the Declarations.
B. "Collision" means the upset of "your covered auto" or a "non-owned auto" or its impact with another vehicle or object.
Loss caused by the following is considered other than "collision":
1. Missiles or falling objects;
3. Theft or larceny;
4. Explosion or earthquake;
6. Hail, water or flood;
7. Malicious mischief or vandalism;
8. Riot or civil commotion;
9. Contact with bird or animal; or
10. Breakage of glass.
If breakage of glass is caused by a "collision", you may elect to have it considered a loss caused by "collision".
The ISO BAP, by contrast, reads as follows:
SECTION III - PHYSICAL DAMAGE COVERAGE
1. We will pay for "loss" to a covered "auto" or its equipment under:
a. Comprehensive Coverage
From any cause except:
(1) The covered "auto's" collision with another object; or
(2) The covered "auto's" overturn.
Both coverages are all-risk. While OTC coverage lists specific perils, they are not intended to limit coverage to just those perils, but rather to clearly state that the 10 listed perils are explicitly not a collision loss and therefore fall under OTC.
It’s still important to read the form, though. Some policies specifically say under OTC that they cover only the listed perils.
Response 3: My understanding is that OTC coverage applies to just that—everything except damages caused by a collision. It’s the same thing for comprehensive, which is basically defined as damages not caused by a collision. Are you sure you're not talking about specified perils, which are essentially covered named perils?
Response 4: The IRMI Glossary suggests that OTC and comprehensive coverage are one and the same. My thinking is that the same types of auto physical damage losses were and are contemplated under both terms.
Possibly, carriers deemed the word “comprehensive” too inclusive, similar to when the “C" in CGL was amended to stand for “commercial” some years ago. At least in that case, a one-word substitution could be made rather than the rather awkward creation of a new three-word phrase!
Response 5: OTC coverage is not a named-peril coverage, at least in the view of most courts and companies. There's no difference in most forms, except for the title of the coverage. The PAP provides coverage for all direct and accident losses, except if specifically excluded, and then says some of that loss would be considered collision. Then, it typically lists 10 perils that would be considered OTC or comprehensive, even though some of those perils involve collisions, like colliding with an animal.
The policy generally doesn't say that only those 10 perils will be OTC or comprehensive. If a company specified as such in their policy, then OTC could be named-peril. It stands to reason that if the insurer owes for all direct and accidental loss, then what isn't collision must be OTC.
Here are a few examples of OTC or comprehensive losses that are routinely paid even though they are on the list of 10 perils:
- Bleach spills on the upholstery and discolors it.
- Crayola crayons melt, ruining the upholstery.
- Rodents die in the ventilation, causing overwhelming bad odors.
- An insured drives through caustic chemicals, damaging wheels.
- A horse chews up upholstery when a window is left open.
Response 6: OTC coverage is not a named-peril coverage unless it’s a non-standard auto policy. It applies to any direct and accidental damage that is not the result of a collision, unless specifically excluded by the policy. The ISO policy names some examples of causes of loss that are considered OTC to clarify the coverage. But some of the causes might be considered collision without the clarification. The coverage is not limited to those causes of loss. If the policy you're writing limits coverage to named perils, it's an inferior policy.
Response 7: The ISO PAP does not use the word “comprehensive” in the terms or definitions. OTC coverage describes losses that do not involve collision, except one with an animal. Collision is defined as a collision with a stationary or moving object. So if something comes off a vehicle and hits your car, for example, that would be an OTC loss. However, if the object is laying in the road, that would be a collision loss.
Response 8: What matters is what each policy form actually says. Generalizing about undefined terms is not productive.
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