insuring the garage risk through the bap

Insuring

the

garage risk

through

the BAP

with

Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CPIW Vice President of Technical Affairs

Massachusetts Association of Insurance Agents

This program is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with

the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other

expert assistance is required, the services of a competent professional person should be sought.

With special thanks to the Insurance Services Office, Inc. for advance information, continued support, and permission to use their forms

and information.

Insuring the garage risk …just what form do you use?

Is there a garage policy …still …and who qualifies for it according to CAR/AIB/ISO …the garage policy is “passé’” As of 1/1/2004….eligibility for the garage policy was restricted to:

1. Franchised auto dealers 2. Non-franchised auto dealers

3. No service/repair or parking risks

CAR rule for eligible classifications

Garage Policy What no longer qualifies? – according to CAR/AIB/ISO

1. Service stations - including car washes

2. Repair stations

3. Storage or parking garages

4. Auto body shops

5. Whether or not these entities have repair plates!

Garage Policy – now the Auto Dealers Form As of 2016 C.A.R manual now mentions Auto Dealer Form

1. CA 00 25 10 13 Auto Dealer Coverage Form

2. MA forms to use with national coverage form

MM 25 02 MA Auto Dealer Declarations Pages

MM 25 01 MA Amendatory Endorsement Auto Dealers

On a voluntary basis a company can use whatever form it wants ….

So …How do we cover service stations, etc.? A commercial package policy

1. CGL

Operations/premises/products/completed

operations - of all client exposures

CG 22 68 - operations of customers autos on

particular premises … to enhance normal valet

parking language

2. Inland Marine Customer’s cars (if CA 99 37 is NOT on BAP) Tools, etc.

3. Property CP 00 10 (Building and Business Personal

Property Form

Building Other contents

BOP can be used if company wants to for Prem/op Buildings & BPP Need carrier specific IM or separate policy for customer cars

4. BAP Auto exposure Repair plates Owned vehicles Auto non-ownership Hired/borrowed autos Garagekeepers Coverage CA 99 37 - in lieu of inland marine for customer’s vehicles

Repair Shops, etc

How will you cover repair plates?

Registration Plates Not issued for a Specific Auto – Massachusetts MM 20 10 Can apply to

Repossessed autos Farm plates Owner-repairman plates Transporter plates Boat Trailer Repair plates

Rates per plate as under garage policy

Pay for liability coverage for repair plate – coverage options BI/PD MP UM UIM

Describes situations use for

What if the service station does NOT have a repair plate … and a garage mechanic test drives a customer’s car … where is the coverage?

GL/BOP covers “ parking” within the auto exclusion - limited coverage … ONLY

for parking

CG 22 68 09 97 Operation of customers Autos on Particular

Premises

States CGL Coverage A Exclusion g does not apply to

Limited coverage – on premises/ways adjoining only

Can do more than “park” the vehicle with this

endorsement …but can’t go very far!!!

Who is an insured under BAP??

YOU for “covered

autos”

Using the Bap w/o repair plate to cover use of customer auto

What is a covered auto??

BAP CA 00 01 states:

Page 1 of BAP


MA has own BAP declarations pages

Page 2 of

BAP

Dec pages

MM 00 97


Want symbol 1 or symbol 9 activating auto liability so can have coverage when customer’s auto is driven

This will

make BI/PD

arising out

of a

customer’s

auto

covered for

YOU ….

not

mechanic

employee



YOU for “covered

autos” – symbol 9

Or 1

Others are only

covered when

using an auto you

HIRE or BORROW

That is NOT a

customer’s auto



With CA 99 33 … employee is DEFINITELY an insured when using a vehicle that is not owned, hired or borrowed by YOU


Symbol (1) OR (9) plus CA 99 33 covers the garage

and mechanic driving a customer’s car …repair plate

is NOT needed


How do I get garagekeepers coverage – damage TO customer’s auto??

CA 99 37 Garagekeepers

Rated and sold just as the garagekeepers coverage built into the garage policy

Direct Primary Direct Excess Legal Liability

Show locations where have “garage operations”

Show location

where conduct

garage

operations

How do I get garagekeepers coverage –

damage TO customer’s auto??

Show location

where conduct

garage

operations –

Buy comp and

collision for

locations

How do I get

garagekeepers coverage –

damage TO customer’s

auto??

Buy coll/comp on Direct basis

Primary basis – client

not have to submit claim

to own auto policy – “1st

party basis)

Excess basis –Not need to

be legally liable but only

pay after client submitted

claim to its carrier

How do I get

garagekeepers coverage –

damage TO customer’s

auto??

Buy coll/comp on Direct basis

Direct basis ALWAYS

covers “legal liability”

If don’t check EITHER box then

coverage ONLY on a “legal

liability” basis

How do I get garagekeepers

coverage – damage TO

customer’s auto??

Pay coll/comp to

“customer’s auto” if insured

attending, servicing,

repairing, parking or storing

In your

“garage operations”



customer’s auto??

Customer’s auto definition

in CA 99 37land motor

vehicle or trailer in your

possession

For

Servicing, repairing, storage,

or safekeeping

WITH OR WITHOUT

Owner’s knowledge

Also employee’s vehicle

being worked on for a fee



customer’s auto??

Garage Operations definition in

CA 99 37

Ownership, maintenance, use of

LOCATIONS

For business of

Selling, servicing, repairing,

parking, storing

Portions of roads or other

accesses adjoining described

locations

ALSO – includes all operations

NECESSARY or INCIDENTAL to

Performance of garage operations

How do I get garagekeepers coverage – damage TO

customer’s auto??

Loss definition in CA 99 37

Coll/comp pay physical loss to

AND

Loss of use of



customer’s auto??

What if my client “sells” a few cars on the side?

MM 20 27 01 04 Physical Damage Coverage – Autos Held for sale by Non-dealers

Endorsement to be added to BAP

Similar to dealers physical damage as found in garage policy

MM 20 27 01 04 Physical Damage Coverage – Autos Held for sale by Non-dealers

Probably “used” only … since if auto dealer would be sold auto dealers form … or garage policy

What if my client “sells” a few cars

on the side?

Buy comp for vehicles at described location(s )

Buy collision – all locations

What if my client “sells” a few

cars on the side?

Show value

temporary locations

in transit

IF deliver or buy vehicles from over 50 miles must buy dealer’s drive away collision coverage

CA 25 02

What if my client “sells” a few cars on the side?

What about independent tow truck operator –

The BAP C/C/C exclusion will preclude coverage for damage to the vehicles towed

If tow truck not part of a garage policy risk can add CA 99 37 GARAGEKEEPERS COVERAGE to BAP

1) If carrier will allow

2) If part of “garage”/service station operations … NOT just indiscriminate towing

BAP Liability excludes damage to property in care


If Tow truck is part of a garage policy risk … then

Garagekeepers CA 99 37 coverage can respond


If independent contractor tow truck operator will CA 99 37

work or should one buy “on hook” inland marine coverage??

What is “incidental” mean if one ONLY tows???


Buying and selling “online”

We have an insured who at times will purchase a

vehicle and then sell online.

He has a trailer that he uses to tow the vehicles

back to his house.

He only does this a few times a year. He is not a

dealer.

40


He would like coverage for the vehicle being towed.

We have thought about this up and down and have

tried several different scenarios.

The producer was thinking maybe dealers physical

dmg & drive away

41


There is a BAP endorsement for phys damage for

"non-dealers" ...but ... it is a BAP endorsement ...

If this is a personal lines client …without a BAP …I

doubt any company will sell a BAP with JUST this

coverage …and no vehicle with a MA plate.

If the insured has a voluntary BAP already …the

company does NOT have to provide this coverage.

42


If the risk is ceded …

If they ask for this coverage then the company would have

to provide ...to at least $1,000,000 ... – shown in rules of

operation www.commauto.com

if no BAP ...

then you would need to look into surplus lines ...

www.insurancemarketplace.com

www.mynewmarkets.com

www.bigimarkets.com

43

http://www.commauto.com/

http://www.insurancemarketplace.com/

http://www.mynewmarkets.com/

http://www.bigimarkets.com/

44

Dealers physical damage for non-dealers


Damage to customer’s auto

I’ve learned that some of our auto detailing

prospects are picking up and delivering their

customer’s vehicles.

Most of these detailers do not have repair

plates.

I’m thinking about the detailer’s exposure to

liability for BI/PD caused by operating a

customer’s auto, and for damage to the

customer’s auto.

45


Would GKLL coverage extend physical damage

coverage to the customer’s auto while it is being

picked up or delivered?

46


The CA 99 37 Garagekeepers Coverage Endorsement

could be added to the business’s BAP to provide damage

to the customer’s auto

This is the insuring agreement …before choosing

coll/comp

Picking up the

car would be

an operation

necessary to

the

performance

of that garage

operations 47


Could the customer’s auto be considered a non-

owned auto under the detailer’s non-owned auto

liability thereby providing the detailer with auto

liability coverage while picking or delivering a

customer’s auto?

Or, does the detailer need a repair plate?

48


If the customer’s vehicle is registered then I think a

repair plate is ….”redundant”.

The BAP and the MAP exclude the garage employee

from “insured status”

MAP

While any auto is being used by anyone in the course of

his or her employment in the business of selling, servicing,

repairing or parking autos. This exclusion does not apply

to the ownership, maintenance or use of your auto by you

or a household member.

BAP

b. Anyone else while using with your permission a covered

"auto" you own, hire or borrow except:

(3) Someone using a covered "auto" while he or she is

working in a business of selling, servicing, repairing,

parking or storing "autos" unless that business is yours. 49


Since the individual driving the customer’s car to

bring back for “detailing” is not an insured …

whether customer has insurance under the BAP

or the MAP …

the business needs to address this through the

BAP …

50


A garage plate is NOT necessary …but proper

“symbols” activating liability coverage under the

detailer’s BAP would be necessary …

or if insured under a BOP … auto-non-ownership

coverage

51


Symbol (1) or (9) on the BAP of the garage/auto

detailing place would provide coverage for the

business when a customer’s car is being

driven. (1) – obviously any auto

52


Symbol (9) would also work

It is a non-owned auto …being used in the

business …to and from being worked on

53

Damage to customer’s auto The Garage/auto detailing employee is NOT an

insured … unless CA 99 33 is added (which I think

should be on all BAPs anyway)

“you” is the business …for any “auto” ..what is the

symbol

But the employee is ONLY an insured when using

a vehicle YOU own, YOU hire or YOU borrow … a

customer’s car doesn’t fit that definition 54


Again,

the Garagekeepers

Coverage CA 99 37

would apply for

damage TO

customer’s car

55


because picking up

car is

“necessary” to

detailing operations

as defined by the

business

56

Garagekeepers …”black/white/gray”

MA Garage Liability policy question.

Operations:

Auto dismantling/recycling operation with 15 repair plates / used

auto sales with minor maintenance on vehicles held for sale –

3 dealer plates / towing contract with town police dept. and CVS.

Question –

Coverage for the "vehicles" while being towed on the

insured's tow trucks comes from where?


Under a MA Garage Liability policy

the care, custody and control exclusion excludes

property damage

and

the Garagekeepers coverage provides for loss to a

customers auto left in the insured's care, custody and

control while the insured is attending, servicing, repairing,

parking or storing it in your garage operations.

(Which doesn't appear to contemplate towing)


Another issue is that the vehicle being towed is never a

"customer"

either CVS or the police department calls the insured to

have the vehicle towed due to a parking violation, DUI,

accident etc…..

The owner is indicating that they have always had coverage

for the vehicles being towed under the Garage/Garage

Keepers policy but it seems to me that there's a coverage

issue here.

Your thoughts?


Garage issue …Garage policy

generally not provided to

anyone that is not a dealer …

so would use the CA 99 37

Garagekeepers Coverage and

attach to BAP (which

essentially same as

garagekeepers coverage under

garage policy.

This does states:


The definition of “garage operations” states:


The definition of “customer’s auto” states:


Consent is not the issue …

it is “what is incidental” …if not tow back to one’s own

garage

If one tows back to the garage where store or repair …then

that is considered “incidental” …

but gets “gray” when tow elsewhere… and one should

probably buy “on hook” coverage which is inland marine …

motor truck cargo coverage.


Interesting,

so we'd be relying on the "incidental" under garage

operations as it relates to a customers auto in their

possession for storage or safekeeping (towing).

Do you think a carrier could also try to deny a claim under:


I believe they do accept responsibility for loss to vehicles

being towed under contracts with the police and CVS.

Or because the vehicles are in their care, custody and

control they would be liable for loss in the absence of those

contracts so the exclusion doesn't apply?

I can envision a battle with a claims adjuster if they total a

$50,000 vehicle being towed under contract etc…..


That contractual exclusion is the “normal” liability

exclusion …

things that are “normally covered” …still will be …

this is not a performance bond … and one can’t assume

things that are not normally covered …and expect them to

be covered (like being done a job by a specified time)

But …if one has doubts….Separate inland marine coverage

is more specific


I would appreciate your thoughts regarding a

coverage in MA Garage policy.

Insured is a auto repair garage that does towing. Insured

has purchased optional Garagekeepers coverage in the

amount of $120,000 covering Comp and Collision.

The Section VI Garagekeepers coverage states “We will pay

all sums the “insured” legally must pay as damages for

“loss” to a “customer’s auto” or “customer’s auto”

equipment left in the “insured’s” care while the “insured” is

attending, servicing, repairing, parking or storing it in your

“garage operations” under: …Comprehensive …Collision . .


Our insured assumes that when he tows an auto for AAA

the Garagekeepers coverage would cover for damage to the

auto.

Is it reasonable to consider an auto he tows as a

“customer’s auto” since he will,

in most cases,

work on the vehicle, and in all cases will store it

temporarily?


Same issue as before …

There are no guarantees in life …

it is an “interpretation” thing … I have talked to Jim Paci at

AIB …over the years …

we both can argue for and against coverage …

Towing back to one’s garage establishment to service or

store …is “incidental” to garage operations.

Towing to unrelated places …may or may not be.

Inland Marine/motor truck cargo/on hook coverage …is a

“guarantee” of claim payment

Dealer’s physical damage

I am not real familiar with garages/dealers etc.. The agency

has a customer that insures several dealer plates. Attached

to his business auto he has physical damage coverage-autos

held for sale by non dealers. In talking to this customer he

was asking me questions in which I couldn't answer w/out

looking into further.

I called underwriting and they said they aren't licensed so

they can't interpret policy language, not much help there!

I sent the claims dept the below email..

Now THIS is an interesting

response … don’t you think???


Q: In regards to the attached endorsement, MM20271006

(dealers physical damage for non-dealers)

I was curious to what 2C means by transported?

Transported means to be taken or carried from one place to

another.


The exclusion specifically spells it out for "specified cause of

loss coverage" whereas it says collision or upset not

covered while vehicle transporting it.

The insured has collision and it isn't specific except to be w/

in a 50 mile radius.

I understand that to say..(as an example) he buys a car at

auction, he himself, a friend, a company that he hires to

transport the purchased vehicle would be covered in the

event of a collision or upset while being transported no

matter who is doing it or whether a plate is on it or not.


Response..

claims dept. called me today and stated if the insured has a

vehicle being towed/transported then the party towing and or

hauling it would be responsible

and

Company wouldn't pay for any damage.


That endorsement (MM 2027) is issued to BAP when garage

policy not given ..it is "dealer's physical damage coverage"

as found in garage policy.

If a client test drives a vehicle ...and the policy provides

coll/comp on vehicles held for sale ...there is coverage ...

even if test drive is over 50 miles. (I went for a 200 mile test

drive and didn’t buy the car because I hated it)


If the vehicle is being towed ...for delivery/pickup over 50

miles ...technically the tower is legally responsible ...

if I tow my own vehicle ...no coverage ...

need the endorsement listed below ... CA 25 02


if someone else is doing it ...their BAP doesn't cover this ...

they need inland marine coverage ...

and if I want to make a first party claim and let my carrier

subrogate ...I still need the endorsement listed below

CA 25 02

If insured is buying or delivering vehicle OVER 50 miles ...

that is when the dealers driveaway collision coverage

endorsement is needed CA 25 02 ...then the delivery/pickup

exclusion over 50 miles is removed.


BEWARE that dealers physical damage is 100% coinsurance .... so one must report and insure COMPLETE values or EVERY loss is penalized by underinsurance penalty


Back to question ….

Secondly comprehensive isn't really addressed in this form

as far as a radius or being driven or transported.

So if he buys a car at auction, he is driving or having

transported, he stops somewhere and it gets stolen I take it

there would be coverage?


There is no problem with dealers physical damage and

comprehensive coverage …

it is just the collision issue of vehicle delivery/pickup


I think I almost get it!

Sorry to be so anal/annoying on the matter.

Still need some clarification..

If the insured tows/flatbeds or has someone else do

delivery/pickup a vehicle the insured owns w/ in the 50 mile

radius then the insureds coll/comp will pay in both

instances?

Yes WITHIN 50 miles


In same scenario above however 50 miles is exceeded for

delivery/pickup the insured then needs CA2502 for his

coll/comp coverage to kick in?

you ONLY have a problem with COLLISION …

comp responds … the endorsement removes the exclusion

for collision loss during delivery OVER 25 miles


I guess I am confused on when the insured would need the

inland marine coverage?

What do you mean?

If I pay someone to transport vehicle and they are in a

collision …my dealers physical damage collision pays or if

accident over 50 miles my dealers collision endorsement still

allows dealer's physical damage to pay…

then my company will SUBROGATE against guilty party …

THEY need motor truck cargo coverage/inland marine

because the BAP does NOT cover damage to property

transporting

83

Insuring garage through BAP

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insuring the garage risk through the bap

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