Author: Chris Boggs
Insurance Services Office (ISO) recently introduced several changes to its Auto Dealer Coverage Form (CA 00 25) with a November 2020 edition date and a proposed effective date of December 1, 2020. These changes are in response to changes in the business auto program, the general liability program and the dissolution of the garage program. Following is a synopsis of these changes.
Confidential or Personal Information Exclusion
Theft or unauthorized use of data by parties breaching a network's security (referred to as “data breach") are becoming more common. Companies that disclose personal information or are victimized by data breach may be subject to fines, may be required to reimburse victims and often must provide credit monitoring to the impacted parties.
Policy language in the Auto Dealer Coverage Form (ADCF) may open the door to coverage for such events. “Personal and advertising" injury is defined in the ADCF to include “oral or written publication, in any manner, of material that violates a person's right of privacy." (This same language is found in the commercial general liability (CGL) coverage form.)
Because the release of personal information, whether intentionally, unintentionally or via a data breach, may constitute the publication of a person's right of privacy, there is the possibility coverage may be found.
Additionally, ACDF's Section III – Acts, Errors or Omissions Liability Coverages may be tortured into providing coverage for such events.
ISO never intended coverage for these types of losses. In response to this potential for coverage, ISO added the Access or Disclosure of Confidential or Personal Information exclusion to the ADCF. This exclusion generally precludes coverage for damages arising out of any access to or disclosure of any person's or organization's confidential or personal information.
Automatic Trailer Liability Coverage
Since at least 1987, ISO's Business Auto Policy (BAP) has extended automatic liability coverage to “trailers with a load capacity of 2,000 pounds or less designed primarily for travel on public roads." This same automatic extension of coverage was included in the Auto Dealers Coverage Form (ADCF) when it was introduced in 2013.
After 33 years, ISO is changing this condition in the BAP and they are making the same change in the newer ADCF. Two reasons ISO gives for this change:
- Market conditions require this change; and
- ISO is not aware of any legal requirement regarding the disclosure of load capacity; but they are aware that Title 49 C.F.R. §567.4 mandates that manufacturers permanently attach the Gross Vehicle Weight Rating (GVWR) to all trailers.
There is a third reason not in the official filing: Big I's Technical Affairs Committee (TAC) has been requesting this change for several years.
The new automatic trailer coverage grant reads: “'Trailers' with a registered Gross Vehicle Weight Rating of 3,000 pounds or less designed primarily for travel on public roads."
Note that the automatic extension of coverage is no longer based on load capacity, it is now based on the trailer's gross vehicle weight. But there is a downside to this change, for automatic coverage to apply, the vehicle must be registered. “Homemade" unregistered trailers are not extended automatic coverage.
Products/Completed Operations
Evidently there was some confusion in the ADCF regarding coverage for products/completed operations in Section II – General Liability Coverages arising out of the exclusionary phrase, “… other than the ownership, maintenance or use of 'autos'." This exclusionary “other than" wording was intended solely to assure Section I (Auto) and Section II (General Liability) properly dovetailed.
Obviously, Section I (Auto) is intended to provide coverage for the ownership, maintenance or use of an “auto." And Section II (GL) is designed to extend coverage for covered premises/operations and products/completed operations losses.
However, because the insuring agreement in Section II excepted (excluded) the “…maintenance…" of an auto, the exclusionary wording was or could potentially be misapplied or “over applied" to exclude a product or completed operations loss arising out of maintenance to a customer's auto.
To remedy this issue, the phrase, “… other than the ownership, maintenance or use of 'autos'," as been removed from the Section II Bodily Injury and Property Damage Liability insuring agreement.
Long-Term Leased Vehicles
For years there has been a shadow “gap" in the coverage grant for long-term lease vehicles provided by the Business Auto Policy (CA 00 01) that carried over to the Auto Dealers Coverage Form – there may have been no coverage for vehicles acquired via a long-term lease during the policy period unless it was specifically listed.
Prior editions of the BAP extended automatic coverage in Symbols 2-6 to newly acquired owned autos. Likewise, the ADCF extended automatic coverage to newly acquired owned autos using Symbols 22-26). A leased vehicle is not necessarily an owned vehicle, so until the vehicle was listed, there was potentially no coverage. (Symbol 1 in the BAP and Symbol 21 in the ADCF did not necessarily have the potential gap as these cover ANY auto.)
To remedy this potential gap, ISO added a new paragraph under the “Owned Autos" section that reads:
3. An "auto" that is leased or rented to you without a driver, under a written agreement for a continuous period of at least six months that requires you to provide primary insurance covering such "auto", will be considered a covered "auto" you own.
Now there is no question that a vehicle acquired via a long-term lease is the same as an owned vehicle. This same provision is found in the personal auto policy (PAP).
Maximum Deductible
ISO is introducing a new maximum deductible provision in the ADCF applicable to autos not held for sale. The new provision limits the out-of-pocket cost to five times the highest deductible applicable to any one covered auto. The insured can apply this provision to Theft, Mischief or Vandalism losses only or to All Perils covered by the policy.
Transportation Expense and Loss of Use Expense Coverage
Transportation Expenses has been a Coverage Extension within the Physical Damage coverage of the BAP since at least 1987 and was part of the ADCF at its introduction. Loss of Use Expenses was added as a Coverage Extension within the BAP in 2001 and was included as part of the ADCF from its inception.
From time to time ISO increases these limits in an attempt to keep up with changes in the cost of services (inflation). The limits are increased in the new BAP and ADCF to:
- Transportation Expenses: $30 per day / $900 total (BAP only); and
- Loss of Use Expenses: $30 per day / $900 total.
Note: The ADCF does NOT provide Transportation Expense coverage – only Loss of Use.
Unmanned Aircraft Exclusion
The ADCF now includes an exclusion for drones (unmanned aircraft) within Paragraph A (Bodily Injury and Property Damage) and Paragraph B (Personal and Advertising Injury). Several endorsements are available to manage the exposure.
Reinforcing Exclusions Within Personal and Advertising Injury
Two exclusions to the Personal and Advertising Injury coverage have been strengthened to address internet and electronic publications. Both the Material Published With Knowledge Of Falsity and the Material Published Prior To Policy Period exclusions now include the phrase “in any manner" to assure that the exclusion extends to more than just written (hard copy) publications.
Other 2020 Auto Program Changes
For information on the new endorsements introduced in this most recent filing, see the VU article, ISO Business Auto Form and Endorsement Revisions.
Last updated: January 8, 2021
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