Author: Mike Edwards
"In talking to a customer of mine today, I more or less stumbled upon a potential coverage situation. He and his wife are long-time customers, and our agency writes both their business and personal insurance. We met for lunch, and during the conversation, they told me that they had just bought a new 19-ft. Airstream Flying Cloud travel trailer. I don't handle their personal insurance myself, but they said the agency wrote the coverage for them last week.
"They are planning to attend a trade show next month in Dallas. They will pull the Airstream with one of the company's pickup trucks. While they're at the trade show, they will use the Airstream as a place to sleep, as well as an office. I'm not exactly sure how coverage in the BAP and PAP would apply in such an arrangement. Lastly, if a customer was injured in a slip and fall inside the trailer while it is parked at the trade show, would that be covered under the CGL or BAP?"
Discovering new exposures mid-term, especially inadvertently, is a double-edged sword. The obvious big advantage is the opportunity to be proactive, and make any needed recommendations before an otherwise uncovered loss occurs. One downside is that you may get this information in an informal setting, outside the office, after normal office hours. Whether or not you have a legal duty to be "on duty" 24/7 is something of a conundrum. In addition, a casual "I'll take care of that" comment at such times can (and has) lead to E&O claims.
For the discussion which follows, assume the following. The two owners are Jack and Jill Smith, and their business is J&J Enterprises, Inc. Also, J&J Enterprises, Inc. is the named insured for all business insurance, and the pickup truck is titled to the business.
Jack and Jill Smith are named insureds for all personal insurance. The coverage form excerpts and commentary below are based on ISO forms. Proprietary forms may be different.
Situation #1: Jack and Jill use a pickup belonging to J&J Enterprises to pull their personally-owned Airstream trailer to the trade show in Dallas
In the event of an at-fault accident, it should be assumed that all parties will be sued: J&J Enterprises, Inc., as well as Jack and Jill personally. Note that the accident could arise solely from the ownership, maintenance or use of the pickup truck, or the trailer, or both. Jack and Jill could be sued on the basis of their driving of the pickup truck, or their ownership (including faulty maintenance) of the Airstream, or both. Below is commentary on coverage issues in the ISO BAP and the ISO PAP.
Business Auto Policy – J&J Enterprises
CA 0 01 10 13
Section II – Liability
1. Who Is An Insured
The following are "insureds":
a. You for any covered "auto".
b. Anyone else while using with your permission a covered "auto" you own, hire or borrow except:
(1) The owner or anyone else from whom you hire or borrow a covered "auto".
This exception does not apply if the covered "auto" is a "trailer" connected to a covered "auto" you own.
(2) Your "employee" if the covered "auto" is owned by that "employee" or a member of his or her household.
Section V – Definitions
B. "Auto" means:
1. A land motor vehicle, "trailer" or semitrailer designed for travel on public roads;
Comments:
(1) For liability arising out of the pickup truck, J&J Enterprises, Inc. is an insured under Who Is An Insured 1.a. (above), if the symbol for liability coverage is 1, 2, 4, or 7.
(2) For its vicarious liability arising out of the non-owned Airstream trailer, J&J Enterprises, Inc. is an insured under 1.a. above, if the symbol for liability coverage is 1 or 9.
(3) Note: In the ISO BAP, Section V – Definitions (see above) includes "trailers" within the definition of "auto."
(4) Jack and Jill are insureds in J&J's BAP under 1.b. (above) – as permissive users of J&J's pickup.
(5) Jack and Jill are probably not insureds in the BAP of J&J Enterprises, for their personal liability arising out of Airstream trailer. In the above BAP excerpt for Who Is An Insured, there seems to be a conflict between 1.b.(1) and 1.b.(2). Both provisions describe exceptions to coverage for various permissive users of an "auto" (in this case, Jack and Jill's Airstream) which J&J Enterprises hires or borrows. In exception 1.b.(1), owners of a trailer connected to an auto J&J Enterprises owns is an insured. This would give Jack and Jill liability coverage arising out of the trailer. However, 1.b.(2) specifically excludes an "auto" (the Airstream) owned by an employee. While this apparent conflict might be debated, the solution would be to add the CA 99 33 Employees As Insureds to the BAP of J&J Enterprises.
Jack and Jill Smith – Personal Auto Policy
Coverage for the ownership, maintenance or use of the Airstream, as well as the company's pickup truck, can be provided by Jack and Jill's PAP.
PP 00 01 01 05
Part A – Liability Coverage
B. "Insured" as used in this Part means:
1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".
2. Any person using "your covered auto".
3. 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.
4. For any auto or "trailer", other than "your covered auto", any other person or organization but only with respect to legal responsibility for acts or omissions of you or any "family member" for whom coverage is afforded under this Part. This Provision (B.4.) applies only if the person or organization does not own or hire the auto or "trailer".
Definitions
J. "Your covered auto" means:
3. Any "trailer" you own.
Comments:
(1) Under B.1., Jack and Jill would have liability coverage for the ownership, maintenance or use of their Airstream trailer, even if it was undeclared. Note also that in the Definitions excerpt above, an owned trailer is considered a "Your Covered Auto." In addition, Jack and Jill would have coverage for their use of the pickup owned by J&J Enterprises. However, if they regularly used the pickup, there could be a coverage gap, based on the exclusion for any vehicle "which is furnished or available for their regular use." Coverage can be bought back by PP 03 06 01 05 – Extended Non-Owned Coverage.
(2) Under B.3., vicarious liability is provided to third parties made liable by a "Your Covered Auto." Therefore, J&J Enterprises is an insured, in the event Jack and Jill's Airstream trailer caused or contributed to an accident, and J&J Enterprises was sued in its capacity as their employer.
(3) Under B.4., vicarious liability coverage is provided to third parties made liable for an auto which is not a "Your Covered Auto" in Jack and Jill's PAP. For example, if Jack and Jill had borrowed the pickup from a friend or coworker, the lawsuit would certainly name Jack and Jill, the coworker (as owner of the pickup), and J&J Enterprises (as employer). Under B.4., the owner of the pickup is not an insured in Jack and Jill's PAP, but J&J Enterprises is. However, since in this case the pickup truck is owned by J&J Enterprises, it is not an insured under B.4.
Situation #2: Injury to a customer arising out of the trailer while parked at the trade show
CG 00 01 04 13
Coverage A – Liability
Exclusions
g. Aircraft, Auto, or Watercraft
"Bodily injury" or "property damage" arising out of the ownership, maintenance, use or entrustment to others of any aircraft, "auto" or watercraft owned or operated by or rented or loaned to any insured. Use includes operation and "loading or unloading".
Section V – Definitions
B. "Auto" means:
1. A land motor vehicle, "trailer" or semitrailer designed for travel on public roads;
Comments:
(1) In both the BAP and CGL, the term "auto" also includes "trailers." So in CGL exclusion g. above, the exclusionary language for an "auto" should also be read to include a "trailer." In addition, note that the exclusion applies to "autos" (and "trailers") which are "owned or operated by or rented or loaned to any insured." In the CGL, employees are insureds, thus the Airstream which is owned by Jack and Jill is excluded in the CGL of J&J Enterprises.
(2) Coverage for the customer's slip and fall would be found under the BAP of J&J Enterprises.
Additional information:
Last Updated: September 16, 2016