Author: VU Faculty

Your insured's business auto policy includes Symbols 7 and 8. He acquires a new vehicle, but fails to report it until he has an accident three months later. Normally, there is no coverage under Symbol 7 for acquired vehicles beyond 30 days. However, rather than buy the vehicle, he leased it under a long-term lease agreement. Does that make a difference?

Here's a claim a Pennsylvania agent reported recently:

"Our client leased (long term) a vehicle 3 months ago and failed to advise us. We now have a collision claim and the carrier does not want to cover it because it is beyond the 30 day period. However, we do have Hired Physical Damage Coverage on the policy which is 'X'd' for primary coverage. We are unable to find any reference in the policy language that leased vehicles (long term) are to be added as 'owned vehicles.' Shouldn't the carrier cover this under Hired Physical Damage coverage? The policy includes Symbols 7 & 8."

Interesting question. Unlike the ISO Personal Auto Policy which states in the contract that a vehicle leased in writing for at least six months is considered owned, the CA 00 01 10 01 is silent on this issue. If you read the symboling system coverage grant, this appears to be a loophole that creates coverage in spite of the 30-day restriction for Symbol 7 autos. We ran this by our faculty and got the responses below.

Symbol 8 covers any autos you lease, hire, rent or borrow. If you have symbol 8 physical damage, I think you have a good case for coverage. The only problem is you are not covering the interest of the lessor. Normally you would add a leased vehicle using an Additional Insured - Lessor endorsement. Contractual liability doesn't cover damage to a leased vehicle.  Symbol 7 is intended only to cover newly acquired autos if they're reported in 30 days, but the policy language does refer to "owned" (not leased) autos. I think you need to explain symbol 7 to your insured so he understands his obligations.

Symbol 8 says:

Only those "autos" you lease, hire, rent or borrow. This does not include any "auto" you lease, hire, rent, or borrow from any of your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households.
 
Looks like it would be covered. The ISO rule says if you lease for 6 months or longer, the vehicle is deemed to be an auto you own, but that is a rating rule not a coverage rule. I suspect ISO's intent is to not have Symbol 8 pick up this exposure if you lease rather than rent but, if so, they'd better move the wording from the manual to the contract.

I am sure it is not the intent of the insurance company, but I do not see anything in the policy language that would not allow coverage from Symbol 8.

The business auto policy doesn’t address the issue of what a leased vehicle is. On the other hand, the ISO personal auto policy states that a vehicle leased under a written lease for six months or more is considered to be an owned auto.
 
The policy, under Symbol 8 says we cover:  “Only those "autos" you lease, hire, rent or borrow.”  The word “lease” isn’t defined so we’re left trying to figure out what the word means. I took a quick look at FC&S and IRMI and found no discussion. Webster’s on-line defines lease as:  “a contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent.” 
 
While I believe the intent of Symbol 8 is not to cover such situations, I can easily see the argument that coverage does apply. The policy, unlike the PAP, doesn’t stipulate the length of a lease. I can see a typical customer reading a policy and seeing reference to lease and thinking they are covered.