Author: VU Faculty
One of the most debated commercial lines issues is whether or not a vehicle is an "auto" or "mobile equipment." When you carefully read the policy definitions, it's amazing how many vehicles fit the definition of "mobile equipment," even vehicles licensed and used on public highways. In fact, it's possible that a vehicle could be an "auto" under one set of circumstances and "mobile equipment" under another. In this article, we'll look at an example of this debate.
A business might have a CGL but not a BAP policy (fairly common), a BAP but not a CGL policy (less common), or they might have both policies with the same or different carriers. In such cases, it can be critical whether BI or PD is caused by an "auto" or "mobile equipment" (it can be important even if both policies are provided by the same carrier). When you carefully read the policy definitions, it's amazing how many vehicles fit the definition of "mobile equipment," even vehicles licensed and used on public highways. In fact, it's possible that a vehicle could be an "auto" under one set of circumstances and "mobile equipment" under another.
For example, here's an "Ask an Expert" question we recently received:
A local used car dealership is loaning motorhomes to various non-profit organizations to use as an office or changing room when the non-profits hold an event that needs an office or changing room. Let's call it AL's used cars.
AL (and this is true) requires the non-profit organization to furnish him a certificate of CGL liability coverage naming him as an additional insured for use of the motorhome as an office and/or changing room. It is OK with AL if the certificate states that coverage applies only while the motorhome is stationary. AL has furnished us with copies of certificates that others
have furnished to him that have done exactly that.
PROBLEM: CG0001 exclusion "g" excludes ownership maintenance, use or entrustment of any "auto." I don't think we, or anyone else can issue a certificate of liability insurance on a CGL policy naming AL as an additional insured for AL's motorhome that the non-profit is using.
The motorhome could possibly qualify as "mobile equipment" and would thus be covered by the CGL policy. The reason is that mobile equipment includes "vehicles...maintained primarily for purposes other than the transportation of persons or cargo." Some argue that vehicles such as mobile blood banks fit this, and they would likely argue that a motorhome fits this category too. While I think there may be some argument (however slight) for the mobile blood bank fitting this category, I would not feel comfortable saying a motorhome that's on loan to a non-profit fits. There are a lot more issues such as care, custody, and control but I'll not go there.
I agree it's a slippery argument to claim the motorhome as "mobile equipment'" even though I'd enjoy making it. So assuming it's an "auto," I think the CGL exclusion applies because of the wording "any insured." It seems to me the dealer, by virtue of requesting the certificate, is at least in his mind "loaning" the motorhome to the organization, not the volunteers. As a vehicle thus "loaned to any insured," the CGL will throw it out and the auto will pick it up.
This reminds me of the debate over whether or not a bloodmobile or a library bookmobile is an "auto" or "mobile equipment." Mobile equipment is defined to include: "Vehicles not described in a., b., c. or d. above maintained primarily for purposes other than the transportation of persons or cargo."
If the vehicles are "maintained primarily for purposes other than the transportation of person or cargo," (e.g., I encountered a similar situation involving using Winnebagos as mobile classrooms) could they be considered mobile equipment? As I understand it, they're basically mobile offices or changing rooms. This appears to be a CGL exposure.
For other examples of BAP vs. CGL controversies, check out these articles: