TECH TALK Is Being "Eligible" the ONLY Issue to Consider? BAP v. MAP and the Business Exposure By Irene Morrill, CPCU, CIC, ARM, CRM, CRIS, LIA, CPIW Vice President of Technical Affairs November 2011 So just what IS eligible for the MAP these days? Of course, there is the "MAIP" eligibility v. voluntary company eligibility and I can only address MAIP eligibility. First MAIP Eligibility RULE 27. PRIVATE PASSENGER DEFINITION A. A motor vehicle of the private passenger or station wagon type that is owned or leased under contract for a continuous period of at least twelve months by one or more individuals, excluding (1) partnerships, (2) corporations, (3) unincorporated business associations, and (4) other legal business entities with a federal employer identification number, and is not used as a public or livery conveyance nor rented to others. A vehicle which meets the conditions of Rule 31, regarding the transportation of fellow employees, students or others for consideration, is included in this definition, provided such vehicle is not registered for carrying passengers for hire. B. A motor vehicle that is a pick-up or van, that is owned or leased under contract for a continuous period of at least 12 months by one or more individuals, excluding (1) partnerships, (2) corporations, (3) unincorporated business associations, and (4) other legal business entities with a federal employer identification number, and 1. has a gross vehicle weight rating of less than 10,000 pounds or has a vehicle rating group assigned to it by the Automobile Insurers Bureau of MA (AIB), and 2. is not used for the delivery or transportation of goods or materials unless such use is incidental to the insured s business of installing, maintaining or repairing furnishings or equipment. C. Gross Vehicle Weight Rating means the value specified by the manufacturer as the loaded weight of a single vehicle. Individual Ownership Generally Required A "car-type" vehicle or pickup or van must be individually owned to receive a MAP unless it is a leased vehicle or a trust owned vehicle. If the vehicle is registered to the Federal EIN number instead of the individual's personal social security number then it is NOT eligible for the MAP. There are still many sole proprietors that register and insure their vehicles on an individual basis. Is the MAP the policy for them? Criteria for MAP Pickup and Van Eligibility-Weight In order for a pickup or van to be eligible it must either be LESS than 10,000 lbs. GVWR or it must have an AIB or ISO physical damage rating symbol. This rule allows a pickup or van 12,000-15,000 lbs. to qualify! When any van or pickup model STARTS under 10,000 lbs GVWR, then ALL of that model would receive a physical damage rating symbol. For those of us that have been around for awhile this was a HUGE change a few years ago. Some of us remember when a pickup or van used for business was ALWAYS put on a BAP regardless of weight. Somewhere in the 1990's a "light" pickup or van 10,000 lbs. or less (continued on page 2) Massachusetts Association of Insurance Agents 91 Cedar Street Milford, MA 01757 TECH HOTLINE 800-870-7091 800-972-9312 508-634-2900 508-634-2929 (Fax)
TECH TALK PAGE 2 November 2011 became eligible for the MAP. Both the national PAP and MAP wanted these individuals under the personal auto policy in order to get the premium for their driving experience. The intention was to get the "light" and "service" categories of the business auto clients. Under the BAP a pickup and van is classified based on GVWR, usage and radius of operations. The first weight category is 0-10,000 lbs GVWR. The service category is essentially trades people such as plumbers, electricians, landscapers, etc. I was surprised in 2006 when AIB changed the personal auto eligibility to include ANY pickup or van that had an ISO physical damage rating symbol (now AIB rating symbol). This allows some "medium" category vehicles. Medium weight category under the BAP is 10,001 to 20,000 GVWR. Criteria for MAP Pickup and Van Eligibility-Usage The pickup or van can be used for business as long as the business is NOT delivery or public or livery. "Incidental delivery" such as bringing the junk to the jobsite that one needs to work in their trade or business of repairing/installing/renovating customers' contents or buildings is ok. Interesting that AIB and ISO probably intended to allow the "service" usage category in business auto rating which is: Autos used for transporting the insured's personnel, tools, equipment and incidental supplies to or from a job location. This classification is confined to autos principally parked at job locations for the majority of the working day or used to transport supervisory personnel between job locations. However, it appears that we also have the "commercial" usage category in the MAP also which is: Autos used for transporting property other than those autos defined as service or retail. Retail would NOT be allowed: Autos used to pick up property from, or deliver property to individual households The commercial category could include snowplowing and everything that is NOT delivery! So a lot of commercial types of usage are allowed but do they BELONG under the MAP? Second - Potential Problems with the MAP for Business Rental Suppose your client is a carpenter and has a big job requiring a lot of materials and supplies. Hmmmm it would take multiple pickup truck runs to get the supplies to the jobsite. That is TIME and MONEY... what about the Home Depot truck rental Suppose on the way to the jobsite there is an accident where BI/PD to others is caused and also damage to the rented truck. Suppose the rental contract only provides minimum liability limits and makes the insured responsible for damage to the vehicle. Will the MAP respond? NO, NO, NO. (continued on page 3)
TECH TALK PAGE 3 November 2011 Granted, Part 4 Damage to Someone Else's Property and Part 5 Optional Bodily Injury follows you and household members... We will pay only if you or a household member is legally responsible for the accident But... both these coverages exclude: While anyone is using a vehicle in the course of any business other than the business of selling, servicing, repairing or parking autos. This exclusion does not apply to private passenger autos, or to pick-up trucks, vans, or similar vehicles not used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment. Oops... the insured rented a DUMP TRUCK for a BUSINESS activity... A dump truck is NOT a pickup or van so there is NO coverage for this business usage. And Parts 7 Collision, 8 Limited Collision and 9 Comprehensive ONLY apply to private passenger autos. We will also pay for collision damage to other private passenger autos while being used by you or a household member with the consent of the owner. What about the BAP...would THAT have responded? Certainly for liability if the proper symbol activated bodily injury and property damage. If symbol 1 activates liability coverage then the rental of the dump truck would be covered. 1 Any "Auto" If the insured doesn't have symbol 1 then as long as symbol 8 was shown on the declaration page activating liability coverage, the BI and PD arising out of the dump truck rental would be covered. 8 Hired "Autos" Only 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. What about the damage TO the dump truck. Well that requires the proper symbol activating coverage also. Again, physical damage coverages would have to be activated by symbol 8. If not then there is no coverage. Buying collision and comprehensive is NOT sufficient. The proper "symbol" must activate coverage. Few carriers provide symbol 8 for physical damage coverages but some provide a Hired Auto Physical Damage Coverage Endorsement. However, this endorsement generally only applies to the rental of private passenger autos. One would have to read it to see what is covered as it is NOT an AIB or ISO endorsement. Another potential problem with the MAP used for business is the need to provide certificates of insurance Can a certificate of insurance be issued on a MAP? Why not! The new certificates are even safer and less likely to create a problem. The certificate holder does NOT get a copy of the cancellation notice whether issued for the BAP or the MAP. A cancellation notice is only sent to the named insured of the MAP and a bank or leasing company if listed. The same is true for the BAP. The current edition of the certificate states: SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. (continued on page 4)
TECH TALK PAGE 4 November 2011 Notice will be delivered in accordance with the policy provisions...which means...certificate holder - you ain't gettin' one! Certificates become a problem when we type "dumb stuff" on them. However, in personal lines sometimes an agent feels compelled to ASK the personal lines underwriter IF he can issue a certificate. I don't know WHY he felt such a need...especially when asking a question one might receive an answer one didn't want! There is no good reason why you CAN'T issue a certificate, but if you have been told "no"...then that is your answer. That will teach you... Potential problem with MAP v. BAP and the need for an additional insured endorsement! There is no additional insured endorsement for the MAP other than for a leasing company or a trust-owned vehicle. If the insured cannot get the job without proof of additional insured status for the prospective employer then too bad. Under the MAP insured status is only provided for You and Household Member and someone "using" your auto. We will pay only if you or a household member is legally responsible for the accident. We will also pay if someone else using your auto with your consent is legally responsible for the accident. The BAP automatically INCLUDES additional insured status in certain situations and there also is a specific endorsement that can be added naming a particular employer. 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:... c. Anyone liable for the conduct of an "insured" described above but only to the extent of that liability. If the prospective employer demands that they be specifically named that can be arranged with the MM 99 50: ADDITIONAL INSURED - MASSACHUSETTS MM 99 50 This endorsement modifies insurance provided under the following: BUSINESS AUTO COVERAGE FORM GARAGE COVERAGE FORM TRUCKERS COVERAGE FORM With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement. Changes in Liability Coverage: Who Is An Insured is changed to include the person or organization named in this endorsement, but only for bodily injury or property damage resulting from the acts or omissions of: 1. You, while using a covered auto. 2. Any other person, while using a covered auto with your permission. Additional insured: (continued on page 5)
TECH TALK PAGE 5 November 2011 Of course, this endorsement is OPTIONAL and the company doesn't HAVE to offer it. However, if the underwriter balks at offering this vital endorsement, I would remind the underwriter that per item "c" of the insured definition they are providing insured status for the employer for FREE. Why not get a premium for doing what the client wants and NEEDS done! The endorsement lists a specific entity but they are ONLY an insured for BI/PD arising out of YOU while using a covered auto or someone else using a covered auto with your permission. This is essentially the same insured status as granted for free under the BAP liability definition of insured. There still is NO requirement to issue a cancellation notice to this additional insured so a premium is generated for little to no effort or responsibility. What about employees and driving? If the insured has employees and these employees drive the vehicle they MUST be listed whether a BAP or a MAP insures the vehicle. The MAP original application, renewal questionnaire and yearly coverage selections page requires us to list ALL "customary" operators. Could this affect the MAP policy premium? Sure can, especially in managed competition - whether deferred or not. Will listing operators affect the BAP premium? Certainly could be the difference between voluntary and ceded premium! What about the pollution exposure? What if there is an accident and the pickup or van flips over and barrels of paint or oil or chemicals fly out and disperse into the ground or even a body of water. Will the MAP respond? Yes as there is NO pollution exclusion so the entire limit can be utilized for damage to as well as clean up of the land or water. What about the BAP? Forget it! The BAP excludes pollutants you are transporting but the MM 99 11 amendatory endorsement gives back a smidge of coverage. The endorsement provides $5,000 PD and $35/80 BI. Don't spend it all in one place! What about equipment such as snowplows, sanders, tool boxes attached, signage? The MAP provides collision and comprehensive for "your auto". We do NOT mention equipment. One would need the custom equipment endorsement MPY- 0037-s but this only provides coverage when the equipment is installed/attached. When the equipment is taken out or off there is no coverage. The BAP just plain covers the stuff! SECTION III PHYSICAL DAMAGE COVERAGE A. Coverage 1. We will pay for "loss" to a covered "auto" or its equipment under: There is NO requirement for the equipment to be attached. Which is a better policy? I think that EVERY household should have a personal auto policy so that there will be coverage that "follows" you and household members. If there is one in the household already, then perhaps the sole proprietor should have a BAP that will "do" what needs to be done more effectively. If there is NOT a MAP in the household, then perhaps the BAP could still be issued with the DOC attached. The DOC or Drive Other Car endorsement MM 99 22 could allow the named insured and a spouse to rent or borrow vehicles and have a policy and multiple coverages that will respond! (continued on page 6)
TECH TALK PAGE 6 November 2011 This endorsement changes only those coverages listed below for which a charge is shown below. Each of those coverages is changed as follows: Premium Name of Individual BI PD MED UM UIM COMP $ Ded. COLL $ Ded. If the BAP to which this endorsement is attached has BI/PD/MP/Coll/Comp then those coverages CAN be activated on this endorsement. Certainly this endorsement provides you and resident spouse with liability coverage and physical damage coverage when borrowing or renting vehicles: A. Changes In Liability Coverage 1. Any auto you hire, borrow or don t own is a covered auto for Liability Coverage while being used by any individual named in this endorsement or by his or her spouse while a resident of the same household except: Liability coverage can apply to any type of auto used for business or pleasure as long as it is NOT owned by you or a household member. C. Changes In Physical Damage Insurance Any private passenger-type auto you hire, borrow or don t own is a covered auto while in the care, custody or control of any individual named in this endorsement or his or her spouse while a resident of the same household except: 1. Any auto owned by that individual or by any family member. 2. Any auto used by that individual or his or her spouse while working in a business of selling, servicing, repairing or parking autos. Physical damage coverage ONLY follows for private passenger autos... still no DUMP TRUCK!!! Medical payments can follow named individual and ALL family members: B. Changes In Auto Medical Payments The following is added to Who Is An Insured: Any individual named in this endorsement and his or her family members are insureds while occupying or while a pedestrian when being struck by any auto you hire, borrow or don t own except: These are some of the major differences - but not ALL... (disclaimer!) Who knows WHICH policy is best...after the loss I can tell you WHICH policy would have been better... but the BAP is designed for business and the MAP...really is not. * * * * Good luck. If I can be of service to you, please call me, Irene Morrill, Vice President of Technical Affairs at 800.870.7091 or email me at imorrill@massagent.com. This article has been developed expressly for the members of MAIA. Reprint by other than members without the express permission of the author is not permitted.