Section V - Definitions Note that Section I contains all the auto-related coverages; Section II is dedicated to general liability coverage; and Section III presents a new coverage - Acts, Errors or Omissions Liability Coverage. This updated policy layout creates an easier-to-read policy form. Each coverage along with its relevant insuring agreement, exclusions, who qualifies as an insured, payment and limit information is packaged together. There is no longer a need to flip between sections to interpret coverage.
Part II - Key Differences between the Auto Dealers Coverage Form and the Garage Coverage Form Part one introduced the first key difference between these forms - layout and presentation. The following key differences relate to the coverages, conditions, exclusions, and definitions.
Coverage Symbols. Both the ADCF and the GCF use symbols 21 - 31. Further, the same coverages are extended from each symbol. However, one minor difference and one key difference are found in the coverage symbols. Within Symbol 29 the phrase "...used in your garage business" is replaced in the ADCF with the phrase, "...used in your 'auto' dealership." Obviously, this is minor and arises from the change in form name.
The key difference within the symbols is found in Symbol 30 - Autos Left With You for Service, Repair, Storage or Safekeeping (garagekeepers coverage). The new ADCF adds two phrases to the definition of this symbol that clarifies the apparent intent:
- "...lawfully within your possession...," somewhat self-explanatory intimating that coverage is extended to autos only when the insured is in lawful possession of them; and
- "...with or without the vehicle owner's knowledge or consent." This allows coverage for autos that may have been towed to the insured's location. This is not in conflict with the "lawful" requirement if the towing was in compliance with or at the direction of the jurisdictional laws.
Coverage Sections. As was shown previously, the ADCF is divided into separate coverage sections. Section I contains all auto-related coverage information. Section II extends General Liability coverage. Section III extends Acts, Errors or Omissions Liability Coverage (a new coverage). The GCF combined auto and general liability coverage into one section (Section II), placed garagekeepers coverage in Section III, and extended physical damage coverage from Section IV. The new layout seems much easier to read and interpret; there is little need to flip between sections to interpret coverage.
Exclusions. The list of exclusions is largely the same in the ADCF as was found in the GCF with one minor difference - the placement of the exclusions. A separate list of exclusions applies to each coverage part of the newly filed Auto Dealers Coverage Form; but in the garage form the auto-related and general liability-related exclusions were grouped into one list while the garagekeeper's and physical damage exclusions were listed in separate sections.
Coverage provided by Section II - General Liability of the ADCF is broader than the general liability coverage provided by the GCF. Because of this, there are several additional exclusions in the new ADCF not present in the GCF (newly available coverages are detailed in the next part of this article). These include:
- Damage to impaired property or property not physically impaired;
- Aircraft, Auto or Watercraft (auto is not excluded in the general liability coverage of the GCF);
- Liquor liability; and
- Personal and Advertising Injury exclusions. Personal and advertising injury coverage was not provided by the unendorsed GCF so these 17 exclusions were not present in the form (but all 17 were in the endorsement that gave the coverage to the insured).
Because this is a coverage form designed specifically for auto dealers, the general liability exclusions do not mirror those found in the Commercial General Liability (CG 00 01) form. The ADCF and the CGL share many of the same exclusions, but there are differences allowing the ADCF to respond where the unendorsed CGL may have excluded protection.
Within the Covered Auto Liability Coverage section (known in the GCF as "Garage Operations - Covered Autos"), the ADCF adds four exclusions not present in the soon-to-be withdrawn garage form. The first two are:
- D.4.j. Handling of Property. This exclusion mirrors an exclusion found in the Business Auto Policy, excluding coverage for damage to property before the insured accepts the property for movement and after it has been moved.
- D.4.k. Movement of Property by Mechanical Device. Like the exclusion above, this new exclusion mirrors the exclusionary wording found in the auto form, excluding BI or PD resulting from the movement of property by a mechanical devise not attached to a covered "auto."
These two exclusions exist to allow the auto liability coverage and the general liability coverage provided by and within the Auto Dealers Coverage Form to dovetail regarding the handling and movement of property. Damage caused by property being moved is covered under the general liability section of the form when these two exclusions apply (just like when a separate CGL and BAP are in place).
The remaining two new exclusions found in the Covered Auto Liability section of the ADCF are:
- D.4.n. Damage to Impaired Property or Property not Physically Damaged. Used to exclude coverage for "property damage" to tangible property that cannot be used, is useless or is less useful because it incorporates the insured's product or work or the insured has failed to or been delayed in fulfilling a contract or agreement.
- D.4.q. Acts, Errors or Omissions. Added to reinforce that damages arising out of the defined term ("Acts, Errors or Omissions" as presented later in this article) are not covered under this section of the policy.
Who is an Insured. Within each coverage section of the Auto Dealers Coverage Form (except Physical Damage Coverage) there is a list of who qualifies as an insured for that specific coverage part. The granting of insured status with the ADCF largely matches the list found in the old garage form with one major exception: the new ADCF automatically includes the spouse of an individual named insured. Under the current garage program, the policy must be endorsed to extend protection to a spouse. This is a broadening of protection.
Several changes apply to the "Who Is An Insured" provisions within Section II - General Liability. These relate to extending insured status, limiting insured status for employee actions and excluding certain legal entities from the definition of an insured. An explanation of each of these changes follows.
The general liability section of the ADCF extends insured status to: 1) executive officers of corporations; 2) managers of limited liability companies (LLC); and 2) newly acquired auto dealerships (under specific conditions).
Another change in the general liability section's definition of who qualifies as an insured revolves around employees. With the form's change to more of a bundling of common coverages, ISO can now specifically address the employee exposure as it relates to the general liability coverage extended from the ADCF. The conditions placed on extending insured status to an employee in the general liability section of the ADCF essentially mirror those found in the CGL form. Employees are
not extended insured status in the ADCF for:
- BI or Personal and Advertising Injury to the "you," partners, members, fellow employees (or any spouse, child, parent or sibling of that fellow employee);
- BI or Personal and Advertising Injury arising out of the employee's providing or failing to provide professional healthcare services; or
- PD to any property owned, occupied by, used by, rented to, or in the named insured's care, custody or control for any purpose.
(See the coverage form for complete wording.)
Lastly, a new exclusionary paragraph is added to the Who is an Insured in Section II stating that insured status does not extend to cover any current or past partnership or LLCs not specifically listed on the Declarations. This mirrors provisions found in the CGL.
Other Insurance Conditions. Additional "Other Insurance" conditions are found in the ADCF that are not present in the garage program.
- General Liability (Section II): coverage provided by the ADCF is primary. If there is other insurance is also written on a primary basis, the ADCF policy states that it will share limits with the other policy on a pro rata basis.
- Acts, Errors or Omissions (Section III): protection is provided on a primary basis unless there is another policy written specifically to cover this exposure on a primary basis. If another primary policy exists, the ADCF is excess.
- Damage to Premises Rented to You (previously known as "Fire Legal Liability") is a new coverage now automatically given in the ADCF. The addition of this protection required a change to the other insurance condition. The condition states that the ADCF's general liability coverage is excess over any other policy: 1) that is fire insurance for the premises rented to or temporarily occupied by the insured (with the owner's permission); and 2) insurance purchased by the insured as a tenant to cover "property damage" to the premises rented to or temporarily occupied by the insured with the permission of the owner.
- The last new other insurance condition relates to losses resulting from the maintenance or use of watercraft or aircraft. If the loss is not otherwise excluded by the policy, the ADCF is excess over any other insurance applicable to the loss.
Definitions. One definition is missing from the ADCF that was in the GCF and seven are added that were not part of the old garage form. Not surprisingly, the deleted definition is "garage operations." Since the form now references "Auto Dealer Operations," there is no need for the continued use or defining of "garage operations." The seven newly defined terms are (partial definitions are provided; the form must be reviewed for the full definition):
- Act, Error or Omission: This is new coverage is found in Section III. The definition relates to the insureds failure to comply with truth in lending requires, accurate reporting of mileage (odometer) laws, insurance agents and brokers requirements, and failure to effect a clean title.
- Advertisement: Because "personal and advertising injury" is now part of the basic coverage provided by the ADCF, "advertisement," as used within the coverage, is now defined. In part, an advertisement is a notice broadcast or published to the general public about the insured (includes use of the Internet). Other provisions apply.
- Auto Dealer Operation: The crux of the whole form. An auto dealer operation is the ownership, maintenance or use of location(s) for an auto dealership to include "that portion" of the roads or other accesses that adjoin these locations. This can also include all operations necessary or incidental to an auto dealership.
- Executive Officer: A person holding any officer position created by the insured's charter, constitution, by-laws or other such document.
- Impaired Property: Tangible property that cannot be used, is useless or is less useful because it incorporates the insured's product or work, or the insured has failed to or been delayed in fulfilling a contract or agreement.
- Loading or Unloading: This is the handling of property after it is accepted and moved onto an aircraft, watercraft or auto; while it is in and being moved by these modes of transportation; and while it is being removed from these modes of transportation until they reach their final delivery place. But this term does not include use of a mechanical device attached to the auto, watercraft or aircraft.
- Personal and Advertising Injury: False arrest, detention or imprisonment; malicious prosecution; wrongful eviction from, entry into, or invasion of the right of private occupancy; libel or slander; violation of the right of privacy; the use of another's advertising ideas; and infringing upon some intellectual property rights.
As stated, these are not the full or exact definitions of these terms, only example language. The policy form must be review for the full meaning of each term.
Part III - New Coverages in the Auto Dealers Coverage Form Several "new" coverages found automatically in the ADCF were available to policies written on the GCF, but an endorsement was required. There is one new coverage in the ADCF that was not previously available - Acts, Errors or Omissions coverage.
"New" Coverages - Endorsement No Longer Required Three coverages are now automatically included in the ADCF that required an endorsement under the garage program:
- Personal and Advertising Injury;
- Medical payments; and
- Legal liability coverage.
To garner these coverages under the GCF, a minimum of two endorsements were required. Personal and Advertising Injury protection could be added by attachment of the CA 25 14 - Broadened Coverage - Garages. And if the insured wanted just personal injury coverage, the CA 25 08 (Personal Injury Liability Coverage - Garage) was attached (although there is very little reason to add just personal injury other than as an underwriting tool).
Medical payments coverage was not included in the GCF but is automatic in the ADCF. Previously the Garage Locations and Operations Medical Payments Coverage (CA 25 05) endorsement was required when medical payments coverage was desired.
The last "new" coverage automatically included in the ADCF is legal liability coverage (historically known as fire legal liability). Like the personal and advertising injury coverage, this protection was available by attachment of the CA 25 14 (Broadened Coverage - Garages) endorsement.
New "New" Coverage - Not Previously Available Acts, errors or omissions is a new coverage included within the Auto Dealers Coverage Form. This coverage is designed to pay all sums the named insured becomes legally obligated to pay due to:
- An insured's failure to comply with any local, state or federal law or regulation regarding the disclosure of credit or lease terms (such as those found in the Truth in Lending Act and the Consumer Leasing Act).
- An insured's failure to disclose the accurate odometer mileage when selling or leasing an auto.
- An insured's failure when acting in the capacity of an insurance agent or broker if and when a valid insurance agent or broker license is held. This involves the placement of physical damage coverage, auto lease/loan gap protection, credit life, or credit disability coverage sold.
- A defective title.
As was mentioned previously, this is a self-contained coverage found within the ADCF. It contains its own insuring agreement, conditions, exclusions, definitions and listing of who qualifies as an insured.
Parts of
or the entire coverage section can be excluded by endorsement. These endorsements were listed in the previous BAP article:
- Changes to the Bankruptcy or Insolvency Exclusion for Acts, Errors or Omissions Liability Coverages (CA 25 62). The Auto Dealers Coverage Form contains a bankruptcy or insolvency of the insurance carrier exclusion within the Acts, Errors or Omissions Coverage related to the insured's placement of insurance on the insured's vehicle. This exclusion is excepted (not applicable) if the insurer used by the named insured is rated B+ or better. Attachment of this endorsement amends this exception by replacing it with the credit rating specified in the endorsement or by changing the rating agency to other then AM Best.
- Exclusion - Acts, Errors or Omissions Liability Coverages (CA 25 63). Section III of the Auto Dealers Coverage Form extends coverage to apply to Acts, Errors or Omissions Liability relating to truth in lending, odometer, insurance agents and brokers and title coverages. Attachment of this endorsement removes this protection.
- Exclusion of Specified Acts, Errors or Omissions Liability Coverages (CA 25 64). One or more of the coverages relating to Section III (Acts, Errors or Omissions Liability) can be deleted by attachment of this endorsement.
- Total Bankruptcy or Insolvency Exclusion For Acts, Errors Or Omissions Liability Coverages (CA 25 65). When this endorsement is attached, the AM Best B+ rating exception related to insurance placed by the named insured is completely removed. Removal of this exception makes the named insured liable for any insurer bankruptcy or insolvency regardless of the insurance carrier's rating. This appears to be an underwriting tool available to the underwriter.
Part IV - Eligible Classes ISO limits eligibility for the ADCF to:
- Franchised or non-franchised private passenger auto dealers;
- Franchised or non-franchised truck or truck-tractor dealers;
- Franchised or non-franchised motorcycle dealers (includes all two wheeled cycle vehicles);
- Franchised or non-franchised recreational vehicle dealers;
- Other franchised or non-franchised self-propelled land motor vehicle dealers;
- Franchised and non-franchised residence trailer dealers
- Franchised and non-franchised commercial trailer dealers; and
- Equipment and implement dealers.
Next week we introduce and discuss ISO's Businessowners' Policy (BOP) filing. I would love to hear your feedback, please send me an email
cboggs@ijacademy.com.
Until next time,
Christopher J. Boggs, CPCU, ARM, ALCM, LPCS, AAI, APA, CWCA, CRIS, AINS
Director of Education
Academy of Insurance
cboggs@ijacademy.com 
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