FL Adjuster Claim Professional Exam: Commercial Auto Policies

Garage Policy

The garage policy is a commercial policy for franchised and nonfranchised auto and trailer dealers, covering:

Garage Liability: General liability and auto-related liability exposures.
Garagekeepers: Bailee liability for customers’ vehicles in care for service, repair, or storage.
Physical Damage: Covers owned, hired, or consigned vehicles for sale.

Key Fact: Combines general liability and auto liability in one form, with optional endorsements for additional coverages.

Declarations and Symbols

The garage policy uses numerical symbols (21–31) to identify covered autos and coverage types:

21: Any auto
22: Owned autos only
23: Owned private passenger autos only
24: Owned autos other than private passenger autos
25: Owned autos subject to no-fault
26: Owned autos subject to compulsory uninsured motorists law
27: Specifically described autos
28: Hired autos only
29: Nonowned autos used in garage business (e.g., employee or customer test-driven vehicles)
30: Autos left for service, repair, storage, or safekeeping (used with garagekeepers coverage)
31: Dealers’ auto physical damage

Liability Coverage

The Auto Dealers Coverage Form (ADCF) includes two insuring agreements:

Other Than Covered Autos: Covers bodily injury or property damage from garage operations (e.g., premises operations, products-completed operations).
Covered Autos: Covers liability from ownership, maintenance, or use of covered autos.

Key Point: The ADCF (introduced 2013) replaced the Garage Liability form, adding optional “Acts, Errors or Omissions” coverage for consumer protection law violations.

Who Is Insured:

Other Than Covered Autos: Named insured, partners, employees, directors, or shareholders acting within their duties.
Covered Autos: Named insured, permissive users, employees using nonowned autos in business, and those liable for the insured’s conduct.

Example: A customer slips on a wet floor (premises liability) or brake failure after repair causes a crash (products-completed operations).

Exclusions: Expected/intended injury, contractual liability, workers’ compensation, property in insured’s care, pollution, racing, war, and more.

Garagekeepers Coverage

Covers damage to customers’ autos in the insured’s care for service, repair, or storage.

Primary Direct: Pays for covered perils up to the limit, less deductible.
Excess Direct: Pays after other collectible insurance, even if the insured isn’t liable (goodwill basis).

Exclusions: Contractual liability, theft by insured/employees, defective parts, faulty work, electronic equipment.

Key Fact: The garage owner is the insured, not the customer. Coverage applies only when the garage is legally liable, unless excess direct is selected.

Example: Hail damages a customer’s car at a garage. Excess direct coverage pays after other insurance, even if the garage isn’t liable.

Physical Damage Coverage

Covers owned, hired, or consigned vehicles for sale under comprehensive, collision, or specified causes of loss.

Limit: Lesser of actual cash value or repair/replacement cost.
Deductible: Per auto, with a maximum per event (e.g., $2,500 max for theft/vandalism).

Exclusions: Wear and tear, tire damage, nuclear hazards, racing, false pretenses, diminution in value.

False Pretense Coverage (CA 25 03): Protects against fraudulent acts (e.g., theft during a test drive or bad check purchases).

Broad Form Products Coverage (CA 25 01): Covers defective products liability, subject to a $250 deductible.

Test Your Knowledge

Question: A customer test-driving a car at a dealership relies on their personal auto policy for liability coverage.

Answer: True

Explanation: Customers are not insured under the garage policy. Their personal auto policy applies, but the dealer’s policy covers up to the state’s compulsory limit if no other insurance exists.

Question: The Auto Dealers Coverage Form (ADCF) replaced the entire Garage Policy in 2013.

Answer: False

Explanation: The ADCF replaced the Garage Liability form, not the entire Garage Policy, and clarifies coverage provisions.

Truckers and Motor Carrier Policies

Provide commercial auto insurance for transporting goods:

Truckers Policy: For-hire truckers only.
Motor Carrier Policy: Private and for-hire truckers.

Coverages: Liability, physical damage, and trailer interchange (for trailers under written agreements).

Key Fact: ISO discontinued the truckers form in 2010, but some insurers still use it. Motor carrier policy covers both private and for-hire carriers.

Additional Symbols:

Nonowned trailers under interchange agreements.
Owned trailers in another’s possession under interchange agreements.

Trailer Interchange Coverage: Liability for damage to trailers in the insured’s possession under a written agreement.

Exclusions: Nuclear hazards, war, wear and tear, loss of use.

Motor Carrier Act of 1980

Requires motor carriers to carry minimum insurance for public liability and environmental restoration ($750,000–$5M, depending on cargo).

MCS-90 Endorsement: Ensures compliance with the Act, covering bodily injury, property damage, and environmental restoration.

Key Fact: Applies to hazardous and nonhazardous cargo carriers, with limits varying by cargo type.