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Proper Use of Covered Auto Symbols for Commercial Auto
Coverage for commercial automobiles can range from very narrow and specific to very broad. The scope of coverage can vary in this range by use of what is known as covered auto symbols. These symbols are actually numbers and can range from broadest Symbol 1 (any auto) to Symbols 8 and 9 (Hired and Non-Owned only) which are the narrowest coverage. Some insurers even use special symbols such as Symbol 10 or 11 for even more specifically defined coverage grants. Covered auto symbols drive the rest of the coverage in the Commercial Auto Policy Coverage form. Therefore, it is extremely important that you structure Covered Auto Symbols to trigger the right coverage structure and avoid a not-covered claim.
A listing of most of the major covered auto symbols used on commercial policies is as follows:
- Symbol 1 – Any Auto
- Symbols 2, 3 and 4 – Owned Autos, Owned Private Passenger Autos and Owned Auto other than Private Passenger
- Symbol 5 – Owned Autos Subject to No-Fault
- Symbol 6 – Owned Autos Subject to Compulsory UM Law
- Symbol 7 – Specifically Described Autos
- Symbol 8 – Hired Autos
- Symbol 9 – Non-owned Autos
- Symbol 19 – Mobile Equipment Subject to a Motor Vehicle Insurance Law
Each covered auto symbol is listed in the Commercial Auto Declarations page next to the coverage. For example, if you list Symbol 1 next to Auto Liability coverage, you will have coverage for ANY Auto that you own, hire, borrow or rent for liability coverage. If you list Symbol 2 in the Auto Liability declarations page for coverage instead of Symbol 1, Symbol 2 gives you liability coverage for Owned Autos only. Therefore, use of Symbol 2 would exclude liability coverage out of the auto form for Hired, Non-Owned and Borrowed Vehicles. Symbol 2 narrows liability coverage versus Symbol 1. Further, if you use Symbol 7 (Specifically Described Autos) as your liability covered auto symbol, liability coverage would only apply to the specifically listed autos on the policy. This would further narrow coverage.
Why then, would a client use a covered auto symbol like Symbol 7 versus a much broader covered auto symbol like Symbol 1 for liability? You want the broadest coverage all the time, correct? You can use narrower covered auto symbols when carriers may not want to write certain auto liability exposures that your client has under one policy. You can purchase coverage for that exposure by buying a separate policy for the same named insured listing that covered auto symbol excluded by the writer of the Symbol 7 coverage. For example, many insurers do not like to write pizza delivery operations because they would pick up the exposure of the autos owned individually by pizza drivers. Since primary insurance coverage follows the ownership of the car (unless endorsed otherwise), the pizza delivery driver owned vehicle’s liability insurance responds first in an at-fault auto accident, and non-owned auto coverage (Symbol 9) responds excess over the primary owned auto to protect the owner of the pizza business for a claim in excess of the primary auto owner’s insurance. If the pizza shop owned a few vans used in delivery, the insurance carrier may want to write the owned vans but not the individual pizza delivery driver’s liability on an excess basis. If the carrier wanted to use Symbol 1, which includes non-owned liability as listed in the paragraph above, they would be picking up the exposure of the autos owned by the individual pizza drivers. The carrier could use Symbol 2 (Owned Autos only) or Symbol 7 (Specifically Described Autos) and have the pizza owner buy a separate Symbol 9 (Non-Owned Autos) insurance policy to cover the exposure of the individual pizza drivers using their individually owned autos. The various covered auto symbols allows a carrier to write the vehicles owned by the pizza shop but not the non-owned vehicles. Covered auto symbols allow for flexibility and tailoring of coverage specific to the client’s needs and the carrier’s appetite for exposure.
In another example, covered auto symbols provide flexibility and competitiveness in rating. Let’s say your client is a ready-mix concrete operation with horrible loss experience from the use of the mixed-in-transit trucks. They also have a sizeable fleet of pickup trucks and private passenger type vehicles that have enjoyed a loss-free experience. Placing coverage for the pickups and private passenger type (PPTs) units on the same policy as the mixed-in-transit units will result in the insured paying a high price for the pickups and PPTs because of experience rating rules where the past experience is placed in a rating formula that results in a debit rating situation of the entire fleet. One way to mitigate this is to place a separate policy for pickups and PPTs using Symbol 7 and a separate policy for the mixed-in-transit units using Symbol 7 on that separate policy. Using covered auto symbols in this manner will result in a credit modification to the pickups and PPTs on a separate policy and likely will save the client money overall. You have the same first named insureds for both policies but you will not run into conflicts of coverage under the two or more policies provision for the same named insured because the covered auto Symbol 7 (Specifically Described Autos only) drives the coverage.
Covered auto symbols also drive other coverages in the policy form such as coverage for Newly Acquired Autos. If Symbols 1, 2, 3, 4, 5, 6 or 19 are entered next to a coverage in Item Two of the Declarations, then you have coverage for autos that you acquire of the type described for the remainder of the policy period. But, if Symbol 7 is entered next to a coverage in Item Two of the Declarations, an auto you acquire will be a covered auto for that coverage only if:
a. We already cover all autos that you own for that coverage or it replaces an auto you previously owned that had that coverage; and
b. You tell us within 30 days after you acquire it that you want us to cover it for that coverage.
Section I of the business auto coverage form sets out the symbols that may be used in the declarations to indicate autos that are covered autos for purposes of the policy s various coverages. Considering the significance of these symbols in determining how the policy applies, it is extremely important that both the insured and insurer understand them.
Covered auto symbol structure can help you tailor an insurance policy to a client’s specific need. It can also help you place coverage with carriers that want one exposure but not another on an auto schedule. However, take care to read the definition of each covered auto symbol because it can trigger automatic coverage or can be quite restrictive in coverage depending on the symbol you select. To learn more about protecting your business with a commercial automobile policy, visit: AssuredPartners NL Property Casualty.