Commercial Vehicle

Program Overview

What Do We Write?

Farmers has elected to pursue three major groups of vehicles that may contain acceptable risks. They are:

– Vehicles used in the Select Industry Groups

– Vehicles Not in Select Industry Groups– Selected Motor Carriers For-Hire

What Do We Write?

• Vehicles in our Select Industry groups usually require the least amount of effort to solicit and qualify. They are insured under the Commercial Auto Coverage Part of the Commercial Package Policy.

Farmers Will Accept Business in Each of the Select Industry Groups

• Retail/Service

• Restaurants

• Commercial Real Estate

• Artisan Contractors

• Habitational

• Wholesale/Distribution

• Automotive Trades

Non-Select Industry Risks

• Businesses not included in one of the Select Industry groups may have vehicles eligible for our monoline commercial policy. If they have commercial vehicles and meet current underwriting rules, the vehicles may be eligible for a monoline Business Auto Policy. To be eligible, however, all eligible vehicles must be insured on the policy or within the Farmers Group.

Motor Carriers for Hire

• Operations consisting of fleets of 5 or more trucks or truck tractors with trailers that are engaged in hauling goods (including household goods), materials or commodities of others for-hire, as a common carrier or as a contract carrier , may be eligible on a monoline Commercial Auto Policy. These operations are limited to use within an air mile radius of 500 miles from the place of garaging.

Motor Carriers for Hire

• Operations consisting of fewer than 5 power units may be eligible if operating under a long term, exclusive lease to another motor carrier insured by the Farmers Insurance Group, or if operations are confined to delivery of goods or services from retail stores to customers within a 200 mile radius.

We Want More of These

• Panel Delivery

• Walk In

• Pickup Truck

• Van Type

• Flat Rack Truck

We Do Not Want These

• Farmers is not a market for :• Dump trucks• Flammable delivery trucks• Crane Services• Bus or Livery services

Submit for Approval Rules

• Risks which have had their insurance coverage canceled or non-renewed within the past three years. Submission must include information on the reasons for cancellation or non-renewal.

Submit for Approval Rules

• Risks with drivers that exceed the standards of the MVR evaluation program

• Sports Cars or High Performance Vehicles. A list of these vehicles is found in the Personal Lines Manual

Ineligible Equipment

• Wheeled or tracked equipment, whether used on or off road, such as:

• Cranes• Loaders• Equipment used for:

– road construction – geophysical exploration

Ineligible Equipment

• High capacity compressors• Generators• Pumps• Lighting equipment

Submit for Approval

• Trucks or vans hauling employees or workers as passengers unless operations are also covered by Workers’ Compensation Insurance.

Submit for Approval

• Trucks exceeding 45,000 lbs. GVW or Tractor - trailers exceeding 45,000 lbs. GCW regardless of radius of operation.

GVW- GCW Defined

• GVW denotes Gross Vehicle Weight which is the maximum loaded weight for which the vehicle is designed, as specified by the manufacturer. GCW denotes Gross Combination Weight which is the maximum loaded weight for the combination of a truck-tractor and trailer or semi trailer for which the truck tractor is designed, as specified by the manufacturer

Submit for Approval

• Trucks exceeding 10,000 lbs. GVW operating regularly or frequently in excess of 200 miles radius from the garaging address.

• Passenger cars, vans, or pickups with an actual cash value or purchase price exceeding $90,000.

• All Motor Carriers For-Hire

Mileage Radius Defined

• The Radius is measured on a straight line from the street address of a vehicle’s principal garaging to the farthest point of regular operations. Road mileage from point A to point B may be 223 miles, but the distance on a straight line (Radius) may only be 180 miles.

Acceptable Radius of Operations

• All must be used within an air mile radius of 500 miles from their place of garaging. (Radius Classes Local, Intermediate, and Extended Intermediate)

Special Classes of Vehicles

• Passenger cars, station wagons and vans may be placed on Commercial policies only when used in the business of the named insured, and rated as Commercial Auto “Private Passenger.”

• Pleasure use vehicles, including pickup trucks, not used in business, even if owned and registered to a corporate named insured, should be submitted to the appropriate Personal Lines Company.


• Motor Homes not leased or rented to others and used for business purposes may be written on Business Auto or Truckers Coverage Forms, subject to the passenger car, station wagon and van rule. Submit all others to Personal Lines.


• Farm Trucks hauling produce from field to warehouse or field to customer, if 10,000 lbs GVW and under, may be submitted to Personal Lines.


• Courtesy Vans are eligible only if:• Owned by a business insured by Farmers

in one of the Selected Industry Groups and used to transport the insured’s customers on a random basis. All other commercial vehicles owned by the insured must also be included on the policy.

• Extreme underwriting caution is exercised to ascertain that exposures are controlled.

Motor Vehicle Record (MVR) Program

• The following MVR Evaluation and MVR Point Program must be applied to any drivers of passenger cars or trucks written on a Business Auto Policy in the Selected Industry Groups. It is also used for motor carrier for-hire Truckers Coverage and monoline commercial vehicles on policies for eligible risks not included in the Selected Industry Groups. State or other local laws govern where applicable.

Acceptable Drivers

• All drivers who meet the standards of the MVR Point Program are acceptable provided they have the following qualifications:

• Minimum of 3 years experience operating the type of equipment insured.

• Must be 23 years of age or older if driving over-the-road equipment of 45,000 lbs. GCW or more, unless the youthful driver can demonstrate completion of a certified Truck Driving School and meet the 3 year experience qualification.

Acceptable Drivers (Continued)

Must be at least 21 years of age or older when driving equipment other than stated above.

• Commercial Drivers License (CDL), when required by law

Unacceptable Drivers- Named Driver Exclusion

• All risks with drivers who do not meet the qualifications or the MVR Point Program to be described in the following pages, are SFA. When requested in states where permitted, and at the underwriter’s discretion, the service center may prepare a Driver Exclusion Endorsement E1280A).

The MVR Point Program

• This program is established to determine acceptable vehicle risks. It is based on driver points assigned for negligent accidents and violations, including those incurred during personal use (in states where permitted).

The MVR Point Program - Major Violations

• Drivers charged with any of the following Major Violations within the last five years are unacceptable and cannot be bound:– Accident involving a fatality.– Driving with a suspended or revoked drivers

license.– Failure to stop or report an accident.– Driving under the influence of liquor or drugs.– Homicide or assault from operation of a vehicle.– Reckless driving, speed contest or eluding an

officer.

The MVR Point Program - Minor Violations

• A Minor Violation is any moving traffic violation other than a Major Violation listed above. Each driver is assigned one (1) point for each Minor Violation incurred during the past 3 years.

The MVR Point Program - Negligent Accidents

• Negligent Accidents are vehicle accidents in which the insured driver was at fault. All accidents are considered at fault, except those occurring under the following circumstances (at the Underwriter’s discretion, a copy of the police report may be requested):

The MVR Point Program - Negligent Accidents

• No point will be charged if-– Insured driver’s vehicle was struck while legally

parked.– Insured driver’s vehicle was struck by another

vehicle while legally stopped for traffic and the insured was not convicted of a moving traffic violation.

– The person responsible for the accident reimbursed the insured or the insured’s driver for the accident, or there is a judgment against the responsible person

– The other party received a citation and the insured driver did not.

– Collision with a bird or animal.

The MVR Point Program - Assigning Points

• Assign two (2) points for each negligent accident occurring during the past 3 years involving bodily injury

• Assign two (2) points for each negligent accident occurring during the past 3 years in which the combined property damage for all parties involved in the accident was more than $1,000, and no bodily injury was reported.

The MVR Point Program - Assigning Points

• Do not assign points for a negligent accident involving less than $1,000 of combined property damage when no bodily injury was reported. However, if the driver is cited for a Minor Violation in connection with such an accident, charge one (1) point for the violation.

The MVR Point Program - Equipment Citations

• Though not included in the point total, attention should be paid to the number and severity of equipment-related citations. Excessive citations are an indication of an inadequate fleet maintenance program. Of particular concern are safety-related equipment citations which may increase the likelihood of loss such as:

The MVR Point Program - Equipment Citations

– Worn or defective brakes– Worn or defective tires– Cracked rims or frames– Defective lights– Over-weight loads– Unsafe or unsecured loads

The MVR Point Program - Table

• The MVR Point Program Table found in the auto business guide must be used for all risks with 10 or more drivers including the named insured. The Program applies to all traffic violations and accidents including those incurred during personal use.

The MVR Point Program - Table

• For those risks with fewer than 10 drivers, use the MVR Point program Table as a guideline for eligibility, but the underwriter can apply discretionary underwriting judgement to determine acceptability if the risk is submitted with full information for approval (SFA).

Classification of Vehicles

• Commercial Vehicles are rated according to the classification assigned. Because the rate depends upon this classification, it is extremely important to understand the classification process.

Classification of Vehicles

• Primary Classification is Based on Four Features– Whether the vehicle(s) are part of a fleet– The GVW (Gross Vehicle Weight) or GCW

(Combined Vehicle Weight)– Nature of business use– Mileage radius

Primary Classification

• The Primary Classification is obtained from the Classification Codes and Rating Factors accessed through help screens in the CLS rating sequence.

Secondary Classification

• A Secondary classification is obtained in the same manner as the Primary classification and is based on degree of hazard.

Vehicle Size/ Weight

• Light Truck. A light truck has a GVW of 10,000 pounds or less. A ½-ton or ¾-ton pickup would be in this size class.

• Medium Truck. A medium truck has a GVW of 10,001 lbs. to 20,000 lbs. Crawler type (runs on treads instead of wheels) trucks are also in this class. A 1-ton or 1½-ton vehicle would be in this truck size class.


• Heavy Truck. A heavy truck has a GVW of 20,001 lbs. To 45,000 lbs. A 2-ton or 3-ton vehicle would be in the heavy truck size class.

• Extra-Heavy Truck. An extra-heavy truck has a GVW over 45,000 lbs. A 4 ton or larger vehicle would be in the extra-heavy size class


• Truck-tractors (Motorized vehicle without a body for carrying commodities or materials, equipped with a fifth wheel device for semi-trailers. Heavy truck-tractors have a GCW of 45,000 lbs or less; extra-heavy truck-tractors have a GCW over 45,000 lbs.


• Semi-trailer. Semi-trailers are equipped with a fifth wheel coupling device for use with a truck-tractor, with a load capacity over 2,000 lbs (includes converter gears commonly referred to as dollys or bogies, used to convert containers into semi-trailers).

Determination of the Primary Classification

• To determine the first three digits of the Classification Code you must consider the nature of the business use. Business use is broken down into three categories:– Service– Retail– Commercial

Determination of the Primary Classification

• These three categories apply to all vehicles except:– Extra heavy truck-tractors– Semi-trailers– Trailers– Service or utility trailers (0 - 2000 lbs load

capacity)

Service Use Defined

• Vehicles used to transport the insured’s personnel, tools, equipment and incidental supplies to and from job locations are classified as “Service” use. These vehicles are usually found at a job site the majority of the workday.

Service Use Defined

• Risks typical of this class are artisan contractors such as:– Carpenters– Electricians– Tile setters– Plumbers

Retail Use Defined

• Vehicles used to pick up property from or deliver property to individual households are classified as “Retail” use. Risks typical of this class are:– Dry Cleaners and Laundries– Store delivery trucks– Dairy home delivery

Commercial Use Defined

• Vehicles used to transport property other than those with the business use categories of Service or Retail are included in the “Commercial” Category. Examples would be:– Manufacturers– Bakery products distributors– Wholesale milk dealers

Multiple Use Vehicles

• There are many times when a vehicle can be placed under more than one classification.

• When a vehicle is involved in two or more of these classes, it becomes necessary to establish the amount of use the vehicle has in each activity to determine the proper class. The proper class is determined according to the percent of use in each category.


• The Secondary Classification is the final factor needed to determine the proper rate classification.

• The secondary Classification is based on the degree of hazard found in certain classifications. Of course, the premium charge for a more hazardous classification will be more than for a less hazardous classification.


• Use the Secondary Classification Code for the fourth and fifth digits of the Classification.

Business Auto Coverage Form CA0001

• For coverage to apply under the commercial auto coverage part, a vehicle symbol must be shown on the declarations page. These symbols are described in detail on the Business Auto coverage form.

Business Auto Coverage Form CA0001 - Symbols

• Symbol 1 covers any “auto” owned, rented, leased or otherwise in the possession of the insured.

• Symbol 2 covers Owned Private Passenger “Autos” only.

• Symbol 3 is seldom used. It limits coverage to all owned private passenger cars which are not normally insured on a commercial policy.

Business Auto Coverage Form CA0001 - Symbols

• Symbol 4 provides blanket coverage for Owned “Autos” other than Private Passenger “Autos” only. (Includes Liability Coverage for non-owned “trailers” while attached to owned power units.)

• Symbol 5 provides blanket No Fault benefits, and is used in states where such coverage is mandatory

Business Auto Coverage Form CA0001 - Symbols• Symbol 6 provides blanket Uninsured

Motorists Coverage, and is used in states where such coverage is mandatory with no right of rejection.

• Symbol 7 confines coverage to specifically described vehicles. As the majority of vehicle policies are written on a schedule basis, symbol 7 will appear on most of them. It can appear opposite any coverage shown on the Declarations. (Includes Liability Coverage for non-owned “trailers” while attached to owned power units).

Business Auto Coverage Form CA0001 - Symbols• Symbol 9 applies only to “autos” the

insured does not own, lease, hire, rent, or borrow that are used in connection with the insured’s business. (Includes “autos” leased, hired, rented or borrowed from employees, partners, members of the insured’s company, or members of their households, but only while used in the insured’s business or personal affairs.

Covered Autos

• If liability coverage is provided on the following types of vehicles, they are considered covered autos:– Trailers with a load capacity of less than 2000

pounds– Mobile equipment being carried or towed by

an insured vehicle.– Any non-owned vehicle used with the

permission of its owner as a temporary substitute for an owned covered vehicle that is out of service for repair, breakdown, servicing or loss or destruction.

Liability Coverages

• Like the personal auto policy, the liability section of the commercial auto policy covers:– Bodily Injury & Property Damage– Legal Defense Costs– All expenses incurred by Farmers in

investigating a claim– Up to $2,000 cost of bail bonds

Commercial Policy Exclusions

• Coverage does not apply to any of the following:– Expected or intended injury– Contractual Liability Workers’

Compensation– Employer’s Liability– Fellow Employee Claims


• Coverage does not apply to any of the following:– Damage to property in the care, custody

or control of the insured.– Damage to “handled property”.– Movement of Property by Mechanical

Device.– Operation of Mobile Equipment.– Products and completed operations.


• Coverage does not apply to any of the following:– Pollution– War– Racing

Uninsured Motorist

• Not mandatory in all states• Not needed if insured carries

Workers Compensation coverage and only transports employees of the business

• Waiver must be signed if coverage is rejected by insured.

Underinsured Motorist Coverage

• Pays all sums the insured is legally entitled to recover as compensatory damages from the owner or driver of an “underinsured motor vehicle”.

Personal Injury Protection

• Under PIP the insured recovers damages from auto accidents from their own insurance company rather than from the other party’s insurer.– This coverage is also known as “No Fault

Coverage”.

Auto Medical Payments Coverage

• Pays for reasonable expenses for necessary medical and funeral services to or for an insured who sustains bodily injury caused by an auto accident.

Optional Coverages

• Hired Auto Coverage– Provides liability coverage on autos that

are leased, hired, rented or borrowed.

Optional Coverages

• Non-Owned Auto – Provides liability coverage for vehicles

which the named insured does not own, hire, lease, rent or borrow that are used in connection with the business. This coverage is excess of any other insurance.

Optional Coverages

• Additional Insured- Lessor– Used to name the owner of a leased or

rented vehicle as an additional insured

Optional Coverages

• Drive Other Car Coverage– Used to afford liability, auto medical

payments, uninsured/underinsured motorist and physical damage coverages for specifically named individuals and their spouses while they are using a non-owned auto.

Optional Coverages

• Hired Autos Specified as Covered Autos– Provides primary coverage on vehicles

that the insured hires, borrows or leases for an extended period of time.

Optional Coverages

• Individual Named Insured – Provides coverage for the named

insured’s spouse and family members who are residents of the same household.

Physical Damage Coverage

• Comprehensive covers any cause of loss except collision of the auto with another object, or overturn of the auto.


• Specified Causes of Loss insures these perils:– Fire, lightning, explosion– Theft– Windstorm, hail or earthquake– Flood– Mischief or vandalism– Sinking, burning, collision or derailment of

a conveyance transporting the covered auto.


• Collision coverage pays for damage to an insured vehicle as a result of impact with another object or the overturning of the vehicle.

• Towing coverage is available for private passenger type vehicles only. It pays for towing and labor performed at the place of disablement.


• Temporary Transportation Expense– applies only to covered autos which have

either Comprehensive or Specified Causes of Loss Coverage. It pays up to $15 per day up to a maximum of $450 for temporary transportation expense incurred by the insured due to a total theft of the covered auto of the private passenger type. There is a 48 hour waiting period before this extension takes effect.

Mobile Equipment

• This endorsement is used to insure self propelled special equipment licensed for road use for Bodily Injury and Property Damage Liability (locomotion hazard), Medical Payments, UM/UIM, and/or physical damage insurance when it is intended to be insured as an “Auto.”

Rental Reimbursement Coverage

• Provides coverage for rental costs incurred for the rental of an auto to replace a damaged “covered auto.” The maximum that can be paid is the agreed upon daily limit shown on the endorsement.

Electronic Equipment

Coverage Endorsements• Citizens’ Band Radio Coverage

• Tapes, Records and Discs Coverage• Audio, Visual and Electronic Data and

Equipment Coverage– Farmers can add coverage for all these

types of equipment.

Policy Conditions

• The conditions section sets out the obligations of the insurance company and the policy holder.– It is especially important that the insured

be encouraged to become fully aware of his/her obligations concerning a loss or potential loss.

Appraisal• This condition stipulates that in the event

of a physical damage loss, an appraisal process will be followed. This process involves the selection of two competent appraisers- one by the insured and one by the company. In the event the appraisers cannot agree, they will select a competent and impartial umpire to make the final decision. This provision requires each party to :– pay its chosen appraiser; and– bear the other expenses of the appraiser and

umpire equally

Duties in Event of Accident, Claim, Suit or Loss

• See page 7 of CA 0001 for a complete listing

Legal Action Against Us

• Bringing legal action is generally prohibited unless all parties have fully complied with policy provisions. Furthermore, we must agree in writing that the insured is obligated to pay. Otherwise, the amount of the obligation must have been finally determined in a judgement. This means the suit may be brought against us only to recover an agreed settlement or final judgement.

Loss Payment- Physical Damage Coverages

• This condition gives the insurer the right to settle a physical damage loss in any way it chooses of the listed options which are:– Pay for, repair or replace damaged or stolen

property– Return stolen property at our expense and pay

for damage that results from the theft– Take all or part of the damaged or stolen

property at an agreed or appraised value

Transfer of Rights of Recovery Against Others

• This is a statement of the insurer’s subrogation rights. If an insured to or for whom the insurer makes payments under the policy has rights to recover damages from another, those rights are transferred to the insurer to the extent of payment. Furthermore, the insured must cooperate in the company’s effort to subrogate against guilty parties. Also the insured must not do anything after an accident or loss that would waive the company’s right to subrogation.

General Conditions

• Bankruptcy– This condition affirms our obligation

under the policy regardless of the insured’s financial condition. We must provide coverage in accordance with the terms of the policy despite the insured’s bankruptcy.

General Conditions

• Concealment, Misrepresentation or Fraud– Certain actions by the insured can void

coverage. The Concealment, Misrepresentation or Fraud provision can be the basis for denying a claim when there is evidence that: • Coverage was obtained fraudulently.• The insured intentionally concealed or

misrepresented material facts that would have caused the insurance company not to issue the policy.

• There is other fraud, such as that involved in making a claim under the policy.

Concealment

• Concealment by the insured is intentionally withholding facts that should have been provided to the insurance company.

• Misrepresentation by the insured is making an incorrect statement with the intention of deceiving the insurance company.– For concealment or misrepresentation to void a

policy, such concealment or misrepresentation must concern a material fact.

Material Fact

• A material fact is information which, had the insurance company known, would have caused the company to decline the risk, or include in the policy entirely different provisions than originally included. – For example: the company may have

declined to issue the policy or issued it with a lower limit of liability had the truth been known.

Fraud• Fraud is similar to misrepresentation

but involves a false statement intended to deceive and induce the insurance company to part with something of value or to surrender a legal right.

• An act of fraud involves four elements:– Someone deliberately lies.– The intent of the lie is for someone else to

rely on that lie.– The other person relies on that lie.– As a result of the lie, damages are or will be

suffered by the person relying on that lie.

Liberalization

• Business auto policies are always subject to this revision. This condition affords the insured additional coverage automatically if the business auto coverage form is revised to provide more coverage at no additional premium charge. This provision allows the insured to benefit from a more liberal policy provision automatically as soon as it becomes effective.

No Benefit to Bailee

• A bailee is a person that has temporary custody of property belonging to someone else. The policy prohibits a bailee from benefitting from the insured’s insurance coverage in the event of a loss to the property and allows the insurer to recover from the bailee for any paid loss under the coverage form for which the bailee is legally liable. Only the insured should benefit from the policy.

Other Insurance

• This condition deals with how coverage applies when more than one policy is in effect to cover the same loss. See policy form for details.

Premium Audit

• This condition discusses how final premiums will be calculated. The deposit premiums under the business auto coverage form are only an estimate, based on the estimated exposures. Farmers will compute the actual premium at the end of the policy period based on the actual exposures.

Policy Period, Covered Territory

• This condition determines when and where coverage will apply. The business auto coverage form covers accidents and losses occurring during the policy period within the coverage territory. The coverage territory is the United States, its territories and possessions, Puerto Rico, and Canada. Coverage also applies to a covered auto while being transported between any of these places.

Two or More Coverage Forms Issued By Us

• This condition limits recovery to no more than the actual amount of loss or damage. The purpose is to prevent an insured from recovering the amount of the loss from more than one source. This is commonly referred to as “Stacking Limits.” This condition does not apply to any coverage that was issued specifically to apply as excess insurance.

Commercial Vehicle

Documents

Transcript of Commercial Vehicle