Property & Casualty Insurance/Garage Ops - Accident while Test Driving
Dear Jay: We are finally converting our non-dealers garage business from ISO's CA0005 to a combo of CG0001 and CA0001. We would like to ask your opinion of the following scenario. The insured is an auto repair shop and one of the employees is test driving a customer's auto. With permission he takes the vehicle off premises and onto the Interstate where he has an accident resulting in bodily injury and property damage to a third party. Will the BAP's non-owned liability provide coverage (subject to other policy provisions of course)? If so, are we correct that the coverage is secondary to the customer's auto policy? We have had no luck finding information on this type of scenario in IRMI, FC&S etc. Most non-owned coverage discussions address employee owned vehicles. One of our underwriters is certain that the BAP's non-owned liability has always provided coverage for test driving customer autos while another believes that we need to endorse the CGL to provide this coverage. We want to make sure that we are providing our insureds with this coverage but on the correct coverage form. Your opinion will be appreciated. Thank you.
Have I ever told you how much I love Garage questions? LOL Actually, it's one of my favorite subjects. I wrote and taught a seven hour class on it one time. That was right about the time that ISO had changed the rules and made service and repair risks no longer eligible!
Anyway...here's the "real story." The coverage scenario is no different now than it was before...you just have multiple policy forms rather than one. Remember, the old CA0005 was just a combination of a CA0001 and a CG0001 (1978 edition). In reality, the customer has better coverage now through having two policies instead of one.
First...the CA0001 using Symbol 9 is the appropriate way to handle the auto-related coverage. The insured is using a non-owned vehicle when he test drives the customer's car. When it comes to non-owned vehicles, the only thing you have to worry about is having the proper endorsement in place if the non-owned vehicle belongs to the employee. That's where the restrictions come in. On the other hand, the CG0001 excludes all auto-related losses, so it would NEVER provide coverage.
So...if the employee is test driving a customer's vehicle and is involved in an incident, the CA0001 would respond to cover the insured and his employee for any third-party BI or PD caused. HOWEVER, the damage to the customer's car is NOT covered without endorsing Garagekeeper's Legal Liability on the CA0001.
You raised the point about the customer's PAP. Unfortunately, while the PAP grants coverage for permissive users, like most other auto policies, it has an exclusion for anyone in the auto service or repair business. Therefore, while the PAP would respond to cover the owner of the car, it would not respond to cover the auto repair shop.
By the way...here's what the CA0001 says about Symbol 9:
Non-owned Only those "autos" you do not own, lease, hire, rent or borrow that are used in "Autos" Only connection with your business. This includes "autos" owned by your "employees", partners (if you are a partnership), members (if you are a limited liability company) or members of their households but only while used in your business or your personal affairs.
Notice it says "...this INCLUDES..." In other words, those descriptions are included in the definition of non-owned, but they are not limited to them.
I hope that helps a little. Please let me know if you have more questions.