DECIPHER CGL CHANGES WITH CAUTION

Rough Notes, Nov 2004 by Malecki, Donald S

Depending on the facts of each case, it may turn out that there is another insurance problem or, in other words, duplication of coverage between the CGL and commercial auto policies. It is also possible where contractors' equipment written for physical damage coverage with a $5,000 deductible on an inland marine form could also be covered by the commercial auto policy's physical damage coverage for a lesser deductible amount. At best, it would appear that problems confront not only businesses, but also their insurers.

Additional factors to consider

Another endorsement that needs to be issued with the commercial auto policy is titled Mobile Equipment, CA 20 15 10 01. This is the document that shows the coverages, covered auto symbols, limits, and premiums applicable to mobile equipment to be covered by the commercial auto policy.

This endorsement will eventually be required to effect coverage under a commercial auto policy, since this endorsement states that it provides only those coverages where a premium is shown in the Schedule, and the coverages apply only to the vehicles shown as covered autos.

The endorsement, however, may not be necessary, at least for the first year, where, in the above example, the commercial auto policy is amended by Endorsement CA OO 51 to recognize certain mobile equipment as autos, and with the symbols designated reflecting automatic coverage for liability, physical damage and mandatory uninsured and underinsured coverages.

If there is any good news here, it may be that this change is not going to affect all businesses. In fact, some insurers writing businesses with high concentrations of mobile equipment are said to be willing to continue writing the pre-2004 CGL policy so as to avoid the problems highlighted here. This is also likely to be especially good news to those businesses in this category that are covering their physical damage coverages with contractors' equipment floaters, where the cost is likely to be less, and the coverages broader than if written on a commercial auto policy.

In the final analysis, all of these changes are not going to be easy to pull off. They are going to cause problems for businesses and insurers alike. What agents and brokers need to do, in the meantime, is to practice good risk management.

By Donald S. Malecki, CPCU

The author

Donald S. Malecki, CPCU, is chairman and CEO of Donald S. Malecki & Associates, Inc. He is an active member of the CPCU Society, serves on the Examination Committee of the American Institute for CPCU, and is an active member of the Society of Risk Management Consultants.