Info about Insurance

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The Business Auto Policy (BAP)

The BAP permits the insurance buyer to purchase five kind of protection:
 Physical damage or property insurance.
 Liability insurance.
 Medical payments insurance.
 Uninsured motorist insurance.
 Personal injury protection, required in those states with no-fault statutes.

Property Insurance:

Under the property insurance section of the BAP, the insured may choose the perils against which the organization wishes to be insured. The choices are a specified perils policy, a comprehensive perils policy, or a collision policy. If the insured wishes, it can pay an additional premium to cover towing and labor costs incurred at the place of disablement. The insured may also select what property, in this case what automobiles and their equipment, are to be insured. The choices are (1) only owned automobiles, (2) only owned private passenger automobiles, (3) only owned automobiles other than private passenger vehicles, (4) only owned automobiles that are specifically described, or (5) only automobiles that are leased, hired, rented, or borrowed. Notably, personal property carried in the automobiles is not covered.

The protection is limited to direct property losses with one exception: extra transportation costs incurred because of the theft of a private passenger auto insured under the policy. Several conditions affect the amount of the recovery. Unless the policy is endorsed to provide coverage on a stated amount basis, the insurer promises to pay the smaller of two amounts (less, of course, a deductible, if applicable):
 The actual cash value of the damaged or stolen property at the time of the loss.
 The cost of repairing or replacing the damaged or stolen property with another of like kind and quality.

Liability Insurance:

Under the liability insurance part of the BAP, the peril covered is an accident for which the insured is legally liable. “Accident” is defined to include, but is not limited to, continuous or repeated exposure to the same conditions, resulting in bodily injury or property damage that is neither expected nor intended. The source of the liability covered is the “ownership, maintenance, or use of a covered automobile.” As with the property coverage, the insured may select which automobiles it wishes to have covered. The choices are identical to those cited previously, but the liability coverage may be extended to non owned autos other than those leased, hired, rented, or borrowed. This extension would cover employee autos driven in the course of business.

The named insured is an insured person for any covered automobile. With two exceptions, anyone else using a covered automobile owned, hired, or borrowed by the named insured is an insured person if he or she is using the auto with the permission of the named insured. The two exceptions are (1) someone else using an automobile the named insured borrows from any employee or a member of the employee’s household, and (2) someone else using a covered auto while working in a business of selling, servicing, repairing, or parking automobiles.

The amount of recovery is determined by several provisions. A single limit per accident applies to all court awards or settlements. Separate limits for bodily injury and property damage losses are available by endorsement. Defense and Investigation costs are not subject to this limit, but payment of this amount toward an award or a settlement ends the insurer’s obligation to defend the suit.

Medical Payments Insurance:

Medical payments insurance, covering expenses for medical services, is a form of health insurance added by endorsement to the BAP. The legal liability of the insured for these expenses is not an issue. The Insurer promises to pay all reasonable medical and funeral expenses incurred within three years following an accident occurring while a person is entering, occupying, or leaving a covered automobile. The insured, again, may determine what is a “covered automobile.”

Medical expenses paid under this endorsement do not reduce the insurer’s responsibility under liability insurance. Thus, if an insured is legally responsible for medical expenses incurred by a passenger, that passenger could collect twice from the insurer for the same medical expenses. Because the usual occupants of covered automobiles are employees, this coverage is a much less frequent part of the BAP than of the personal auto policy (workers’ compensation would apply). Furthermore, only for sole proprietors are the benefits extended to cover the named insured.

Uninsured/Under-insured Motorist Insurance:

To provide protection against uninsured motorists and hit-and-run drivers, insurers have developed uninsured motorist insurance, which can be added by endorsement to the BAP. Under this endorsement, any person injured while occupying the insured auto can submit a claim to the insurer, which will then act as if it represented the negligent uninsured or hit-and-run driver. A vehicle is considered to be uninsured if it is insured for less than the minimum amount specified under the financial responsibility law of the state in which the covered auto is principally garaged. Under an under insured motorist endorsement, the auto is under insured if it is insured for less than the limit of the insured’s under insured motorist coverage.

It should be noted that the insured victim cannot collect under this coverage unless the uninsured or under insured motorist was negligent. On the other hand it is not necessary for the insured to obtain a judgment before seeking or obtaining reimbursement from the insurer. Instead, the insured and the insurer must decide through negotiations whether the uninsured or under insured motorist was negligent.

Personal Injury Protection:

In states that have passed no-fault laws, the BAP coverage on the named insured’s owned automobiles must provide the benefits specified in the statute. A personal injury protection endorsement frequently referred to as the PIP endorsement, adds these benefits.