Commercial Auto Insurance – Business Auto Policy (BAP)

Liability & Insurance 750

What's on this Page

Sample ISO Business Auto Policy
Auto Exposures of the Named Insured (Our Vendor, Licensee, Contractor, etc.)
- Owned Autos
- Hired Autos
- Non-owned Autos
- Scheduled Autos
- Any Auto
Who is Insured
- Policy Definition of Insured
- Additional Insured Status Under the BAP
Contractual Liability Insurance
Rental or Use of County Autos by Other Entities
- Overview
- Sample Auto Insurance Requirements
Key Exclusions
- Pollution
- Care, Custody or Control
Pollution Liability Insurance - Autos
- Uninsured Pollution Claims
- Covered Pollution Claims
- MCS-90

All autos owned by any named insured. A named insured is an entity shown in the policy declarations.
If there are multiple named insureds on the policy, an auto is covered if it is owned by any one of the named insureds.
There is coverage for an auto owned by any named insured, even if the auto is not listed on the policy.
Liability insurance for owned autos is primary.

Autos hired or borrowed by, or leased or rented to, any named insured.
Liability insurance is excess of the owner’s insurance, except for liability assumed under a contract.
When a business does not own autos, hired auto liability is sometimes endorsed to the GL policy. That is acceptable.

Autos that the named insured does not own, lease, hire, rent or borrow which are used in connection with the business.
Autos driven by the named insured’s employees are non-owned autos.
Autos driven by the named insured’s independent contractors or subcontractors are non-owned autos.
Autos driven by the named insured’s volunteers or members are non-owned autos.
When a business does not own autos, non-owned auto liability is sometimes endorsed to the GL policy. That is acceptable.

When “any auto” is checked on the certificate of insurance it means that non-owned, hired and all owned autos are insured.

The named insured.
Permissive users the autos the named insured owns, hires, rents or borrows, with a few exceptions.
Persons or entities that are legally liable for the conduct of the named insured or covered permissive users. In most County agreements this includes us.

Most insurers won’t give us an additional insured endorsement on the BAP because our status as an insured is built into the definition of insured. This is acceptable.
In lieu of an additional insured endorsement many insurers often issue the Designated Insured endorsement CA 20 48. It does nothing except state that we are insureds to the degree that we are included in the policy definition of “insured”. We accept this, except in situations where the other party is renting or using our vehicles.

The named insured is covered for contractual obligations to indemnify us for third party suits resulting from an auto accident.
The contractual liability coverage does not extend to obligations to indemnify a car rental company for damage to a rental car.
When the named insured agrees to indemnify another party for auto liability, the BAP’s hired and non-owned auto coverages became primary (See Also BAP Conditions, Sec. IV, Paragraph B, Item 5c located here, Page 9 of PDF.).

When a contractor, consultant or other party uses a County vehicle (with or without charge) their hired auto insurance covers them.
It also covers us if they are engaged in activities FOR us. Example: We engage an outside company to inspect our properties and we allow then to use our vehicles for the work. This is because we are legally liable for their actions while they are doing our project.
If they use our vehicle for other activities outside the scope of work, we are not legally liable for their actions and are not considered insured parties under their BAP. However, our agreements require the other party to indemnify us and we are protected by the contractual liability coverage in their BAP. This does not give us status as an insured, but we are indirectly protected.

We do not require the other party to cover the vehicles for physical damage, but we do recommend that County Counsel add language to the agreement which makes the other party responsible for physical damage to the vehicles, regardless of the other party’s negligence in causing the damage.
Substitute these for the auto insurance requirements in the standard Templates.

The BAP does not cover damage to property:
- Owned by the insured;
- Transported by the insured; or
- In the care custody or control of the insured. Example: a contractor operates our transit facility and buses. A the contractor’s driver, operating our bus, backs into a wall at the facility, damaging the wall and the bus. The contractor’s BAP will cover neither the damage to the wall, nor the damage to the bus because both are in the contractor’s care, custody and control.

Leakage or discharge of vehicle operating fluids not resulting from an auto accident.
Discharge of pollutants being transported by the insured vehicle.
If the substance discharged does not meet the policy definition of “pollutant”, the claim is covered.
Definition of pollutant: any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.
Pollution liability can be added to the BAP by endorsement CA 99 48.

The insured’s negligence causes an accident in which another vehicle discharges its cargo of pollutants.
The insured negligently punctures a container causing pollutants to escape.
Resulting from an auto accident, vehicle operating fluids (gas, oil, transmission fluid, etc.) escape from the vehicle’s reservoirs that normally hold them.
The pollution exclusion applies only to traditional environmental pollution into the air, water, and soil, but not to all injuries involving the negligent use or handling of toxic substances that occur in the normal course of business. (MacKinnon v. Truck Insurance Exchange, 2003)

Required on the auto liability policy of certain regulated motor carriers to ensure that federally mandated liability limits and environmental restitution coverage are in place.
The endorsement functions more like a bond than an insurance policy. It guarantees that the insurer will provide the federally mandated coverages. If the insured purchased the required limits and pollution coverage, the endorsement has no effect. If the insured did not purchase the federally mandated coverages, the insurer pays the claim, but then has the right to be reimbursed by the insured.
Detailed explanation of the MCS-90