When we think of vehicles covered under the Business Auto Policy, we think of cars, pickup trucks, vans, even tractors and trailers. But what about a wheel loader? Surely, that’s not an auto! That’s mobile equipment, and bodily injury or property damage it causes is covered by the Commercial General Liability Policy, isn’t it? Maybe.
Business Auto Policy
In 2004, the industry standard Commercial General Liability Policy was changed. Mobile equipment subject to state financial responsibility laws is considered an auto, and its use may not be covered by the Commercial General Liability Policy. In 2006, the same language was added to the industry standard Business Auto Policy.
Many states consider any type of vehicle on a public highway subject to financial responsibility laws. New Jersey, for example, says:
Motor vehicles driven on public highways must be registered and insured. A motor vehicle is defined to include “all vehicles propelled otherwise than by muscular power, excepting such vehicles as run only upon rails or tracks and motorized bicycles.”
This becomes a problem when a piece of construction equipment, for example, crosses a public road that intersects a job site. When off road, the equipment is mobile equipment and covered under the Commercial General Liability Policy. When on the public road, it is an auto and covered under the Business Auto Policy.
There are steps a contractor with such equipment can take to avoid problems:
- When possible, write Commercial General Liability and Business Auto Coverage with the same insurance company, to avoid disputes at claim time over which carrier should pay.
- Especially when coverage is written with different insurance companies, make sure that the auto and mobile equipment definitions in the Commercial General Liability and Business Auto Policies match. This may not be the case if an insurer is using an older form or a non-standard form.
- Make sure that the Business Auto Policy’s liability coverage is written to cover “any auto” (symbol 1), “all owned autos” (symbol 2) or “Mobile Equipment Subject To Compulsory or Financial Responsibility or Other Motor Vehicle Insurance Law Only” (symbol 19.) These symbols provide broad liability coverage for equipment that may be considered an “auto.”
Being aware of how insurance policies treat mobile equipment is key to avoiding gaps in a contractor’s liability insurance program.