Commercial auto on the P&C exam

This set covers symbols, insureds, physical damage settlements, rating and the dealer and motor carrier forms. The symbol table at the top of the page is the one to keep open.

Notes on each optionCommit to an answer first. The notes under the item then open on every option: what rules it in or out, and the one word that splits the runner-up from the key.

1. Item 01

   A company wants its business auto policy to cover an employee's liability for injuring a coworker while driving a company truck on the job. Which endorsement does it need?

   • AFellow Employee Coverage
   • BDrive Other Car Coverage
   • CIndividual Named Insured
   • DEmployees as Insureds
   1. ACorrect: the BAP excludes bodily injury to a fellow employee, and the Fellow Employee Coverage endorsement removes that exclusion to protect the driver.
   2. BDrive Other Car extends coverage to named individuals driving autos the business does not own, not to injured coworkers.
   3. CIndividual Named Insured adds personal-auto-style coverage for a sole proprietor and family, not fellow-employee injury.
   4. DEmployees as Insureds covers employees using their own autos in the business, not injury to a coworker.

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2. Item 02

   ISO withdrew which commercial auto form and replaced it with the Motor Carrier Coverage Form?

   • AGarage Coverage Form
   • BTruckers Coverage Form
   • CAuto Dealers Coverage Form
   • DBusiness Auto Coverage Form
   1. AThe Garage Coverage Form was replaced for dealers by the Auto Dealers form, not by the Motor Carrier form.
   2. BCorrect: ISO withdrew the Truckers Coverage Form and replaced it with the Motor Carrier Coverage Form, which serves for-hire and private carriers.
   3. CThe Auto Dealers form is itself the replacement for the garage form, not a withdrawn form.
   4. DThe Business Auto Coverage Form is still the general commercial auto form; it was not withdrawn.

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3. Item 03

   A utility's covered truck has a permanently mounted cherry picker. While the truck is parked, a worker operating the cherry picker damages a customer's roof. Which policy covers this liability?

   • AThe business auto policy
   • BThe CGL
   • CNeither policy
   • DBoth policies, pro rata
   1. AThe BAP excludes liability from operating equipment like a cherry picker mounted on the truck, even though the truck is a covered auto.
   2. BCorrect: the BAP excludes operation of truck-mounted equipment such as a cherry picker, and the CGL's auto exclusion has a matching exception, so the CGL responds.
   3. CThere is no gap: the BAP exclusion and the CGL exception are designed to hand this loss to the CGL.
   4. DThe two policies dovetail rather than overlap, so there is no pro rata sharing.

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4. Item 04

   Under ISO commercial auto rating, a risk qualifies for fleet rating when it has at least how many self-propelled autos under common ownership?

   • A3
   • B5
   • C10
   • D2
   1. A3 autos is below the fleet threshold.
   2. BCorrect: ISO commercial auto rules treat 5 or more self-propelled autos under common ownership as a fleet.
   3. C10 autos would be a fleet, but the threshold is lower, at 5.
   4. D2 autos is far below the fleet threshold.

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5. Item 05

   A contractor insures an older specialized truck under a stated amount endorsement for $40,000, with a $500 deductible. The truck is totaled when its actual cash value is $32,000. How much does the insurer pay?

   • A$32,000
   • B$39,500
   • C$40,000
   • D$31,500
   1. A$32,000 forgets the $500 deductible.
   2. B$39,500 treats the stated amount as an agreed value, which it is not.
   3. CPaying the full $40,000 ignores both the lower ACV and the deductible.
   4. DCorrect: stated amount pays the least of the stated amount, ACV or repair cost, minus the deductible: $32,000 − $500 = $31,500.

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6. Item 06

   Which business is BEST suited to the Business Auto Coverage Form rather than a specialized auto form?

   • AA trucking firm hauling goods for others
   • BA plumber with six service vans
   • CA franchised new-car dealership
   • DA used-car lot selling to the public
   1. AA trucking firm hauling goods for others belongs on the Motor Carrier Coverage Form.
   2. BCorrect: the Business Auto form is the general form for businesses that use autos in their work, such as a plumber's service vans.
   3. CA franchised new-car dealership is written on the Auto Dealers Coverage Form.
   4. DA used-car lot is also a dealer risk for the Auto Dealers Coverage Form.

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7. Item 07

   Under the Business Auto Coverage Form, supplementary payments include the cost of bail bonds up to:

   • A$500
   • B$250
   • C$2,000
   • D$1,000
   1. A$500 is not the BAP bail bond limit.
   2. B$250 is the bail bond limit in the personal auto policy and the CGL, the usual mix-up.
   3. CCorrect: the Business Auto form pays up to $2,000 for bail bonds, in addition to the limit of insurance.
   4. D$1,000 is not the BAP bail bond limit.

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8. Item 08

   Hired auto liability coverage on a business auto policy is typically rated on:

   • AThe radius of operation
   • BThe cost of hire
   • CThe number of employees
   • DThe number of owned autos
   1. ARadius of operation is used to rate the insured's own trucks, not hired auto liability.
   2. BCorrect: hired auto liability is rated on the insured's cost of hire, meaning what it spends renting or leasing autos.
   3. CNumber of employees is the base for non-owned auto liability, the tempting near-miss.
   4. DThe number of owned autos rates owned-auto coverage, not hired autos.

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9. Item 09

   In a collision, a covered truck's fuel tank ruptures, and diesel spills onto a neighbor's lawn. Under the business auto policy, the neighbor's property damage claim is:

   • ACovered only for the cleanup costs incurred
   • BCovered only under the CGL
   • CCovered; the auto's own fuel is excepted
   • DExcluded as a pollution loss
   1. ACoverage is not limited to cleanup; the spill is ordinary property damage once the pollution exclusion is lifted.
   2. BThe BAP responds because the auto's own fuel is excepted from its pollution exclusion, so this is not left to the CGL.
   3. CCorrect: the BAP pollution exclusion does not apply to the auto's own fuel escaping from its tank, so the damage is covered like other property damage.
   4. DThe pollution exclusion targets pollutants carried as cargo, and the truck's own fuel is carved back.

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10. Item 10

    A large fleet's auto premium is recalculated after the policy period ends, based on the fleet's actual losses during that period, within a minimum and maximum. This is:

    • AJudgment rating
    • BExperience rating plan
    • CSchedule rating
    • DRetrospective rating
    1. AJudgment rating relies on the underwriter's evaluation, not the period's actual losses.
    2. BExperience rating uses prior years' losses to set the premium in advance, not losses in the current period.
    3. CSchedule rating applies debits and credits for features of the risk, not actual losses.
    4. DCorrect: retrospective rating sets the final premium after the period from that period's actual losses, between a minimum and a maximum.

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11. Item 11

    A corporation's business auto policy includes uninsured motorists coverage. Its owner is hit by an uninsured driver while crossing a street on foot. Under the corporation's policy, the owner is:

    • ACovered, as owner of the named insured
    • BCovered if the owner has no personal policy
    • CCovered for medical bills only
    • DNot covered; only occupants are insureds
    1. AOwning the corporation does not make the owner an insured; when the named insured is an organization, UM covers occupants of covered autos.
    2. BHaving no personal policy does not create insured status under the corporation's policy.
    3. CUM does not shrink to medical bills only; the owner is simply not an insured here.
    4. DCorrect: when the named insured is an organization, business auto UM covers only people occupying a covered auto, so a pedestrian owner is not an insured.

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12. Item 12

    A business auto policy has a $500,000 combined single limit. A covered truck injures one person ($400,000) and damages a store ($150,000) in one accident. How much does the policy pay?

    • A$550,000
    • B$500,000
    • C$400,000
    • D$250,000
    1. A$550,000 is the total damages, but the combined single limit caps the payment at $500,000.
    2. BCorrect: a combined single limit is one amount for all BI and PD from one accident, so the policy pays its $500,000 limit.
    3. C$400,000 pays only the injury, as if BI and PD had separate limits.
    4. D$250,000 splits the limit in half, which no combined single limit does.

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13. Item 13

    In commercial auto rating, trucks are assigned a size class primarily by:

    • AOriginal cost new of the truck
    • BModel year
    • CGross vehicle weight
    • DEngine size
    1. AOriginal cost new is used for physical damage rating, not for the truck size class.
    2. BModel year affects physical damage rating, not the size class.
    3. CCorrect: trucks are assigned size classes (light, medium, heavy, extra-heavy) by gross vehicle weight.
    4. DEngine size is not a commercial auto rating class.

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14. Item 14

    A caterer's driver, using a covered van, causes an accident while delivering to a client's event. The client is sued as vicariously liable. Under the caterer's business auto policy, the client is:

    • AAn insured, but only for property damage
    • BAn insured, as someone liable for the driver
    • CNot an insured, since it did not use the van
    • DNot an insured unless named in the declarations
    1. ACoverage is not limited to property damage; the client is protected for both bodily injury and property damage.
    2. BCorrect: the BAP insures anyone liable for the conduct of an insured, to the extent of that liability, so the vicariously liable client is an insured.
    3. CUsing the van is not required; being liable for an insured's conduct is enough.
    4. DThis insured status applies automatically, without being named in the declarations.

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15. Item 15

    A company driver takes an owned, covered truck on a delivery to Mexico City. Under an unendorsed business auto policy, liability coverage for an accident in Mexico is:

    • ANot provided; Mexico is outside the territory
    • BProvided, as all of North America is covered
    • CProvided for liability but not physical damage
    • DProvided for trips of up to 30 days
    1. ACorrect: the BAP territory is the U.S., its territories and possessions, Puerto Rico and Canada, so an owned truck in Mexico is not covered without an endorsement.
    2. BThe territory is not all of North America; Mexico is left out.
    3. CWith Mexico outside the territory, neither liability nor physical damage applies.
    4. DThe 30-day rule is for worldwide coverage of autos hired or borrowed without a driver, not owned trucks driven to Mexico.

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16. Item 16

    A company van with $500 comprehensive and $500 collision deductibles hits a guardrail, causing $3,000 of body damage and breaking a $600 windshield. The insured elects to treat the glass as part of the collision. How much does the insurer pay?

    • A$2,600
    • B$3,600
    • C$2,500
    • D$3,100
    1. A$2,600 applies two deductibles, but treating the glass as collision means only one applies.
    2. B$3,600 ignores the deductible.
    3. C$2,500 leaves out the glass entirely.
    4. DCorrect: glass broken in a collision can be treated as collision so one deductible applies: $3,000 + $600 − $500 = $3,100.

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17. Item 17

    A partner in a firm drives their own car on firm business and causes an accident. The firm's business auto policy shows Symbol 1. Under that policy, the partner is:

    • ACovered only if the car is listed
    • BNot an insured, though the firm is covered
    • CAn insured, as a permissive user
    • DAn insured, since partners are named insureds
    1. AListing the car would not help; the form excludes a partner as an insured for a car the partner owns.
    2. BCorrect: the BAP excludes a partner as an insured for a covered auto the partner owns, though the firm itself is covered for its liability.
    3. CPermissive users are generally insureds, but the form carves out a partner driving their own car.
    4. DPartners are not named insureds just by being partners, and the form expressly excludes them for their own cars.

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18. Item 18

    Under business auto physical damage coverage, which loss to a covered van is NOT covered?

    • AA tire blowout with no other damage
    • BA deer striking the front grille
    • CTheft of the entire van
    • DA windshield cracked by a flying stone
    1. ACorrect: business auto physical damage excludes loss due and confined to blowouts, punctures or other road damage to tires, unless it results from the total theft of the van.
    2. BHitting an animal is a covered comprehensive loss.
    3. CTheft of the entire vehicle is covered.
    4. DGlass breakage from a flying stone is a covered comprehensive loss.

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