Deciphering Commercial Auto Policy Symbols
Most commercial auto insurers issue insurance contracts on standard ISO forms like the Business Auto Policy (BAP). The BAP utilizes a set of numbers to designate the types of autos you have elected to cover. These numbers are called covered auto designation symbols.
The numeric symbols on your auto policy are important because they determine which autos qualify as covered autos. Only "covered autos" are insured under your policy. Suppose an auto accident generates an auto liability claim against your firm. If the vehicle driven by the at-fault driver is not a covered auto, the claim will not be covered. Likewise, your auto insurer will not pay for physical damage to a vehicle that does not qualify as a covered auto under your policy.
Covered Auto Designation Symbols
The covered auto designation symbols include the numbers 1 through 9 and 19. Each numeric symbol represents a specific category of autos, such as "owned autos" or "hired autos." Your policy should include a section that explains the meaning of each symbol. This section usually appears on page 1 of the Business Auto Coverage Form. The meaning of each symbol is explained below.
Of the 10 available symbols, symbol 1 affords the broadest coverage. Symbol 1 designates any auto, which includes all of the following:
- autos you own
- autos you hire, rent, lease or borrow
- autos you don't own (non-owned autos)
Note that Symbol 1 can be used to trigger auto liability coverage only. It cannot be used to initiate any other type of coverage. The following examples demonstrate how this symbol works.
Example 1 You, Jack Jones, are the sole owner of a consulting business called Jones Inc. You have purchased a commercial auto policy that shows symbol 1 (any auto) for liability coverage. Both you (Jack Jones) and your business (Jones Inc.) are named insureds on your policy. One day, you are driving a vehicle owned by your company when you inadvertently rear-end another vehicle. The driver of that vehicle is injured, and sues you personally for bodily injury. Will your policy cover the suit?
Under the standard BAP, you (the named insured) are an insured for any covered auto. Symbol 1 designates any auto. At the time of the accident you (Jack Jones) were driving an auto owned by your firm. Any auto includes autos owned by a named insured. The claim should be covered because you are an insured, and the vehicle you were driving when the accident occurred is a covered auto.
Example 2 You ask Steve, one of your employees, to drive to a nearby store to buy ink for the company printer. Steve complies, using his personal vehicle. He is returning to your office when he accidentally sideswipes another auto. The driver of the other vehicle is injured in the accident. He later sues both your company (Jones Inc.) and Steve for bodily injury.
Symbol 1 appears in your policy declarations for liability coverage. As a named insured, Jones Inc. is an insured for accidents involving any covered auto. Steve's vehicle qualifies a non-owned auto. It was being used on behalf of your business when the accident occurred, but the vehicle is not owned by you or your company. Any auto includes a non-owned auto. Thus, the vehicle is a covered auto, and the suit against Jones Inc. is covered.
What about Steve? Unfortunately, he is not an insured. Employees are insureds under a commercial auto policy only while driving vehicles owned, hired or borrowed by a named insured. At the time of the accident, Steve was driving a vehicle owned by him personally. Thus, the claim against him is not covered by your policy.
Symbols 2, 3 and 4
The next three symbols designate owned autos. Symbol 2 triggers coverage for all autos you own. These include both private passenger type autos and commercial vehicles (trucks). Symbol 3 designates private passenger autos only. Symbol 4 triggers coverage for commercial vehicles only.
Symbols 2, 3 and 4 afford automatic coverage for autos you acquire during the policy period. Symbols 2 and 4 automatically afford liability coverage for any trailer you don't own that is attached to a car or truck that you do own.
Symbols 5 and 6
These symbols apply to specific coverages. Symbol 5 is used to provide no-fault coverage for autos you own, when such coverage is required by law. Symbol 6 is used to trigger uninsured motorist coverage for autos you own. This symbol is used only when you are required by law to purchase, and cannot reject, UM coverage.
Of the 10 available symbols, symbol 7 is the most restrictive. It covers only those vehicles described in the declarations. If symbol 7 is listed for any coverage, that coverage applies only to vehicles scheduled on the policy.
Symbol 7 provides very limited coverage for vehicles you acquire after the policy inception date. Any new vehicle is covered only for coverages that are included on all autos you own.
For example, suppose that you own two autos, both of which are covered for liability and comprehensive coverages. You acquire a new auto during the policy period. All autos you own are covered for liability and comprehensive coverages, so your new auto will be insured for those coverages as well. However, your new vehicle will be afforded these coverages for 30 days only. If you want to insure your new vehicle for liability or physical damage beyond the 30-day period, you must report the new auto to your insurer. You must also pay the applicable premium.
Suppose that you buy a new vehicle to replace one you sold or that was "totaled" in an accident. A new vehicle that replaces one you previously owned is afforded the same coverages that applied to the former vehicle. These coverages will expire in 30 days unless you report the new vehicle to your insurer.
While Symbol 7 should generally be avoided, there are some circumstances where this symbol may be appropriate. For instance, suppose you own three pickup trucks. You have insured one truck that you use in your business under a commercial auto policy. You lease the other two trucks to another company. Those pickups are insured for liability under the lessee's auto policy, and you don't want to insure them under your policy. Thus, your policy includes Symbol 7 for liability.
Symbol 8 designates hired autos. This term includes vehicles you hire, rent, lease or borrow. Symbol 8 does not cover any vehicle you hire, rent, lease or borrow from any of your employees, partners or members (if you are a limited liability company) or any members of their households. Symbol 8 may be used to insure hired autos for liability or physical damage coverage.
Symbol 9 is used to cover non-owned autos for liability. Non-owned autos are vehicles you use in your business but do not own, hire, rent, lease or borrow. Examples are vehicles that are owned by your employees or partners and used in your business.
Finally, symbol 19 designates mobile equipment that is subject to a compulsory or financial responsibility law. This symbol is rarely needed. Under the standard BAP, mobile equipment (such as a bulldozer or forklift) that you are required by law to insure for liability is considered an auto while it is being driven on a public road. Such a vehicle can be covered via any symbol that triggers coverage for commercial autos you own. Examples are symbols 2 and 4.
Symbol 19 may be used if you acquire mobile equipment during the policy period, the vehicle must be insured for liability, and none of the existing symbols are appropriate. For example, suppose that you purchase a commercial auto policy that covers only hired and non-owned autos. Two months after your policy begins you buy a forklift that you are required by law to insure for liability. Symbols 8 and 9 do not apply to owned autos. Thus, symbol 19 can be added to your policy to trigger liability coverage for your forklift when it is driven on a public road.
Commercial auto policies are subject to a final audit, which is conducted after the policy has expired. An audit is needed when the policy includes symbols that provide automatic coverage for newly acquired vehicles.
For instance, suppose that your policy shows symbol 1 for liability and symbol 2 for physical damage. You acquire several new vehicles during the policy period. Because your policy affords automatic coverage for newly acquired autos, you need not notify your insurer at the time of each transaction. Rather, you submit a report at the end of the policy period that lists the vehicles you owned when the policy began, and the autos you acquired during the policy period. Your insurer calculates your final premium based on the report.