The CAR Commercial Lines Committee has unanimously voted to recommend to the CAR Governing Committee, among other changes, a new commercial automobile application, and additional insured endorsement.
The proposed commercial lines application and the new additional insured endorsement, with its concomitant role change to the commercial lines manual, appear on the agenda for the Governing Committee meeting scheduled for February 12, 2020, at 10:30 a.m.
Barring an unforeseen circumstance, the Governing Committee will likely approve these changes in commercial lines underwriting as necessary tools to assist CAR’s four servicing carriers in identifying ineligible risks and tightening the standards under which additional insured coverage will apply.
The proposed additional insured endorsement requires an existing contract prior to loss
At their January meeting, the commercial auto committee continued a previous discussion involving modifying or replacing the additional insured endorsement currently in use in the commercial auto residual market.
Specifically, the committee reviewed a proposed additional insured endorsement entitled “CR 99 02-Additional Insured-Massachusetts” and a new Rule 37, to the Commercial Insurance Manual relative to the use of the new CR 99 02 endorsement.
This new endorsement adds the requirement that makes the existence of a written contract between the insured and needs additional insured must exist and be in place before the occurrence of any loss for coverage to exist for the additional insured. For a similar requirement that led to an uncovered loss for an additional insured, see Agency Checklists’ article, “Without Executed Written Contract, Certificate Of Insurance Not Enough To Show Additional Insured Status.”
The proposed definition of an “additional insured” in the new endorsement is:
“[a]person or organization named in this endorsement, for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.”
For the endorsement to provide coverage to an additional insured for bodily injury or property damage, under the CR 99 02 endorsement, the claim must have occurred:
- After the signing and execution of the contract or agreement by you and the person or organization to be added [to the policy].
- While the contract or agreement with the person or organization remains in effect.
- Before your operations performed for that person or organization are complete; and
- Before the end of the policy period.
After discussion, the committee voted unanimously to recommend the CAR Governing Committee approval of the new endorsement CR 99 02 that will require for additional insured coverage on a commercial auto policy that a contract exists between the insured and the additional insured and that that contract be in full force and effect before the loss for which the additional insured seeks coverage.
Also, the committee voted to recommend the approval of revisions to section II-Common Coverages and Rating Procedures of the Commercial Insurance Manual by adding rule 37-Additional Insured Endorsement-Massachusetts that will explain instructions relative to the use of the new CR 99 02 endorsement for additional insureds.
If the CAR governing committee adopts all the committee’s unanimous recommendations, the new endorsement will take effect ninety days after the CR 99 02 endorsement is placed on file with the division of insurance.
The committee defers action on notices of cancellation to additional insureds
On another matter related to the additional insured question, the committee decided to table further discussion on whether CAR should require a notice of cancellation to additional insureds under contracts requiring notification. In making this decision, the committee observed that such cancellation notices were not currently the common practice in the voluntary market and that there were “significant cost and time requirements” for CAR to develop its own cancellation protocol.
The committee recommends the supplemental application for approval by the Governing Committee
The committee also reviewed the proposed supplemental application form prepared by Mr. Barry Tagen of Pilgrim Insurance and his staff. Under Mr. Tagen’s direction, Pilgrim, with the three other CAR servicing carriers providing input, developed supplemental application forms that will better collect information for determining risk eligibility and ownership. The additional parts of the proposed supplemental application will also collect specific information relative to public transportation and trucking risks.
The supplemental application forms consist of three addenda: A, B, and C.
- Addendum A would obtain general risk information from all commercial risks.
- Addendum B would be used to collect additional information for public automobiles; and,
- Addendum C would be used to obtain trucker-motor carrier information.
If the Governing Committee approves the supplemental application, CAR will require all commercial risks to complete the first supplemental application; Addendum A. This addendum would require the applicant to answer the following questions, in a slightly different format, as part of the application process:
- Name of all entities to be insured on this policy.
- What is the date when and the location where this business was established?
- How long has this business been located at its current principal place of business?
- Management, Ownership, and Control: Please provide the following information for all owners, officers, partners, and stockholders for the entities insured on this policy:
- Does the Principal Owner(s) have any other form(s) of employment and/or income? If so, please explain.
- List the names and addresses of all affiliated companies or corporations under the same ownership.
- Do you or your company have an active Workers Compensation insurance policy? If yes, provide a copy of your policy Declarations Page. If not, please explain why not.
- Do you or your company have an active General Liability insurance policy? If yes, provide a copy of your policy Declarations Page. If not, please explain why not.
- Does your company have an active filing with the Massachusetts Secretary of Commonwealth’s office? If not, please explain why not.
The public auto supplemental application, Addendum B, defines eleven categories of public autos, including charter bus, intercity bus, sightseeing bus, social service agency autos, and hotel shuttle buses.
For the eleven categories, the applicant must identify the number of vehicles in each category and their percentage of use in that category. Additionally, charter and tour operators, inter-city operators, social service operators, sightseeing, and urban bus operators must also list their geographical operation information by destinations, cities, and towns, or routes. Airport buses and hotel shuttles along with school buses must provide as part of the supplemental application their contracts with the transportation hubs, hotels, or school districts for which they provide services.
The application notes, however, that any vehicles used as taxi cabs, car service, rideshare, or limousines with a seating capacity of 8 or less still must be written in CAR’s Taxi/Limo Program.
The Trucker/Motor Carrier supplemental application, Addendum C, asks fourteen additional questions, including questions concerning government filings, owner/operating policy scheduling, common commodities hauled, terminus points, hired physical damage coverage, and hazardous waste hauling.
Mr. Tagen noted for the committee that the supplemental application forms did have overlapping information with the ACCORD application form. However, in his opinion, the supplemental application questions would better determine coverage eligibility and rating categories applicable to CAR’s commercial auto risks.
After discussion, the committee unanimously voted to recommend to the CAR Governing Committee the approval of the supplemental application as drafted by the committee.
Commission rate discussion deferred pending hearing an MAIA proposal
The committee also discussed exhibits presented by CAR staff comparing the existing residual market commission schedules with those of AIPSO, a national service provider and plan manager for residual auto insurance markets in thirty-seven states
The committee voted to defer discussion on this issue to hear from Mr. Nick Fyntrilakis of the MAIA concerning commission schedules. Mr. Fyntrilakis will discuss with the committee the MAIA’s proposed change to the commission methodology of a fixed percentage of the policy premium. This proposal will suggest that a more appropriate measure of the producers’ compensation consists of the loss costs needed to service residual market risks.
Committee to investigate commercial market ride-sharing and short-term rental issues
The committee also decided to add to its next agenda the issues of ride-sharing in the commercial market and short-term rentals. The committee chairman requested members to provide CAR staff with any available information in advance of the next meeting on the subjects.
The CR 99 02 endorsement and the supplemental application are available on the CAR website
To see the proposed additional insured endorsement with its proposed changes red-lined, and the proposed supplemental applications on the CAR website, click HERE for a link to the notice of the CAR governing committee meeting notice. The endorsement is on Page 30 of 39, and the supplemental applications run from pages 32 to 39, of 39.