Author: VU Faculty
An auto policy was written to provide liability and uninsured motorists (UM BI & PD) coverage on a Symbol 2 basis. The insured asked the agency to delete several autos during the policy term. Later there was an accident with an uninsured motorist involving $8,000 in damage to one of the deleted autos. The insured discovers that they asked the agency to delete the autos in error...they still own them. The insurer denied the claim because the auto was deleted, so Symbol 2 no longer applies. Is this correct?
This was an interesting question in that it came almost simultaneously from two sources. First, one of our faculty members was contacted by the insurer involved and asked the following question:
"I have a situation where we have a Symbol 2 on Uninsured Motorist. There is UM coverage for both BI and PD. The vehicle in question was on the schedule at inception. The agent sent us a written request to delete coverage mid-term. We deleted it. The insured still owned the vehicle and had an accident involving an uninsured motorist after the date of deletion.
"The agent is indicating that they think that there should be coverage because Symbol 2 means "any owned auto."
"It is my feeling that Symbol 2 is not ANY owned vehicle; rather, it is ONLY owned vehicles and is a symbol governed by the schedule of vehicles at inception plus any additions or deletions in addition to automatic coverage for any auto of which the named insured acquires ownership during they policy period.
"I turn this discussion over to the gurus of the insurance world. What do you think?"
Within 24 hours, our "Ask an Expert" service got the following email from the agent:
"We have a Symbol 2 for liability and UM. The insured asked the agency to delete several autos during the policy term, so the agency asked the company to delete. Later there was an accident with an uninsured motorist involving one of the deleted autos. The conversation with the insured revealed that they asked the agency to delete in error...they still have the autos.
"Damage to the vehicle was $8,000. We submitted the claim under UM. The company denied the claim because the auto was deleted. Does Symbol 2 really cover "any owned auto" or is the company justified in saying it is only autos on the policy at inception and those added during the year, and once deleted, Symbol 2 does not apply?"
Interesting debate. Although you'd think this is a common occurrence, this is the first time this situation has been raised. Here's what the policy says:
Owned "Autos" Only
Only those "autos" you own (and for Liability Coverage any "trailers" you don't own while attached to power units you own). This includes those "autos" you acquire ownership of after the policy begins.
It seems pretty clear–the policy covers ANY owned and acquired autos...period. The schedule of autos is for informational and rating purposes and is immaterial to coverage unless referred to as such in the contract. As long as the insured owns the vehicles, they're covered.
If there is a need to allow for deletion of autos, then coverage can be written on a Symbol 7 basis. Below are some comments from our faculty.
Although I'm sympathetic to the carrier on this one, unless they specifically attached some endorsement to the policy stating something along the lines of "Symbol 2 applies to any owned auto except the following specified autos," I think the policy form wording hangs them out to dry - they'll have to honor the claim.
Symbol 2 is traditionally written on an audited basis. You look at the ownership/operation exposure during the policy period. What governs is ownership. One of the reasons you use a symbol other than Symbol 7 is because you don't have to constantly report fleet additions and deletions. Under Symbol 2, coverage is automatic when vehicles are acquired and continues on those and originally scheduled autos throughout the policy period.
Symbol 2 covers autos owned by the insured. Period. Whether the auto was deleted, added, purchased new, etc. does not matter. Come claim time we ask one question, “Do you own the auto in question?” If the answer is “yes,” then cut the check.
With Symbol 2, the insurance company's intent on owned autos is to not provide coverage on autos after they have been cancelled. While that is their intent, it is not spelled out in the form. The definition of Symbol 2 in the CA 00 01 10 01 does not limit coverage to scheduled autos. Therefore, I believe that there is coverage under the form for the $8,000 property damage.
The insured has coverage for "any owned auto" if Symbol 2 is used. This means what it says. Now the kicker, the insurer is entitled to a premium for "any owned auto" even if the insured does not want to insure it. In this case, the premium should not be an issue since it was deleted in error, but your insured's error may open them up to an audit of the owned vehicles just to make sure the "error" has not happened for other autos. Remember that any of the automatic coverage symbols are subject to audit. Just because most insurers have not audited them does not waive their right to do so.
Now, if the "error" was an intentional act, the insurer could attempt to void coverage based on fraud. I did not look at case law on voiding due to fraud. Some states are fully retroactive to inception, others allow voiding of only the fraudulent coverage area. Still others only permit prospective cancellation.
I must protest the assumption of the coverage for a symbol two vehicle. Symbol one includes any auto. This includes all owned, non-owned and hired. Symbol 2 covers only those vehicles you own. For a symbol 2 any acquired auto is covered until the end of the policy period.
Unlike symbol 1 it must be added for coverage to apply on the renewal. It must be scheduled. There is no need to audit a symbol 2 policy unless newly acquired premiums are not reported and paid. If a newly acquired loses coverage at renewal unless added specifically to the renewal then does it not make sense that a vehicle voluntarily not written by the insured or deleted by an act of the insured is no longer covered?
The difference between symbol 1 and 2 is roughly equivalent to the difference between named peril and special form coverage in commercial property. Symbol 2 was designed to prevent the needs for audits. Add symbol 8 and 9 and you still do not have the coverage granted by symbol one as the case in question demonstrates.
Symbol 2, unlike Symbol 7, does not require scheduling of vehicles... coverage is automatic and provided on an auditable basis. Whether or not the insurer chooses to conduct the audit or just accept the statement from the insured is a matter of choice. As a practical matter, some record of owned autos is maintained for audit or self-audit purposes, but any such record or schedule is not made a part of the policy by the contract language, and it's more an issue of pricing than coverage...if the insured owns the vehicle at the time of loss, it's covered.
I see nothing in the policy that states if symbol 2 is used, there is no coverage for vehicles the insured owns that are not scheduled. If I'm missing something, I would sure appreciate the specific language pointed out to me.
This conservative interpretation is not uncommon with insurance companies. The policy does affirmatively say that symbol 2 includes autos the insured acquires ownership of after the policy begins. Nowhere does it say that owned autos that are not declared are not covered. Absent clear language to that effect, the company will have a difficult time supporting their position in court.
The courts have often interpreted the policy period to begin when the first policy is issued and to end when it's no longer renewed, not a single 12 month policy period. So, if the policy begins when it's first issued, not at the last renewal date, any auto's acquired since the original inception of the policy would be covered.
I sympathize with the problem but coverage goes on the basis of contract language. It is controlled by the contract (policy) language for symbol 2. I still believe it is a covered vehicle.
For the record, I disagree. Even though a carrier underwriter may prefer the procedure he/she describes, the fact remains there is no policy form wording that relates to what he/she says. So while the carrier may be unhappy (never a pleasant thought for an agency in need of a contract), symbol 2 provides fully automatic coverage (those coverages for which a symbol 2 is indicated on the declarations page) for any vehicle to which the insured takes title.
Symbol 2 is precisely why the policy provides for an audit. I understand the company's desire to get their money for the exposure, but the contract says what it says and there is nothing in there that in any way insinuates scheduling if symbol 2 is used. Send someone out to audit the insured, trust the insured to self-audit, or don't offer symbol 2. If you're a company going into court with these arguments, you won't win.
Great theory, but symbol 1, like 2, excludes autos not listed if the insured goes over a renewal date. The BAP does not have an "Owned but not insured (B.1 & B.2) exclusion like the PAP. Rather, it relies on the newly acquired auto wording to accomplish it. It states that if the insured has symbol 1 through 6, a newly acquired auto is covered until expiration.
I was not one of those who originally responded to the question, but your article is correct. The reader's comments miss a few points. First, Symbol 1 applies to liability only, so the analogy to property coverage is flawed. Second, the sixth sentence is incorrect. What he has described is that Symbols 2 & 7 are basically the same, except for the 30 day reporting period for Symbol 7...they are not; otherwise, their definition would be the same.
As the BAP responds only to "accidents" and "losses" that occur during the policy period, Symbol 2 becomes much broader than Symbol 7, as coverage then moves to the next policy for an owned auto. That is why the company has the right to audit the policy.
If we worried about what "made sense" we could all quit our jobs. :-)
Responding to our responses above....
I have to respond to this discussion as apparently there are several items to review. When all else fails look to the policy. The 2001 ISO Business Auto Coverage Part defines symbol#2 as owned autos only. The first sentence states, "Read the entire policy carefully to determine rights, duties and what is and is not covered." Section I determines covered "autos"". It says, " The symbols entered next to a coverage on the Declarations designate the only "autos" that are covered "autos".
Symbol 2 is defined as "Only those autos you own.... This includes those autos you acquire ownership of after the policy begins." Under symbol 2 a vehicle acquired during the policy period is covered for the balance of the policy period. It is not covered beyond the policy period unless added to the policy. "Auto" is defined as a land motor vehicle, trailer or semi trailer designed for travel on public roads.
Business auto is auditable. It reads, " The estimated premium for this Coverage Form is based on the exposures you told us you would have when this policy began. We will compute the final premium due when we determine your actual exposures. The estimated total premium will be credited against the final premium due and the First Named Insured will be billed for the balance, if any....
The policy says also that, "If Symbols 1,2,3,4,5, or are entered next to a coverage in Item Two of the Declarations, then you have coverage for autos acquire of the type described for the remainder of the policy period." You do not have coverage for any vehicle so acquired after the expiration of the policy period. To achieve coverage under symbol 2 requires the vehicle to be added to the schedule of covered autos. If this is not done the vehicle remains owned but it is not a covered auto. If the insured deletes a car by taking it out of service the audit for that policy period should reflect that automatically and the vehicle should be deleted from the schedule at renewal. No coverage remains and the newly acquired protection is not triggered if the vehicle is put back in service. Nor is there any right for the company to include this exposure as an audit charge. It is an owned vehicle but it no longer is a covered vehicle.
This is the hallmark difference between 1 and 2 symbols on the treatment of covered autos. Any auto means any auto under symbol one. The insured can not own an auto and take it out of service under symbol one. It remains covered regardless. Under symbol two this is not the case. Please do not equate ownership with coverage. It is under symbol one but is not under symbol 2.
Well, I guess we agree to disagree. I think the point is well taken that there is a chance for a claim of misrepresentation upon renewal by failure to acknowledge, or by concealing, the existence of autos.
In the situation originally addressed in the article, renewal wasn't an issue. There were a couple of autos (both were, in fact, on the schedule at policy inception) that were "removed" via phone call because the insured mistakenly thought they were being sold. However, they weren't sold.
Symbol 2 covers all owned autos and the policy doesn't address "removing" autos. At the time of loss, if you own it, it's covered. The comparison to Symbol 1 isn't pertinent because these were physical damage claims and Symbol 1 can only be used for liability coverage.
The only way to provide physical damage coverage on owned autos is Symbols 2, 3, 4, or 7. Symbol 7 is used for scheduled/specified autos (where vehicles can be added or deleted individually) and the others apply to owned autos period...either ALL owned autos (2) or private passenger (3) or non-PP (4).
In the absence of fraud, we believe that the Symbol 2 definition includes all autos owned at the time of loss.
The Section that he refers to on "newly acquired autos," applies to just that...newly acquired. The policy states that coverage applies for "newly acquired" until the policy terminates, because after the policy terminates the auto is no longer newly acquired to that policy.
To the renewal, it is an "owned auto," and is supposed to be listed but, if it is not, coverage is still present because Symbol 2 applies to all owned autos under that given policy. Only Symbol 7 refers to being listed in Item 3 of the Schedule of Covered Autos, which, if you read, states: "Schedule of Autos You Own." Symbol 2 never states the auto needs to be listed, just owned.
On the point of coverage after the expiration, no policy provides coverage for autos after the expiration of the policy. An expiring policy can not and does not dictate terms of the renewal policy. For this reason, the policy does not require or have any discussion of the treatment of newly acquired autos in the renewal policy term.
As to ownership not meaning coverage. This is true in a scheduled type of symbol. However, by its inclusion in the definition of the symbol, ownership does indicate covered auto status. In analyzing policy language, the courts have continuously stated that the drafters could use any language available to specify the limitations. In this case, the drafters said "Only autos that you own." They did not say, but could have said, "Any auto that you own AND tell us about or schedule." The furtherance in the definition is not restrictive in nature...it is illustrative in nature.
I actually had an agent who proposed coverage for a 60 unit fleet of tractor/trailer combos for a fuel hauler. The proposal showed all 60 units using their VINs. Because several weeks lapsed before a decision was made, the insured sold a tandem unit and replaced it with another but newer version. After reviewing other proposals and their renewal, the insured selected a new agent…the one who is referred to above.
During the course of implementing coverage the agency asked the insured to be sure nothing had changed since the proposal. The insured looked at the total number of units and compared that to their current total and said, “nothing has changed.” What the insured was looking at was the number 60 while the agency was looking at VINs.
The policy was issued with a schedule of autos (symbol 2 for liability and physical damage) as proposed and it was later audited by the insurer. The policy was renewed by the same insurer and within a few weeks of the renewal’s expiration there was an accident resulting in a fatality to a third party. The insurer initially indicated there was no coverage because the vehicle wasn’t listed on the schedule. It was at this time the agent called and I spoke to her.
After identifying the symbols involved I instructed she didn’t have a problem. Symbol 2 applies to all owned autos. She was grateful and I never heard from her regarding this issue again. I can only surmise my vast knowledge or expertise at faking same prevailed.