Laurie Infantino AFIS, CISC, CIC, CRIS, ACSR, CISR
President of Insurance Community Center
Here is the simple answer without looking at the lease.
1) The lease will be where it will indicate if the tenant has to insure the TIB’s whether or not they installed them OR if they were installed by a prior tenant.
2) If the lease is clear that the tenant is only responsible for TIB’s that they installed then that is what they would insure.
3) In that case the TIB’s that were installed by the prior tenant, as they are permanent additions, would be insured by the building owner under building and the building owner would increase the amount of the building amount accordingly.
4) Even if the lease requires that the prior TIB’s be insured by the new tenant (your insured) it is very difficult to insure them on the tenant’s form because they did not pay for the installations or “acquire” them.
Again, it all rests on what the lease requires the tenant to do in terms of insure them and/or repair them in the case of a loss.
2 - Our Insured is a manufacturer of truck bodies. The Insured's driver, while operating a customer's vehicle, hit a parked car on a public street. The damage to the customer's vehicle was minimal and was taken care of by the Insured. Had the damage been major, the Garagekeepers coverage would have responded to the damage to the customer's vehicle. The issue is with the Property Damage to the third party's vehicle. Because the insured was operating a customer's vehicle, this is technically a non-owned auto and the claims adjuster is pointing to the other insurance condition under the auto policy, stating that the customer's insurance should be primary (in absence of a contract). It has always been our assumption that because we had symbol 1 on the policy, that the liability for the operation of customer's vehicle would be covered as primary. We never intended that a customer would be responsible for the Insured's operation of their vehicles. If you look at the scenario that you take your vehicle to a dealer or auto service shop. If in the course of test driving your vehicle, the dealer or auto service shop's employee has a collision with another vehicle and does property damage, or even worse, causes a bodily injury, using the coverage forms we have on our policy, you would be held primarily liable for the property damage and bodily injury to that third party. This can't be right. How do we amend our policy to cover, on a primary basis, the third party liability while the insured is using a customer's vehicle? Can we alter or delete the "Other Insurance Condition"? Can we add a symbol 10, described as "customers vehicles, while being used by or in the Insured's care, custody and control on a primary basis.
Answer by Marjorie Segale, AFIS, CISC, CIC, RPLU, CRIS, ACSR, CISR
Unfortunately, none of the Symbols, including Symbol 1, have any impact on the Other Insurance Clause. The language from that section is:
5. Other Insurance
a. For any covered "auto" you own, this coverage form provides primary insurance. For any covered "auto" you don't own, the insurance provided by this coverage form is excess over any other collectible insurance. However, while a covered "auto" which is a "trailer" is connected to another vehicle, the Liability Coverage this coverage form provides for the "trailer" is.
(1) Excess while it is connected to a motor vehicle you do not own.
(2) Primary while it is connected to a covered "auto" you own.
b. For Hired Auto Physical Damage Coverage, any covered "auto" you lease, hire, rent or borrow is deemed to be a covered "auto" you own. However, any "auto" that is leased, hired, rented or borrowed with a driver is not a covered "auto."
c. Regardless of the provisions of Paragraph a. above, this coverage form's Liability Coverage is promary for any liability assumed under an insured contract."
The rationale behind this is the old saying “insurance follows the car” and your insured’s employee is a permissive driver of the customer’s car, thus invoking the customer’s insurance as primary. To many of us and certainly to your insured and their customer, this makes no sense in the context of a business that involves driving a customer’s vehicle. So, whether or not it makes any sense, what can be done to correct this? Unfortunately, there is no standard endorsement by which to do this, so it becomes a very subjective decision and based upon the insurance company’s willingness to make a change to the coverage. I think that the easiest way to fix this is to add a “primary-non-contributory” endorsement to the policy that would have to apply to “Your customers’ vehicles while in your care, custody or control”. Many carriers have published their own endorsement for primary wording but some combine it with Additional Insured wording on the Auto form which is not likely to make your underwriter happy. If that doesn’t work, you could go the route of Symbol 10 – the problem is in order to get the Other Insurance condition to work correctly, you would have to treat the customer vehicle as an Owned Auto and that means substantial premium involved, even if the underwriter would be willing.
This has been a mixed bag of bad and good, but I hope that this lends clarity. Please let us know what happens.