Chapter 11 – Insuring Other Vehicles
Introduction
The Personal Auto Policy (PAP) provides adequate coverage for private passenger cars and pickups that are not used for business purposes. Obviously, these types of vehicles represent the vast majority of vehicles that are used today. With each family averaging two vehicles, the sheer number of personally owned vehicles is overwhelming. There are other types of vehicles that require discussion. We will cover the following:
Motorcycles - Coverage for motorcycles is usually found in the Specialty Insurance Company market. Due to the added risks associated with motorcycle operation, most insured would rather not offer coverage on motorcycles.
There are two common problems that insureds recognize in the operation of a motorcycle. First, the typical motorcycle operator is young and male, which means that there is a high frequency of claims. In short, these two characteristics make the insuring of motorcycles quite chancy to the insurer. Second, motorcycles, for the most part, are light in weight and offer the operator very little protection. This light weight offers absolutely little stability and makes the operation of the motorcycle
difficult. Thus, the operation of a motorcycle creates a hazardous condition to its operator. Injuries are more often quite serious because motorcycle riders are not as protected as an operator of an automobile is. Automobiles offer padded surface, air bags, seat belts, etc., while a motorcycle offers none. Specialty insurance companies will offer Liability and Physical Damage but are extremely reluctant to offer Medical Payments Coverage.
Many states have exempted motorcycles from No-Fault Laws because the premiums for Medical Payments Coverage would be extraordinarily high. Most cyclists simply could not afford such coverage. In these states, the motorcycle owner is treated as though the No-Fault Law did not exist and must operate the vehicle with at least the minimum standard insurance.
On a rare occasion, Motorcycle Coverage is available from a Standard Insurance Company. An adult with an automobile or two and a Homeowners Policy, who then purchases a motorcycle would have far less trouble insuring the motorcycle than a 17-year-old male with no existing coverage with the insurer. Keep in mind, that there are situations where even the Specialty Insurance Companies will not issue insurance and thus, coverage would have to be offered by the State's Automobile Insurance Plan, better known as the Assigned Risk Pool.
Applications and policy forms are not uniform for Motorcycle Coverage. Many will contain special provisions or endorsements, which will differ from insurer to insurer.
Recreational and Customized Vehicles - With the popularity of recreational vehicles, it is important to be familiar with the following:
The term "recreational vehicles" is a very broad area. Although standard policies, such as Homeowners and the Personal Auto Policy do make some provisions for covering some recreational vehicles, many of these vehicles are often covered under Non-Standard Policies that are issued by Specialty Insurers.
Homeowner’s Polices provides $500 of coverage for damage to trailers not used with watercraft. This description would include a camper trailer but Collision Coverage is not included and the dollar amount will not be adequate for most trailers.
With a Homeowners Endorsement, Coverage C - increased special Limits of Liability is utilized to increase most of the other internal limits on specified property under the Homeowners Policy. Unfortunately, it does not mention trailers.
The Homeowners Policy also provides some Liability Coverage for a camper trailer except when being towed by a motor vehicle. The Personal Automobile Policy provides Liability Coverage while a trailer is being towed by an insured motor vehicle. Trailers may also be insured for Physical Damage under the Personal Automobile Policy by listing them on the declarations page and paying the proper premium for them. Physical Damage Coverage for recreational vehicles is written on a Stated Amount Basis by attaching the coverage for damage to your Auto (Stated Amount) Endorsement to the Personal Auto Policy.
Camper bodies that are designed for use with pickup trucks may also be covered by Physical Damage under the Personal Auto Policy. They are automatically covered under that policy for Liability when being hauled by an insured vehicle. They are covered for Liability under the Homeowners Policy when not being hauled by a motor vehicle.
The only motorized vehicles covered under the homeowners forms for Physical Damage are those that service the insured premises and are not licensed for road use and those designed for assisting the handicapped. Vehicles for the Handicapped C-Battery Powered Wheelchairs are covered on and off the residence premises while golf carts are covered off-premises when being used for golf.
Snowmobile - A Snowmobile Endorsement can be used to provide off-premises Liability Coverage under Homeowners Policies for specified snowmobiles provided they are not subject to motor vehicle registration. Coverage would not be available if the snowmobile is used to carry persons for a fee or used for business purposes. Also, no coverage would be available if the snowmobile was rented to others or used in an organized race.
Other Snowmobile Coverages - Some Specialty Insurers offer policies specifically designed to provide Liability and Physical Damage coverage for snowmobiles and other recreational vehicles. Such policies are usually modifications of Automobile Policies. Some polices will require that the snowmobile be used principally off public highways and only on ice and snow. Others will be less restrictive.
Some polices will cover all equipment used exclusively with the snowmobile, while others restrict the coverage to equipment permanently attached to the snowmobile. Some polices will provide Physical Damage Coverage on a trailer used to transport the snowmobile, while others do not. The exclusions will also vary widely from one insurance company to another.
Miscellaneous Type Vehicle Endorsement
The Miscellaneous Type Vehicle Endorsement can be used to provide both Liability and Physical Damage Coverage for motorcycles, motor homes, golf carts and other miscellaneous vehicles. Physical Damage Coverage is provided on a Stated Amount Basis.
Coverage on Pickup Camper Bodies, Camper Trailers, Travel Trailers, Motor Homes
Many insurance companies modify Automobile Policies to meet the needs of owners of the above vehicles. Such policies provide Physical Damage Coverage on the following:
Personal Property and household furnishings used in camping are covered under the Personal Effects Insuring Agreement of such policies.
These specialized policies oftentimes are extended to provide Liability Coverage for non-motorized vehicles while parked. This coverage would only be needed if the insured does not have Comprehensive Personal Liability or a Homeowners Policy. Also, Liability Coverage for non-motorized vehicles while being towed is provided under the Liability Insurance on the towed vehicle.
The Special Recreational Vehicle Polices provide Liability Coverage on motorized vehicles both while being operated and being parked. Comprehensive Physical Damage Coverage and Collision Coverage are provided on a Stated Amount Basis for the recreational vehicle and its equipment. Personal Property Coverage usually is for specified perils: frequently fire, extended coverage, vandalism, malicious mischief and flood.
The Customized Equipment Coverage Endorsement can be used to provide Stated Amount Physical Damage Coverage under a Personal Auto Policy on an All-Risks Basis for customizing equipment such as carpeting, insulation, furniture cooking or sleeping facilities, bars, height extended roofs, murals, paintings and other similar facilities. Keep in mind, these items may be covered under the Personal Auto Policy Covered Property Coverage Endorsement. Amount producing equipment and records or tapes for use are also excluded, though these can be covered under the coverage for tapes, records, or other devices endorsement to the PAP.
Sound reproducing equipment is covered automatically under the Personal Auto Policy if it is permanently attached to the vehicle. Sound receiving and transmitting equipment, which would include CB radios, two-way mobile radio, mobile telephones, etc., would also be excluded but may be insured by attaching the PAP coverage for sound receiving and transmitting equipment endorsement if the equipment is permanently attached to the vehicle.
Classic and Antique Autos - Antique automobiles are usually over 25 years old while classic cars may be less than 25 year olds but possess special value because of unique styling or mechanical features.
Liability Coverage for Antique and Classic Cars does not present any special problems. Rate credits are usually given for Liability Coverage for antique cars driven only in parades and special events. There could be problems when the insured attempts to have Physical Damage Coverage on the Antique and Classic Auto. These problems stem from the fact that these cars generally are appreciating in value rather than depreciating. The definition of cash value - replacement cost less depreciation - does not play a role since the vehicles current value has probably reached the point where it exceeds the original cost new.
A solution to this problem would be to use the PAP Stated Amount Endorsement to establish the vehicle value. It is most important to have an appraisal done, since the Endorsement permits the company to pay either the Stated Amount or the Actual Cash Value, whichever is less. By having a current appraisal; potential valuation problems will be minimal.
Mini Bikes and Mopeds - Mini bikes are small editions of the motorcycle, which are designed for off-road use. They are often used by children (aged 10-16) and usually utilized by groups exploring trails.
Mopeds more closely resemble bicycles and are operated by a small motor or by merely pedaling. Unlike the mini bikes, mopeds may be used on public roads and, like mini bikes, are not licensed. Mopeds do not have turn signals, battery operated lights or other required standard features of motorcycles. If licensing is required, safety accessories (lights and turn signals) usually must be added.
There is no coverage for either mini bikes or mopeds under the unendorsed PAP. There is limited coverage provided under a Homeowner's Policy but the coverage is restricted to on-premises use. This limited coverage might be of some value to the owner of a mini bike but not for a moped owner. Also, such protection is limited to Liability Coverage. Of course, this lack of coverage for off-premises use can create a serious, untreated exposure for the insured.
If not endorsed to the Personal Auto Policy, the best method of insuring mini bikes and mopeds is to obtain Motorcycle Coverage. Most insurance companies that write Motorcycle Insurance will also quote rates for mini bikes and mopeds.
Chapter 11- Review Questions
1. Other types of vehicles that may be cov-ered would be?
A. antique autos
B. moped’s
C. mini bikes
D. all of the above
2. Coverages for motorcycles are usually found in what type of insurance market?
A. Standard
B. Rated
C. Specialty
D. None of the above
3. Which of the following is not considered a recreational vehicle?
A. speed boat
B. snowmobile
C. campers
D. motor homes
4. Many Automobile Policies provide Phys-ical Damage Coverage for which of the following?
A. permanent equipment in a camper
B. the vehicle itself
C. furniture used with the vehicle
D. all of the above
5. These vehicles are often referred to as “small editions” of the motorcycle?
A. trailers
B. mini bikes
C. antique mopeds
D. all of the above
Answers
1. D
2. C
3. A
4. D
5. B