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Managing your risk by Michael Kelly

NCACC Risk Management Director Michael Kelly writes a regular column on risk management for CountyLines. With more than 41 years of risk management/ insurance experience, he holds the CPCU - Chartered Property & Casualty Underwriter, ARM-P - Associate in Risk Management for Public Entities, CRM - Certified Risk Manager, ARe - Associate in Reinsurance and CIC - Certified Insurance Counselor Professional Designations. He can be reached at michael.kelly@ncacc.org or (919) 719-1124.  For archives of this column click here.

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Mar 01

Understanding Symbols for Automobile Coverage

Posted on March 1, 2013 at 10:18 AM by Chris Baucom

Recently the insurance requirement and request of having Symbol 9 automobile coverage has surfaced from the Pool’s membership on a reoccurring basis. It has originated most often from a county Department of Social Services and centers around county employees using their own vehicles on behalf of the county while in the process of fulfilling their job responsibilities. So what is symbol 9 and how can you tell if its coverage design is included in your policy? 

First, understand that coverage symbols for automobile insurance originate through the insurance industry’s use of Acord forms1. Acord forms are standardized documents which include all basic applications for coverage, certificate of insurance forms, loss notice forms – basically all of the most commonly needed forms to facilitate the process of applying for, maintaining and servicing insurance clients in the retail market. In addition, they may be specific for a state and accordingly may differ slightly from state to state. Their use is designed to allow insurance agents/brokers/companies to request, provide and utilize standardized documents to improve accuracy in coverage design as well as diminish errors and misunderstandings. 

In North Carolina, this use of numerical symbols is part of the Acord 137 NC Commercial Automobile Application, and there are nine basic symbol classifications that may apply to the business auto application section. Their use clarifies how coverage is to be provided on a fleet of automobiles. They are designed to limit or broaden coverage depending on which numerical symbol is utilized in the application for coverage and quoting phases.

It might help to first clarify what are the nine numerical symbols that apply to business auto:

Symbol 1 - Denotes ANY AUTO and coverage is to apply to any auto used in behalf of the business or entity regardless of ownership (broadest in coverage design)

Symbol 2  – Denotes ALL OWNED AUTOS and coverage is to apply to any autos owned by the business or entity (according to vehicle’s title)

Symbol 3 – Denotes OWNED PRIVATE PASSENGER AUTOS only

Symbol 4 – Denotes OWNED AUTOS OTHER THAN PRIVATE PASSENGER (Trucks, etc.)
 
Symbol 5 – Denotes ALL OWNED AUTOS WHICH REQUIRE NO FAULT COVERAGE

Symbol 6 – Denotes OWNED AUTOS SUBJECT TO COMPULSORY UM LAW

Symbol 7 – Denotes AUTOS SPECIFIED IN SCHEDULE (If not listed then not covered)

Symbol 8 – Denotes HIRED AUTOS (Taxi, Group Transportation through a vendor, etc.)
 
Symbol 9 – Denotes NON-OWNED AUTOS

Specifically, symbol 9 is used to denote the extension of automobile liability coverage to third parties for bodily injury and/or property damage arising out of the use of a vehicle not owned by the business or entity but used in behalf of the business or entity. It does not include physical damage for the non-owned automobile, as this is completely the option of the automobile owner, (collision or comprehensive coverage) and as such, should be covered under his or her own policy. A frequent example of this county liability exposure is employees using their own personal, private passenger type automobiles in the course of their job, such as with the DSS. 

It is important to note the language as defined and described in an insurance policy is in fact NON-OWNED AUTO and not Symbol 9. However, by standardizing the application for coverage process through use of said symbols, a wide variance of automobiles to be covered (or not covered) is possible during the underwriting/quoting process. It is important to remember coverage specifics are defined in the actual insurance policy, not on a certificate of insurance or through an application for coverage.

Additionally, for non-owned automobiles, typically the coverage that is primary (first in line for payment) is the owner’s insurance policy written on the automobile owned by the employee; then the non-owned coverage applies, on an excess basis. It is for this reason best practice dictates a county risk management policy that states anyone using their own vehicle in their job is required to purchase a specific minimum level of automobile liability insurance. This should be reviewed for compliance along with the procurement of an MVR report providing past driving record history on an annual basis.

The main point is the requirement that your automobile insurance policy affords “symbol 9 coverage,” which means it has to include NON-OWNED AUTO coverage. This is the language to look for in a certificate of insurance in order to be in compliance. Non-owned automobile coverage is routinely included in virtually 99 percent of all commercial automobile policies, as to omit it could be considered an error in professional judgment. The exposure of non-owned automobiles in the operation of virtually all commercial businesses is so prevalent, most agents and brokers routinely include it as a standard matter of coverage composition. The additional cost is minimal and generally considered a “no-brainer” decision to include as a part of the commercial automobile policy.

Finally, as a footnote for clarification, if your owned automobiles are covered through the NCACC L&P Pool, the non-owned automobile coverage is included in our basic coverage document automatically.

 1Acord Forms "Association for Cooperative Operations Research and Development" are trademarks of ACORD and are proprietary.