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Section III -- Acts, Errors or Omissions Liability Coverages

Actual Policy Language

Explanation

SECTION III – ACTS, ERRORS OR OMISSIONS LIABILITY COVERAGES

SECTION III – ACTS, ERRORS OR OMISSIONS LIABILITY COVERAGES

This section of the policy covers claims arising out of a dealer’s wrongful -- but unintentional -- acts, errors or omissions in conducting business.

A.  Coverage

We will pay all sums that an "insured" legally must pay as damages because of any "act, error or omission" of the "insured" to which this insurance applies and arising out of the conduct of your "auto dealer operations", but only if the "act, error or omission" is committed in the coverage territory during the policy period.

We will have the right and duty to defend any "insured" against a "suit" asking for these damages. However, we have no duty to defend any "insured" against a "suit" seeking damages for "acts, error or omissions" to which this insurance does not apply. We may investigate and settle any claim or "suit" as we consider appropriate. But:

1. The amount we will pay for damages is limited as described in Paragraph E. Limits Of Insurance And Deductible; and

2. Our duty to defend or settle ends when we have used up the applicable limit of insurance in the payment of judgments or settlements.

No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under Paragraph D. Supplementary Payments.

 

A. Coverage - Insuring Agreement

Similar to the other liability sections of this policy, the insuring agreement details the insurers obligations in defending claims and indemnifying damages arising out of covered exposures.

In this case, covered exposures are detailed within the definition of Act, Error or Omission, including:

  • Failure to comply with consumer disclosure laws;
  • Errors in the dealership's capacity as a licensed insurance agent or broker in the offering of certain types of insurance products; and
  • Defects in title in connection with the sale of lease of an auto.

Endorsement CA 25 63 (Exclusion - Acts, Errors or Omissions Liability Coverage) deletes this section.

Endorsement CA 25 64 (Exclusion of Specified Acts, Errors or Omissions Liability Coverages) deletes coverage for one or more of the covered acts specified in the definition of Act, Error or Omission.

Endorsement CA 25 66 (Customer Complaint Legal Defense Coverage) adds coverage for legal expenses to defend the insured against a customer complaint.

C.  Who Is An Insured

The following are "insureds" for "acts, errors or omissions":

1. You.

2. Your partners and their spouses, if you are a partnership, but only with respect to the conduct of your "auto dealer operations".

3. Your members, if you are a limited liability company, but only with respect to the conduct of your "auto dealer operations". Your managers are also "insureds", but only with respect to their duties as your managers.

4. Your "executive officers" and directors, if you are an organization other than a partnership or limited liability company, but only with respect to their duties as your officers or directors. Your stockholders are also "insureds", but only with respect to their liability as stockholders.

5. Your "employees", other than either your "executive officers" (if you are an organization other than a partnership or limited liability company) or your managers (if you are a limited liability company), but only for acts within the scope of employment by you or while performing duties related to the conduct of your "auto dealer operations".

6. Any "auto" dealership that is acquired or formed by you, other than a partnership or limited liability company, and over which you maintain ownership or majority interest, will qualify as a Named Insured if there is no other similar insurance available to that "auto" dealership. However:

a. Coverage under this provision is afforded only until the 90th day after you acquire or form the "auto" dealership or the end of the policy period, whichever is earlier; and

b. Coverage does not apply to "acts, errors or omissions" that were committed before you acquired or formed the "auto" dealership.

No person or organization is an "insured" with respect to the conduct of any current or past partnership or limited liability company that is not shown as a Named Insured in the Declarations.

C.  Who Is An Insured

These is generally the same list of covered persons found in the General Liability Coverages section.

Endorsement
CA 25 53 (Exclusion - Newly Acquired or Formed Auto Dealership) eliminates the automatic coverage for newly acquired or formed auto dealerships.

D.  Supplementary Payments

With respect to "Acts, Errors Or Omissions" Liability Coverage, we will pay for the "insured":

1. All expenses we incur.


2. The cost of bonds to release attachments in any "suit" against the "insured" we defend, but only for bond amounts within our Limit of Insurance.

3. All reasonable expenses incurred by the "insured" at our request, including actual loss of earnings up to $250 a day because of time off from work.

4. All court costs taxed against the "insured" in any "suit" against the "insured" we defend. However, these payments do not include attorneys' fees or attorneys' expenses taxed against the "insured".

5. All interest on the full amount of any judgment that accrues after entry of the judgment in any "suit" against the "insured" we defend; but our duty to pay interest ends when we have paid, offered to pay or deposited in court the part of the judgment that is within our Limit of Insurance.

These payments will not reduce the Limit of Insurance.

D.  Supplementary Payments

This is generally the same list of supplementary payments found in the General Liability Coverages section. They are paid outside the limit of liability.

E.  Limit Of Insurance And Deductible

1. Regardless of the number of:

a. "Insureds";

b. Claims made or "suits" brought;

c. Persons or organizations making claims or bringing "suits"; or

d. "Acts, errors or omissions",

the "Acts, Errors Or Omissions" Liability Aggregate Limit shown in the Declarations is the most we will pay for all damages because of "acts, errors or omissions" under Section III.

2. Damages payable under the Limits of Insurance for "Acts, Errors Or Omissions" Liability Coverage are not payable under any applicable Limits of Insurance under Section I – Covered Autos Coverages or Section II – General Liability Coverages.

3. Our obligation to pay damages applies only to the amount of damages in excess of any deductible amount stated in the Declarations as applicable to this coverage. The Limits of Insurance for "Acts, Errors Or Omissions" Liability Coverage will not be reduced by the amount of this deductible.

To settle a claim or "suit", we may pay all or any part of the deductible. If this happens, you must reimburse us for the deductible or that part of the deductible that we paid.

4. The "Acts, Errors Or Omissions" Liability Aggregate Limit applies separately to each consecutive annual period and to any remaining period of less than 12 months, starting with the beginning of the policy period shown in the Declarations, unless the policy period is extended after issuance for an additional period of less than 12 months. In that case, the additional period will be deemed part of the last preceding period for purposes of determining the "Acts, Errors Or Omissions" Liability Aggregate Limit.

E. Limit of Insurance and Deductible

The limit for this section is shown in the Declarations.

A deductible is shown in the Declarations and applies to covered claims in this section.