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Section V -- Definitions

Actual Policy Language

CA 00 25



A.  "Accident" includes continuous or repeated exposure to the same conditions resulting in "bodily injury" or "property damage". 

A. Accident

To be a covered loss, the event causing injury or damage does not have to be sudden. 

B.  "Act, error or omission" means any actual or alleged negligent act, error or omission committed by an "insured" in the course of your "auto dealer operations" arising:

1. Out of an "insured's" failure to comply with any local, state or federal law or regulation concerning the disclosure of credit or lease terms to consumers in connection with the sale or lease of an "auto" in your "auto dealer operations", including, but not limited to, the Truth In Lending and Consumer Leasing Acts;

2. Out of an "insured’s" failure to comply with any local, state or federal law or regulation concerning the disclosure of accurate odometer mileage to consumers in connection with the sale or lease of an "auto" in your "auto dealer operations";

3. In an "insured's" capacity as an insurance agent or broker in the offering, placement or maintenance of any "auto" physical damage, auto loan/lease gap, credit life or credit disability insurance sold in connection with the sale or lease of an "auto" in your "auto dealer operations", but only if the "insured" holds a valid insurance agent or broker license at the time the "act, error or omission" is committed, in the jurisdiction in which your "auto dealer operations" is located, if required to do so by such jurisdiction; and

4. Out of a defect in title in connection with the sale or lease of an "auto" in your "auto dealer operations".

B. Act, Error or Omission

This definition describes the claims that are covered by Section III - Acts, Errors or Omissions Liability Coverages, dealing with claims arising out of a dealer’s wrongful – but unintentional – acts, errors or omissions in conducting business.

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 this definition.

C.  "Advertisement" means a notice that is broadcast or published to the general public or specific market segments about your goods, products or services for the purpose of attracting customers or supporters. For the purposes of this definition:

1. Notices that are published include material placed on the Internet or on similar electronic means of communication; and

2. Regarding web sites, only that part of a web site that is about your goods, products or services for the purposes of attracting customers or supporters is considered an advertisement.

C. Advertisement

The advertising injury coverage (Coverage B of Section II - General Liability Coverages) applies only to advertising goods, products or services to the general public or specific markets. The advertisement must be designed to attract customers. This would not include other types of advertisements, such as employment ads, instruction manuals, and the like. The definition specifically includes reference to electronic advertising, such as the insured’s web-site.

D.  "Auto" means a land motor vehicle, "trailer" or semitrailer. 

D. Auto

There is no distinction in the auto dealers policy between "autos" and "mobile equipment." Since it is a combination general and auto liability policy, any motorized land vehicle is covered as long as it is used in garage operations, subject to the selected covered auto symbol. If Symbol 27 is used, mobile equipment must be scheduled.
E. "Auto dealer operations" means the ownership, maintenance or use of locations for an "auto" dealership and that portion of the roads or other accesses that adjoin these locations. "Auto dealer operations" also include all operations necessary or incidental to an "auto" dealership.

E. Auto Dealer Operations

This definition is the key to understanding the scope of coverage on the auto dealers policy. It is one of the primary reasons that coverage is more restrictive on this policy than is available on the CGL, since coverage is limited to "auto dealer operations" and does not automatically pick up coverage for non-dealer operations or locations.

The defined phrase appears only in Section II - General Liability Coverages, so it does not limit any coverage provided by Section I - Covered Autos Coverages.

The definition includes two parts:

(1) Locations For Auto Dealership. Nothing here or elsewhere restricts coverage to those locations listed in Item Three of the Declarations, so newly acquired and temporary locations would be covered for liability. However, the listed locations as well as any other locations must be involved in an "auto dealership," a term which is not defined in the policy. Perhaps the best reference on which to judge is the list of risks eligible for an auto dealers coverage form (see Eligibility), although an auto dealership could certainly encompass much more than just selling vehicles. As for non-dealership business operations conducted on the same premises, see (2) below.

It may be inferred that "use" of locations for an auto dealership includes coverage for liability arising out of products and completed operations. The nature of several policy exclusions supports this implication.

(2) Necessary Or Incidental Operations. The policy itself provides no guidance as to the meaning of these words and therefore clouds the true scope of the policy in uncertainty. A dictionary defines "necessary" as "essential; needed for the continued existence of something" and "incidental" as "of a minor, casual or subordinate nature." This is truly an ambiguous situation, where the broadest possible interpretation in the insured's favor should be given. There are many cases on record where the insured and the insurer thought enough of their respective arguments to take it to court.

See technical report Avoiding Gaps in Auto Dealers Coverage Form.

Endorsement CA 25 07 (Locations and Operations Not Covered) excludes locations or operations described on the endorsement.

F.  "Bodily injury" means bodily injury, sickness or disease sustained by a person including death resulting from any of these. 

F. Bodily Injury

The intent of this definition is to require some physical manifestation of injury before the policy will respond to a claim for damages. Psychological or emotional distress manifested by bodily harm may be covered, but most Texas court decisions rule out coverage for such injuries to third parties as the result of bodily harm to another. In any event, the company would have to defend the insured, pending a court decision regarding the nature of the damages.

G. "Covered pollution cost or expense" means any cost or expense arising out of:

1. Any request, demand, order or statutory or regulatory requirement that the "insured" or others test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of "pollutants"; or

2. Any claim or "suit" by or on behalf of a governmental authority for damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying or neutralizing, or in any way responding to or assessing the effects of "pollutants".

"Covered pollution cost or expense" does not include any cost or expense arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":

a. That are, or that are contained in any property that is:

(1) Being transported or towed by, handled, or handled for movement into, onto or from the covered "auto";

(2) Otherwise in the course of transit by or on behalf of the "insured";

(3) Being stored, disposed of, treated or processed in or upon the covered "auto"; or

b. Before the "pollutants" or any property in which the "pollutants" are contained are moved from the place where they are accepted by the "insured" for movement into or onto the covered "auto"; or

c. After the "pollutants" or any property in which the "pollutants" are contained are moved from the covered "auto" to the place where they are finally delivered, disposed of or abandoned by the "insured".

Paragraph a. above does not apply to fuels, lubricants, fluids, exhaust gases or other similar "pollutants" that are needed for or result from the normal electrical, hydraulic or mechanical functioning of the covered "auto" or its parts, if the "pollutants" escape, seep, migrate, or are discharged, dispersed or released directly from an "auto" part designed by its manufacturer to hold, store, receive or dispose of such "pollutants".

Paragraphs b. and c. above do not apply to "accidents" that occur away from premises owned by or rented to an "insured" with respect to "pollutants" not in or upon a covered "auto" if:

(1) The "pollutants" or any property in which the "pollutants" are contained are upset, overturned or damaged as a result of the maintenance or use of a covered "auto"; and

(2)        The discharge, dispersal, seepage, migration, release or escape of the "pollutants" is caused directly by such upset, overturn or damage. 

G. Covered Pollution Cost or Expense

This definition applies to the second paragraph of the insuring agreement for Covered Autos Liability Coverage. The insuring agreement and this definition make it perfectly clear that pollution costs and expenses are covered if they result from a covered pollution claim involving the ownership, maintenance or use of a covered auto. 

This includes a specific grant of coverage for costs or expense arising out of a government demand to "test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of pollutants" when there is a covered pollution accident.

There are two exceptions to the pollution exclusion that can trigger this coverage and they are re-stated here as part of the definition:  (1) escape of pollutants which are a part of the auto's operation, such as oil leakage or injury arising out of exhaust fumes, and (2) pollution occurring as a result of damage to property containing a pollutant by a covered auto; e.g., a covered auto running into a gasoline storage tank.
H. "Customer's auto" means a land motor vehicle, "trailer" or semitrailer lawfully within your possession for service, repair, storage or safekeeping, with or without the vehicle owner's knowledge or consent. A "customer's auto" also includes any such vehicle left in your care by your "employees" and members of their households who pay for services performed.

H. Customer’s Auto

This term is used in the Garagekeepers Coverage section and supports the language used for Symbol 30 to describe the types of autos covered in the Garagekeeper’s section.

I. "Diminution in value" means the actual or perceived loss in market value or resale value which results from a direct and accidental "loss".

I. Diminution in Value

This term is used in the Physical Damage Coverage section to exclude such losses in excess of the actual cash value of a covered loss.
J. "Employee" includes a "leased worker". "Employee" does not include a "temporary worker".

J. Employee

This definition clarifies that a "leased worker" (as defined below) is considered an employee. The effect is twofold.

First, a leased worker is included as an insured just as are other employees, subject to the limitations imposed on these persons in the "Who Is An Insured" sections of the policy.

Second, the employee injury exclusion applies to leased workers while working for the insured.

Endorsement CA 23 25 (Coverage for Injury to Leased Workers) amends the definition to delete leased workers, with respect only to the employers' liability exclusion, so that injury to a leased worker is covered.
K. "Executive officer" means a person holding any of the officer positions created by your charter, constitution, by-laws or any other similar governing document. 

K. Executive Officer

The policy provides an important coverage advantage to executive officers compared to employees with regard to the exclusion of injury to fellow employees in the "Who Is An Insured" section of Section II - General Liability Coverages.

L.  "Impaired property" means tangible property, other than your "product" or "work you performed", that cannot be used or is less useful because:

1. It incorporates your "product" or "work you performed" that is known or thought to be defective, deficient, inadequate or dangerous; or

2. You have failed to fulfill the terms of a contract or agreement;

if such property can be restored to use by the repair, replacement, adjustment or removal of your "product" or " work you performed" or your fulfilling the terms of the contract or agreement.

L. Impaired Property

This term is used in Exclusion "j" (of Section II - General Liability Coverages, A - Bodily Injury and Property Damage Liability) to block loss of use claims that are the result of the failure of the insured's work or product to perform as expected.

To be "impaired property" the property must meet two tests:

  1. It cannot be used or is less useful because it includes the insured's product or work, and
  2. It can be restored to use by simply removing the insured's bad product or repairing poor work.

For instance, a vehicle that fails to operate because the insured improperly installed a motor, or installed a motor that doesn't work, is impaired property.

The other part of the definition refers to the insured's failure to perform a contractual agreement, such as failure to install the motor within the agreed time frame.
M. "Insured" means any person or organization qualifying as an insured in the Who Is An Insured provision of the applicable coverage. Except with respect to the Limit of Insurance, the coverage afforded applies separately to each insured who is seeking coverage or against whom a claim or "suit" is brought.

M. Insured

Each liability section (Covered Autos, Garagekeepers, General Liability, Acts, Errors or Omissions) includes its own provision for Who Is An Insured.

This definition includes a provision for the separation of insureds except with regard to the limits of liability. This allows for coverage of one insured for action brought by another insured, unless an exclusion applies.

The separation also makes the words "the insured" very important in that an exclusion applicable to "the insured" would leave coverage in place for any other insured who is not subject to the exclusion. When the words "any insured" or "an insured" are used, the exclusion eliminates coverage for all insureds.

N.  "Insured contract" means:

1. A lease of premises;

2. A sidetrack agreement;

3. Any easement or license agreement, except in connection with construction or demolition operations on or within 50 feet of a railroad;

4. An obligation, as required by ordinance, to indemnify a municipality, except in connection with work for a municipality;

5. That part of any other contract or agreement pertaining to your "auto" dealership (including an indemnification of a municipality in connection with work performed for a municipality) under which you assume the tort liability of another to pay for "bodily injury" or "property damage" to a third party or organization. Tort liability means a liability that would be imposed by law in the absence of any contract or agreement;

6. An elevator maintenance agreement; or

7. That part of any contract or agreement entered into, as part of your "auto" dealership, pertaining to the rental or lease, by you or any of your "employees", of any "auto". However, such contract or agreement shall not be considered an "insured contract" to the extent that it obligates you or any of your "employees" to pay "property damage" to any "auto" rented or leased by you or any of your "employees".

An "insured contract" does not include that part of any contract or agreement:

a. That indemnifies an architect, engineer or surveyor for injury or damage arising out of:

(1) Preparing, approving, or failing to prepare or approve, maps, shop drawings, opinions, reports, surveys, field orders, change orders or drawing and specifications; or

(2) Giving directions or instructions, or failing to give them, if that is the primary cause of the injury or damage.

b. That indemnifies any person or organization for damage by fire to premises rented or loaned to you or temporarily occupied by you with permission of the owner.

c. That pertains to the loan, lease or rental of an "auto", to you or any of your "employees", if the "auto" is loaned, leased or rented with a driver.

d. That holds a person or organization engaged in the business of transporting property by "auto" for hire harmless for your use of a covered "auto" over a route or territory that person or organization is authorized to serve by public authority.

e. That indemnifies a railroad for "bodily injury" or "property damage" arising out of construction or demolition operations within 50 feet of any railroad property and affecting any railroad bridge or trestle, tracks, roadbeds, tunnel, underpass or crossing.

N. Insured Contract

The types of contracts listed here usually contain a "hold harmless" clause in which the insured agrees to indemnify someone for defense costs and sums for which the other party may be legally liable.  This is a combination of the definition of insured contracts and exceptions found in the CGL and BAP policies.

The agreement by the insurance company to pay on behalf of the insured for assumed tort liability does not necessarily require them to actively defend the other party. Covering the insured's contractual liability is not the same as if the other party were an additional insured, making them a party to the benefits of the insurance policy directly.

Even though auto lease and rental agreements are covered, coverage would extend only to the hold harmless clause in the rental agreement in which the lessee agrees to indemnify the lessor for expenses associated with third party liability in the event of an accident. It would not cover the agreement to be responsible for damage to the rented auto. See the Business Auto technical report "Rental Cars" for a complete discussion on how the policy responds to the rental situation.
O. "Leased worker" means a person leased to you by a labor leasing firm under an agreement between you and the labor leasing firm, to perform duties related to the conduct of your business. "Leased worker" does not include a "temporary worker".

O. Leased Worker

This definition distinguishes a leased worker from a temporary worker (see definition of "Employee" above and "Temporary Worker" below).

P.  "Loading or unloading" means the handling of property:

1. After it is moved from the place where it is accepted for movement into or onto an aircraft, watercraft or "auto";

2. While it is in or on an aircraft, watercraft or "auto"; or

3. While it is being moved from an aircraft, watercraft or "auto" to the place where it is finally delivered;

but "loading or unloading" does not include the movement of property by means of a mechanical device, other than a hand truck, that is not attached to the aircraft, watercraft or "auto".

P. Loading and Unloading

Although liability arising out of the use of "autos" is excluded in Section II - General Liability Coverages, the process of loading or unloading a vehicle creates a gray area of coverage between operations (Section II) and autos (Section I). This definition clarifies when the auto exposure begins and ends.

See the Business Auto technical report "Loading and Unloading."
Q. "Loss" means direct and accidental loss or damage. But for Garagekeepers Coverage only, "loss" also includes any resulting loss of use.

Q. Loss

The word "loss" is used in the Physical Damage Coverage section and the Garagekeepers Coverage section.

A loss covered in the Garagekeepers Coverage section includes coverage for the loss of use of the customer's auto, such as payment for rental of a substitute vehicle while damage to the customer's auto is being repaired.

R.  "Personal and advertising injury" means injury, including consequential "bodily injury", arising out of one or more of the following offenses:

1. False arrest, detention or imprisonment;

2. Malicious prosecution;

3. The wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies, committed by or on behalf of its owner, landlord or lessor;

4. Oral or written publication, in any manner, of material that slanders or libels a person or organization or disparages a person's or organization's goods, products or services;

5. Oral or written publication, in any manner, of material that violates a person's right of privacy;

6. The use of another's advertising idea in your "advertisement"; or

7. Infringing upon another's copyright, trade dress or slogan in your "advertisement".

R. Personal Injury

Personal and Advertising Injury (Coverage B in Section II - General Liability Coverages) is based upon offenses which can be described by one of these "named perils" that do not involve physical harm. If the suit does not mention one of these perils, coverage does not apply. Notice, in particular, that discrimination is not mentioned here. Some umbrellas will cover limited forms of discrimination.

The inclusion here of "consequential bodily injury" and exclusion "n" under Coverage A prevents recovery under both Coverage A and Coverage B for bodily injury resulting from a personal injury incident. Example: Suspected shoplifter is detained and restrained, resulting in a claim alleging both bodily injury and false arrest or imprisonment.

1. False Arrest: This peril could include any restraint of a person's right to freedom, such as a store owner detaining a person accused of shoplifting.

2. Malicious Proscecution: This peril refers to initiating civil or criminal prosecution in malice without probable cause.

5. Invasion of Privacy: This peril would cover the unauthorized release of confidential information about a person, in writing or orally. It does not cover actions which are alleged to invade a person's right to privacy, such as construction which affects the privacy of neighboring property, or interference with personal relationships or activities.

6. Advertising Ideas: To be covered, the wrongful use of another's advertising idea must be in an advertisement, as defined above.

7. Infringement: This peril specifically deals with "piracy" or "plagiarism" of a copyright trade dress or slogan, but only within an advertisement, as defined above.

S. "Pollutants" means any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed. 

S. Pollutants

Court cases involving the pollution exclusion and the definition of pollutants have focused on the words "irritant or contaminant" in determining whether a substance is a pollutant, and thus the subject of the exclusion. Because this definition is broad enough to exclude even some typical premises and operations hazards, the pollution exclusions contains several important exceptions, including contractor operations, hostile fires, heating equipment, and "functional" pollutants in the normal operation of vehicles.

T. "Products" includes:

1. The goods or products made or sold in an "auto" dealership by:

a. You; or

b. An "auto" dealership you have acquired; and

2. The providing of or failure to provide warnings or instructions. 

T. Products

The coverage for products liability is limited to products sold in a the insured's auto dealership, as well as products sold in an auto dealership acquired by the insured. 
U. "Property damage" means damage to or loss of use of tangible property. 

U. Property Damage

Property damage liability includes loss of use of tangible property, even if it is not itself damaged. For example, the policy would cover business interruption losses claimed by businesses shut down as a result of a negligent fire on the premises.

V.  "Suit" means a civil proceeding in which:

1. Damages because of "bodily injury", "property damage", "personal and advertising injury" or "acts, errors or omissions"; or

2. A "covered pollution cost or expense",

to which this insurance applies, are claimed.

"Suit" includes:

a. An arbitration proceeding in which such damages or "covered pollution costs or expenses" are claimed and to which the "insured" must submit or does submit with our consent; or

b. Any other alternative dispute resolution proceeding in which such damages or "covered pollution costs or expenses" are claimed and to which the "insured" submits with our consent. 

V. Suit

W. "Temporary worker" means a person who is furnished to you to substitute for a permanent "employee" on leave or to meet seasonal or short-term workload conditions.

W. Temporary Worker

This definition distinguishes temporary workers from leased workers (see definition above) to clarify that temporary workers are not considered employees of the insured. 

X.  "Trailer" includes semitrailer. 

X. Trailer

Y.  "Work you performed" includes:

1. Work that someone performed on your behalf; and

2. The providing of or failure to provide warnings or instructions. 

Y. Work You Performed

Separate exclusions in Section II - General Liability Coverages address "defective products" and "work you performed." This definition is important to coverage for liability arising out of the completed operations of the insured.

Work performed on behalf of the insured, by a subcontractor, is also considered the insured's work.