Recently, Insurance Services Office (ISO) Form CG 00 01 12 04, which contains standardized insurance policy language many insurers include in their policies, has undergone significant changes to its commercial general liability (CGL) definitions of "mobile equipment" and "auto." Because these changes could have negative implications for your company if you don't have CGL and commercial auto coverage with a single carrier, you should consider reviewing your CGL policy to see whether it contains ISO Form CG 00 01 12 04.
New definitions
ISO's CGL definition of mobile equipment now includes a paragraph stating the term "mobile equipment" no longer applies to vehicles that are subject to compulsory or financial responsibility laws or other motor vehicle insurance laws. For roofing contractors, mobile equipment might include extensible boom lifts and fork lifts. (However, job-site operation of such equipment would be covered by your CGL policy for bodily injury and property.)
Before this change was made, the distinction between autos (vehicles designed for travel on public roads) and mobile equipment (vehicles principally designed for use off public roads) sometimes fell into a gray area of coverage. Now, mobile equipment could fall under the auto definition if that equipment is subject to a compulsory or financial responsibility law.
A compulsory liability insurance law usually requires proof of financial security (such as auto insurance with bodily injury and property damage coverage) before you can register your auto. Financial responsibility laws require auto owners to provide proof of ability to pay for auto-related injuries or damage. An auto liability policy is the main form of financial responsibility though some states allow a driver to post a bond or deposit cash or securities into a trust fund held by the state in lieu of insurance. Compulsory liability laws, as well as financial responsibility laws, vary among states.
You should be familiar with financial responsibility laws under U.S. Department of Transportation regulations that require all companies operating commercial motor vehicles on public roadways for various purposes to have adequate liability insurance coverage.
Complicated changes
ISO made these changes because many insurers who issued CGL policies were hit with numerous uninsured motorist coverage claims involving mobile equipment. The changes ensure the coverage is instead handled under the commercial auto insurance policy where it more appropriately belongs. Definitions in ISO Form CG 00 01 12 04 were changed to ensure this intent is explicit.
The 03 06 ISO edition of the Commercial Auto, Truckers, and Motor Carrier coverage forms also had to be amended to align with the changes made to CGL definitions.
If your CGL and business auto policies are with different carriers and do not have common expiration dates, they may contain different versions of ISO forms (all companies do not adopt all forms at the same time) and may not contain the same definition of mobile equipment. Consequently, there could be a gap in your coverage; contact your insurance producer if this is the case.
As mentioned previously, state laws vary in this regard, and if you operate in multiple states, you could have mobile equipment covered differently in different states.
To complicate matters more, the 03 06 ISO edition policy is not approved in Connecticut, New Hampshire or Virginia. Those states use a different ISO auto endorsement to align with the changes made to CGL definitions.
Take time to review
Although these changes are not new, you would be wise to take the time to review with your insurance producer the details of your insurance coverage and the implications of motor vehicle laws in the state(s) in which your company operates.
Leslie Kazmierowski, CPCU, is NRCA's insurance programs manager.
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