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Applying Auto Insurance Coverage to Claims Examples

Posted by Kristin Bowen on Aug 24, 2016 1:15:09 PM

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You’re in the auto business.  Whether it’s an auto body repair shop, detailing or custom cleaning, or a dealership, it’s important to know what types of commercial insurance coverage exists and how insurance would apply to a particular claim. 

Business Income – Actual Loss Sustained: If a covered loss closes your business indefinitely, you don’t have to calculate the lost revenue. During the recovery period, West Bend will pay the lost revenue, based on projections and the last year’s revenue, up to 12 months, minus any applicable deductible.

Broad Form Products and Completed Operations eliminates the liability exclusion for property damage to your products and work performed. A $250 deductible applies.

Garagekeeper’s Coverage – Actual Loss Sustained provides coverage for damage to autos while they’re in your care. There’s no stated limit and the deductible would apply.

Equipment Breakdown Coverage provides coverage when equipment, like lifts, compressors, and diagnostic equipment, breaks down suddenly and accidentally as a result of a covered cause of loss. It pays for the cost to repair or replace the damaged equipment, as well as the costs you incur to restore business operations. A deductible applies.

Employment Practices Liability Insurance provides coverage for claims brought against you due to alleged discrimination, sexual harassment, wrongful termination of employment, and breach of employment contract. These types of claims, brought by employees, former employees, or potential employees, can be costly. Claims against employers can result at any time, from the pre-hiring process to the exit interview, and even from individuals who weren’t hired or who worked for only a few days. A deductible applies to this coverage.

Let’s take a look at some claim scenarios to see how these coverages would work:

The insured, an auto repair shop, replaces a customer’s engine. While the customer was driving the vehicle, the oil drain plug fell out because it wasn’t properly tightened. This caused the oil to leak out of the engine, damaging it beyond repair. Normally this claim for damage to the engine wouldn’t be covered because of the “damage to the insured’s product” and the “damage to the insured’s work” exclusions. With Broad Form Products and Completed Operations endorsement, however, the cost of the engine replacement would be covered, subject to the $250 deductible.

Here’s another example. Let’s say a power surge, not caused by lighting, damages electronic and electrical equipment in a service station, including the security camera, an air compressor motor, automatic doors, and various diagnostic equipment. The service station was closed for six weeks. The cost of repairs is $46,460 and the business income loss totals $24,655. This brings the total paid loss to $71,155. Normally, electrical arcing would be excluded under the property coverage. With equipment breakdown, artificially-generated electrical current would be covered. A deductible applies.

So think about your auto service risks and make sure to discuss any questions or concerns with your independent insurance agent.

Topics: Auto Insurance

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