Chapter 11 – Endorsements for use with Owner’s Policies; the Driver’s Policy

Introduction

· Endorsements are attachments to a policy which vary the terms of the contract. It overrides any provision in the policy which is inconsistent w/ it unless a stipulation to the contrary is embodied therein

· Endorsements can broaden, restrict or alter coverage

· The form of auto policies and endorsements must be approved by the provincial Superintendent of Insurance – all insurers use standard forms

· Any changes made can never be less than what is mandated by statute – enhancements are always binding

· In Ontario auto endorsements are called “policy change forms”

Drive other automobiles – OPCF 2

· The standard working restricts third party liability to named insured and spouse only. This endorsement allows drivers that are listed on the endorsement to have the benefit of third party liability while operating other auto or non owned autos

· Amends the definition of auto in section 2 of the policy

Government owned auto – OPCF 3

· The federal government is not required to carry auto insurance

· This endorsement provides coverage against liability imposed by law for loss/damage arising form one of the perils insured against

· The person covered by this endorsement is the insured – spouse or any other person who operates the vehicle with the insured’s consent

· In order to claim under this coverage, one would need to prove negligence on the part of the insured or driver and that the peril insured against happened

· Special conditions applicable:

o No more than one auto owned by the government is in the care of the insured at one time

o Coverage under this endorsement is subject to a limit per occurrence under the physical damage section

· A person who does not own an auto but who wants coverage while operating a government-owned auto may purchase a Driver’s policy

Permission – OPCF 4 (series)

· This endorsement grants permission for the insured to use the auto for purposes otherwise excluded under the policy

o Permission is granted to carry specific types of explosives – rating and coverage is based on the explosive or incendiary power of the type of explosive being carried

o Grant permission for carriage of radioactive material

Rented or leased auto – OPCF 5 (series)

· Amends policy conditions granting permission for the auto to be leased on a long term basis

· Available for long and short term leases

· The lessee applies for an Owner’s Policy on behalf of the registered owner

· The lessee is given all the rights of a named insured including right to grant permission for other persons to operate the auto

Conversion – OPCF 5D

· Partially negates exclusion – amends exclusion to read: …a written agreement (a mortgage, conditional sale or similar agreement) except a lease

· If a lessee disappears w/ the vehicle, a policy w/ this endorsement will pay the loss assuming theft is covered under the policy – subject to a deductible

Passenger risks – OPCF 6 (series)

· When an owner carries passengers for compensation it usually means that the occurrence of a loss is more likely simply b/c the vehicle is on the road more

· Public conveyances like a bus have a far greater potential for losses b/c they carry many passengers at one time

· There are a number of endorsements available each designed for a particular purpose:

o Used where the insured is carrying passengers for compensation or hire (taxi). This type of business must be stated in the endorsement or protection may be jeopardized

o Designed for school bus coverage. Sets third party liability on a per person basis rather than on an aggregate basis. Performs the following functions:

§ Gives permission to use the auto to carry passengers for compensation or hire for school purposes only

§ Provides specific coverage and separate limits for passenger hazard in addition to the third party liability limits

§ Makes provisions for insuring the insured’s legal liability for loss of or damage to property of passengers in school bus

o Bus used for public transportation:

§ Gives permission to use the auto to carry passengers for compensation or hire

§ Grants specific coverage for BI to passenger and damage to their property

§ Or instead of the above, gives the option of single limit coverage which includes passenger hazard and property damage

o Grants permission for the auto to be used for driver training school purposes by not excluding student driver or student observer. Special limits of liability are specified for BI to a student driver or observer which are in addition to the limits shown on the policy. If the driving school is a secondary school, college, or university, this endorsement would not be used

Property damage reimbursement – OPCF 8

· The insured agrees to reimburse the insurer the sum stated in the endorsement or the amount of the loss whichever is less

· The endorsement does not authorize the insured to settle claims on their own

· Mainly used when heavy vehicles like trucks are insured

· An insured may request a third party liability property damage deductible or it may be imposed by the insurer to min small property damage claims that the named insured is responsible for

Amphibious vehicles – OPCF 9

· Amphibious vehicles are insured for the auto part of the risk under an Owner’s policy – this endorsement is attached to the policy to exclude coverage for the marine use

Restricting glass coverage – OPCF 13

· Insurers offer reduced premiums when this endorsement is used to limit glass coverage under Comprehensive to specified perils which excludes damage caused by gravel and stones

· Some u/w may insist on this endorsement if there are frequent glass claims

Suspension and reinstatement of coverage – OPCF 16 &17

· Suspends coverage in relation to the use or operation of the described, newly acquired, TSA

· Maintains coverage in full for liabilities arising from the o/ship of a described auto (to maintain DCPD while auto is parked and struck by another) and maintains coverage for operations of other non-owned auto as well as AB

· The suspended policy will remain in force for primary liability insurance and as excess insurance

· The policy will be primary AB where there is no other insurance

Amount paid – OPCF 19 (series)

· Designed to limit the settlement on an auto – restricts settlements under section 7 to the lesser of ACV and the amount listed on the endorsement

· If you had a $400 vehicle w/ $5,000 stereo, the ACV would be $5,400. The premium charged is based on ACV of $400. In the event of a claim, payment would the lesser of $5,400 and the $400 recorded on the OPCF 19

· Limited values recorded should be adjusted annually to reflect their depreciated value

· W/ vehicles that have equipment or are valued at greater than their ACV, the insured should be asked for proper documentation to substantiate the increased exposure and charged the appropriate premium by placing the higher value on the OPCF 19a – Valued auto endorsement

· The insured would go to the expense of an appraisal, pay a greater premium and be afforded a richer settlement that being the amount recorded on OPCF 19a

· A 1965 Corvette has an ACV of $900. One in great condition may be $15,000. If the insure wished to purchase coverage to reflect its market value, we would charge for a $15,000 vehicle and provide the insured w/ the enhanced coverage using OPCF 19a.

Coverage for transportation replacement – OPCF 20

· Loss of use by theft is already covered in the policy

· If higher limits are desired or loss of use arising out of other perils covered by the physical damage section this endorsement is available at an additional premium

Damage to property of passengers – OPCF 22

· Some risks like taxis may require coverage for legal liability for damage to property. This endorsement is available w/ a specified limit of liability for property of passengers

Morgagees and lienholders – OPCF 23 (series)

· Standard mortgage endorsement

o If the damage to the auto covered by the physical damage section is not repaired or replaced the loss will be payable to both the mortgagee and the insured

o The insurer agrees to notify the mortgagee in writing of cancellation of the policy giving 15 days notice. This does not extend beyond the expiration date of the policy

o The mortgagee is provided w/ a copy of this endorsement as evidence of coverage and not the entire policy since they have no interest in the other coverages

· Broad form mortgage endorsement

o Provides the same coverage as above and also provides protection for a breach of a condition by the insured, or a misrep, or fraud on the part of the insured – it will not invalidate protection for the lienholder

o The lienholder agrees to the following:

§ If the insured does not pay premiums, the lienholder will pay them on demand

§ When a material change comes to the attention of the lienholder he will notify the insurer w/in 15 days of the change and pay on demand any additional premium

§ If the lienholder knows of a misrep or other breach of policy conditions he will notify the insurer w/in 15 days of learning of it

o If the insurer pays the lienholder b/c of this endorsement, the insurer gains the right to recovery against the insured

o The broad form charges an additional premium

Alteration (changes) – OPCF 25A

· The following changes can be made w/ this one endorsement:

o Change of name or address of insured

o Substitution of auto

o Addition of auto

o Deletions of auto

o Change in coverage or limits

o Addition of coverage

o Deletion of coverage

o Change in rating classification

Liability for damage to non-owned vehicles and providing other coverages when insured persons drive other auto – OPCF 27 (series)

· The purpose of this endorsement is twofold:

o To provide legal liability protection for physical damage to a non owned auto

o To extend third party liability from the normal named insured and spouse to those individuals listed on this endorsement

· This endorsement cannot provide a direct damage coverage for physical damage to the rented vehicle however it does provide a legal liability protection for the driver if the driver is responsible for the damages or assumes responsibility for the damages to this rented vehicle

· This endorsement is applicable where it can be shown both:

o The insured is legally liable or has agreed to be responsible for damage

o An insured perils caused the damage

· Other provisions are:

o Coverage applies to one vehicle only

o Vehicle must be 4,500 kg or less or of a specified type

o It covers the insured, his spouse and all drivers listed in the policy

o Policy in the name of a corporation, the persons named in the endorsement and their spouses are covered

o Does not cover the auto if owned or licensed in name of the insured or a resident of the same dwelling

o Coverage applies only when the auto is being used w/ the owner’s consent

o Coverage is limited to a specified dollar amount per occurrence

o Section 3.3 of the policy applies (defense, interest, costs, etc.)

· Provides liability, AB, uninsured auto, DCPD when the insured drives other auto

Excluding, reducing or increasing coverage for named persons – OPCF 28 (series) and OPCF 29

· It is not permissible to reduce either the liability coverage below the min limits nor to delete AB

· It is possible to exclude a named driver from all coverages except certain AB

· It is possible to provide additional coverage for specified drivers – the names of the drivers to whom the endorsement applies must be shown along with the added coverage

Motorized recreational vehicles – OPCF 32

· When motorized recreational vehicles are covered, this endorsement waives compliance w/ the stat condition pertaining to qualification and age of the operator of the vehicle while it is being operated off the highway

· This type of vehicle is normally operated off the highway and by under age and unlicensed operators

Coverage for emergency road services – OPCF 35

· Provides up to $50 for each time the insured auto is disabled and requires emergency road service

· Does not apply to the cost of parts or supplies, oil, gas, batteries or tires

Fire and theft deductible – OPCF 40

· Extends the deductible under all perils, comprehensive, specific perils to losses caused by fire or theft of the entire auto

Removing depreciation deductible – OPCF 43

· Waives the depreciation for the repair or total loss of the insured vehicle

· Applies for a specified time, when the vehicle is purchased new and the insured is the original owner

· Does not apply to tires and batteries

Family protection endorsement – OPCF 44

· When a third party is AF, it covers the shortfall when the third party is inadequately insured or when the third party is uninsured

· Insured person – the named insured and his spouse and any dependent relatives of either while:

o An occupant of the insured auto or

o An occupant of another auto provided it is not owned or leased by the insured and it is not covered by a Family Protection Endorsement or

o Not an occupant of an auto who is struck by an auto

· Tops up the limit of uninsured auto coverage from the min $200,000 to the endorsement limit

· Stacking multiple family protection endorsements is not permitted

· Will cover hit and run situations provided material evidence exists to corroborate the incident. Material evidence could come from physical evidence or an independent witness

Agreement not to rely on SABS priority of payment rules – OPCF 47

· If an insured purchases one or more of the optional benefits that all insurers must offer, then the insurer must issue this endorsement

Driver’s automobile policy (O.A.P. No. 2)

· A person who drives a vehicle that belongs to another and does not have auto insurance of his own would take a driver’s auto policy

· Also used when there is uncertainty as to whether the vehicle to be driven is insured

· Most frequently used to facilitate filing proof of financial responsibility to obtain a driver’s license for commercial purposes

Non-owned auto defined

· One which the insured is in control of personally as driver or occupant and that is neither owned by nor registered to the insured

· One that is in the care, custody or control of the insured, but is not operated by the insured

· A trailer or semi-trailer – an auto and attached trailer are considered one vehicle w/ respect to the limits of liability under this policy

Coverage

· The basic coverage provided is liability but the policy may extend to cover legal liability for damage to non-owned auto in the care, custody or control of the insured

Rating

· BI and PD are rated based on the highest exposure and this depends on the type of auto the applicant is likely to drive

· There is a min limit for standard limits

· Garage personnel are charged a higher rate than others

· Commercial rates are determined based on full details of exposure

Sample Review Questions - Automobile Insurance (Part 1)

1. Endorsement – attachments to a policy that vary the terms of the contract. It overrides any provision in the policy that is inconsistent w/ it unless stipulation to the contrary is embodied therein.

2. An endorsement (OPCF 2 – drive other auto) might be required when the definition of ‘insured person’ needs to be expanded for the purpose of third party liability. The standard wording restricts the operating of non-owned auto or other auto to the named insured and spouse only.

3. An individual who drives a government-owned auto is not required to carry auto insurance. With the government owned auto endorsement – OPCF 3, the insured not the government can have coverage against liability imposed by law or agreement for loss/damage arising from one of the perils insured against added on.

4. An example of a situation that requires an endorsement giving permission to use the auto is to carry explosives or radioactive material.

5. You can insure a vehicle that is leased or rented by applying the OPCF 5 as long as it is a short or long-term lease.

6. If a lessee disappears w/ the vehicle, a policy w/ OPCF 5D – conversion, will pay the loss assuming theft is otherwise covered under the policy subject to a deductible.

7. A school bus endorsement is necessary the auto is used to carry passengers for compensation or hire for school purposes. It performs the following functions:

- gives permission to use the auto to carry passengers for compensation or hire for school purposes only;

- provides specific coverage and separarte limits for passenger hazard in addition to the third party liability limits

- it makes provision for insuring the insured’s legal liability for loss/damage to property of passengers in the school bus

8. You wish to operate your auto as a taxi. To ensure coverage you will add OPCF 6a, which allows you to use the vehicle to carry passengers for compensation or hire.

9. The standard policy would exclude an auto used to carry explosives.

10. When insuring an amphibious vehicle, you would want to exclude any marine use.

11. The purpose of the Property Damage Reimbursement endorsement – the insured agrees to reimburse the insurer the sum stated in the endorsement or the amount of the loss whichever is less. It is mainly used when heavy vehicles such as trucks are insured.

12. Glass coverage may be restricted when there is a frequency of glass claims – where gravel roads are common.

13. When you do not drive from October to May, you should apply OPCF 16 – suspension of coverage and then OPCF 17 to reinstate coverage.

14. With a 1930 Packard that has been restored and used only in special parades, you would insure it w/ OPCF 19a – valued automobile endorsement. This endorsement would reflect the market value of the vehicle and in turn charge the proper premium for such a value.

15. The Owner’s policy excludes liability for damage to the property of passengers. To extend this, OPCF 22 – damage to property of passengers should be added. This will specify a limit of liability for property of passengers.

16. The 2 types of mortgage endorsement:

- standard mortgage endorsement – designed to protect the interest of the lienholder, mortgage, or assignees in the following ways:

1. losses are payable to both the mortgagee and the insured

2. the insurer agrees to notify the mortgagee of cancellation giving 15 days notice

- broad form mortgage endorsement – there is an additional premium but it provides the same coverage as above and also protects the lienholder if there is a breach of condition by the insured, misrep, or fraud. A claim will not be invalidated as far as the lienholder is concerned. The lienholder agrees to the following:

1. if the insured odes not pay premiums, the lienholder will pay them on demand

2. when a material changes comes to the attention of the lienholder, he will notify the insurer w/in 15 days of the change and pay on demand any additional premium

3. if the lienholder knows of a misrep or other breach of policy condition, he will notify the insurer w/in 15 days of learning it

17. The suspension of coverage endorsement – OPCF 16, would be used when an insured wished to park a favourite auto for the winter or takes an extended vacation and will not be operating his vehicle. It maintains coverage in full force for liabilities arising from the o/ship of a described auto (to maintain DCPD while auto parked and struck by another insured auto) and also maintains coverage for operations of other auto (non-owned) and AB coverage.

18. Deductibles under an auto policy can be amended by applying OPCF 25A – alteration (changes).

19. The provisions of the endorsement to add coverage against liability for damage to a non-owned auto in your car, custody, or control – OPCF 27 are:

- coverage applies to one vehicle only

- coverage applies only to a vehicle of 4,500 kg or less

- it covers the insured, his spouse and all drivers listed in the policy

- if the policy is under a corporation, the persons named in the endorsement and their spouses are covered

- does not cover if the auto is owned or licensed in the name of the insured or a resident of the same dwelling

- coverage applies only when the auto is being used w/ the owner’s consent

- coverage is limited to a specified dollar amount per occurrence

- since this is a liability coverage, even though it is against specified causes section 3.3 applies (defense, interest, costs, etc)

20. You can restrict the amount of coverage that applies to your son when he drives your vehicle instead of his own by applying OPCF 28 – reduction of coverage for named person(s).

21. When insuring motorized recreational vehicles under an auto policy, OPCF 32 – motorized recreational vehicles, must be applied.

22. Transportation replacement – OPCF 20, provides loss of use arising out of other perils covered by physical damage. The insured may choose a limit per day and per occurrence or the insurer may have standard limits.

23. On a new auto, you would want OPCF 43 – removing depreciation deduction. It waives the application of depreciation for the repair or total loss of the insured vehicle. Does not apply to tires and batteries.

24. Family protection endorsement – OPCF 44 covers the shortfall when the third party is inadequately insured to cover the insured’s claims or when the third party is uninsured. It covers the difference b/w the value of the insured’s claims and the third party’s limit of liability insurance.

25. Emergency road service – OPCF 35 provides up to $50 coverage for each time the insured auto is disabled and requires emergency road service. It does not apply to the cost of party or supplies, oil, gasoline, batteries or tires.

26. The following changes can be made using the Alteration – OPCF 25A endorsement:

- change of name or address of insured

- substitution of auto

- addition of auto

- deletion of auto

- change in coverage or limits

- addition of coverage

- deletion of coverage

- change in rating classification

27. A Driver’s policy would be useful when a person drives a vehicle which belongs to another and does not have auto insurance of his own which could extend coverage to ‘other auto’. Also to facilitate filing proof of financial responsibility to obtain a driver’s license for commercial purposes.

28. Under an O.A.P. No. 2, the coverage available include basic coverage for liability, but the policy may be extended by endorsement to cover legal liability for damage to non-owned auto in the care, custody or control of the insured.

29. In the O.A.P. No. 2, a ‘non-owned auto’ is defined as

- one which the insured is in control of personally as driver or occupant and that is neither owned by nor registered to the insured

- one that is in the care, custody, or control of the insured but is not operated by the insured

- a trailer or semi-trailer – an auto and attached trailer are considered one vehicle w/ respect to the limits of liability under this policy

30. A Driver’s policy is rated based on the highest exposure and this depends on the type of auto the applicant is likely to drive.

CIP Study Guide

Automobile Insurance C14