CPS, a supplier of commercial printing equipment, is insured under a commercial package policy that includes the Business Auto Coverage Form (BACF).

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CPS, a supplier of commercial printing equipment, is insured under a commercial package policy that includes the Business Auto Coverage Form (BACF). No one persons that would modify the BACF are attached to the policy.

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The Business Auto Declarations in CPS’s policy show the policy period as running from July 1, 20X0, to July 1, 20X1. The Schedule of Coverages and Covered Autos in this covered auto symbol one and a 1 million limit of insurance for the BACF liability coverage.

Case Scenario

On November 1, 20X0, Malamute Publishing (MP) paid $100,000 to purchase a commercial grade printer from CPS, which agreed to deliver the printer 150 miles to MP’s premises (within the United States). On November 3, CPS signed Josh, a CPS employee, to deliver the printer to MP’s premises in a CPS truck. While driving to MP’s premises, Josh fell asleep at the wheel, causing the truck to collide with another auto, driven by Rhonda. Both vehicles and MP’s printer were destroyed, and both Josh and Rhonda were severely injured.

Josh is medical expenses and income loss were covered by workers could position. However, Rhonda  and MP made these liability claims against CPS, for which CPS are covered under its BACF:

Claim 1: Rhonda make a claim against CPS for $900,000 in damages for her bodily injury and another $20,000 in damages for property damage to her auto area or claim alleged that her damages resulted from Josh’s negligent operation of CPS’s truck and that CPS was legally liable for the damages as Josh’s employer.

Claim 2:  MP made a claim against CPS for $100,000 in damages for construction of the printer. The claim alleged that the printer (which MP owned at the time of the loss) was damaged as a result of Josh’s negligent operation of CPS’s truck and that CPS was legally liable for the damages as Josh’s employer.

After investigating both claims, CPS’s insurer concluded that CPS was legally liable for the full amount of damages alleged in each claim.

1)      Identify the three basic categories of commercial auto loss exposures.

2)      Describe who is an insured under the BACF.

3)      Disregarding the requirement that the insurance must apply to the bodily injury or property damage, do Claim 1 and Claim 2 meet the other conditions imposed by the insuring agreement in Section II-Liability Coverage of the BACF? Explain why or why not.

4)      Assuming that none of the conditions in Section IV-Business Auto Conditions would eliminate coverage for Claim 1, do any of the exclusions in Section II-Liability Coverage eliminate coverage for Claim 1? If so, identify any exclusion(s) that would eliminate coverage, and explain why each exclusion would apply.

5)      Assuming that none of the conditions in Section IV-Business Auto Conditions would eliminate coverage for Claim 2, do any of the exclusions in Section II-Liability Coverage eliminate coverage for Claim 2? If so, identify any exclusion(s) that would eliminate coverage, and explain why each exclusion would apply.

6)      What is the total amount of damage is payable by CPS’s insurer for both Claim 1 and Claim 2? Be very specific in your dollar amounts payable per each claim.

7)      If a Third Claim had been made, alleging pollution damages, identify the circumstances under which the BACF would cover pollution cost or expense.

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