Trailer Coverage under Symbol 2

A Georgia subscriber recently asked the following question:

Our insured had and still has a business auto policy, CA 00 01. Physical damage coverage is under symbol 2, owned autos only; both comprehensive and collision coverages are insured.

In 2010, the insured purchased an SRG trailer. In 2014, the trailer was stolen. We denied coverage based on the fact that the trailer was never added to the current BAP. It was owned since 2010. The insured alleges they thought it was added at the original inception date. We denied based on the wording in the "owned autos you acquire after the policy begins" section of the BAP that states, "You have coverage for autos that you acquire of the type described for the remainder of the policy period." We felt that since the policy period expired and he did not add the vehicle then, there is no coverage for that vehicle.

Coverage under symbol 2 does include "only those autos you own (and for liability coverage any trailers you don’t own while attached to power units you own).

The agent feels that under symbol 2, that since the vehicle is "owned," we should insure it regardless of whether it is listed or not. He says that the insurer can pick up the premium for this trailer when the premium audit is done.

Please advise your opinion regarding the coverage for this unlisted owned trailer under symbol 2. Is there coverage for this owned vehicle under symbol 2 even if it was never listed? .

ANSWER: Symbol 2 under the BAP is for owned "autos". The definition of "auto" includes a trailer. The insured owned the trailer at the time of the loss. So, the claim should be covered. The agent is correct that the trailer is a covered auto and the insurer should pick up the premium for it at audit time. Failure of the insurer to do so will not prevent coverage in this instance.

Ordinary Diligence Requirement of the Insured

The insureds brought an action against the insurer and the insurance agent, alleging that the agent negligently failed to obtain 100 percent dwelling loss replacement coverage on the insureds' home, which subsequently sustained substantial fire damage. This case is Groce v. American Family Mut. Ins. Co., 5 N.E.3d 1154 (2014).

In 1997, the Groces purchased a home and obtained a homeowners policy from American Family. In 2007, the home sustained substantial fire damage, and a dispute arose regarding the amount of insurance claim benefits payable under the policy. The insureds filed a lawsuit contending that the agent failed to obtain a fire insurance policy that would have paid the entire cost of reconstructing the house. The circuit court granted summary judgment to the insurer and the agent. The insureds appealed.

The Supreme Court of Indiana noted that Indiana law requires that the cause of action in tort accrues and the statute of limitations begins to run when the plaintiff knew, or in the exercise of ordinary diligence, could have discovered that an injury had been sustained as a result of the tortious act of another. Moreover, a claim against an agent for negligent procurement of the wrong coverage begins at the start of coverage if the breach was discoverable at the time through ordinary diligence, that is, generally when the policy is issued.

The policy issued to the Groces provided that the insurer would pay for the full cost to repair or replace the damaged building but not exceeding repair costs and the limit in the policy for the building. The insurer calculated the repair cost at $225,245, but the policy limit was $191,500. The insurer paid the latter amount in accordance with the policy language. The insureds claimed they were entitled to the full replacement amount because the agent asked them if they wanted replacement cost coverage, they said "yes," and the agent replied "I'll get this written up."

The court said that the insurer issued a homeowners policy to the Croces for ten years and that the insureds were advised by the insurer of the amount of their dwelling loss coverage limits and reminding the insureds to read the policy. Therefore, the court said, the Groces could have discovered that their dwelling loss replacement coverage did not exceed the applicable policy limits. The court found from the undisputed facts that the Groces, in the exercise of ordinary diligence in reviewing the homeowners policy, could have timely discovered that the insurer's replacement cost liability was capped at the dwelling loss coverage limit.

Thus, in accordance with Indiana law, the statute of limitations in this case began to run no later than the first policy renewal. The insureds did not comply with the statute of limitations, and the trial court's grant of summary judgment to the insurer and agent was affirmed.

Editor's Note: The Indiana Supreme Court affirmed the judgment of the trial court that the insureds had a duty to read their policy, that is, to exercise ordinary diligence in understanding the coverage limits in the policy language. If the agent had insisted that a particular hazard is covered or made representations to the insureds that, if true, would have covered their loss, thereby tolling the running of the limitations period, an exception to the insureds' duty to read the policy would have been created. However, that did not happen in this instance and the insureds had to settle for the stated policy limits.