LMCIT Auto Coverage Guide

Transcription

1 INFORMATION MEMO LMCIT Auto Coverage Guide Understand auto liability, auto physical damage, no-fault, and uninsured/underinsured coverage offered by the League of Minnesota Cities Insurance Trust (LMCIT), including coverage options, provisions, and how coverage works in specific situations such as the use of personal vehicles on city business and coverage for impounded or seized autos. Includes information on filing an auto claim. RELEVANT LINKS: I. About the League of Minnesota Cities Insurance Trust The League of Minnesota Cities Insurance Trust (LMCIT) is a cooperative joint powers organization formed by Minnesota Cities in 1980 as one of the first municipal self-insurance pools in the country. It exists solely to meet the risk management and coverage needs of Minnesota cities and other types of entities. It provides coverage for members property, liability, workers compensation, and auto risks. For more information contact the LMCIT underwriting department This coverage guide provides a summary of auto coverage available through the Trust. LMCIT urges members to examine the coverage document for actual wording. In all cases, the coverage documents determine coverage, exclusions, and limitations. II. Auto coverage LMCIT s auto coverage combines liability and physical damage coverage. Auto coverage is designed to meet member cities auto coverage needs in as simple and foolproof a manner as possible. LMCIT has developed some unique coverage approaches and coverage options in order to better meet members needs. I, Coverage C. III. Auto liability coverage LMCIT s auto liability coverage provides coverage for sums that the city is legally obligated to pay as damages because of bodily injury or property damage arising out of the ownership, maintenance, or use of any automobile. Generally, an automobile is defined as a land motor vehicle, trailer, or semi-trailer designed for travel on public roads. This material is provided as general information and is not a substitute for legal advice. Consult your attorney for advice concerning specific situations. 145 University Ave. West 10/30/2014 Saint Paul, MN (651) or (800) All Rights Reserved

2 Mobile machinery such as bulldozers, farm machinery, forklifts, and other vehicles designed for use principally off public roads are not defined as automobiles for the purpose of LMCIT auto liability coverage. Coverage for liability arising out of the use of mobile machinery is provided under a separate coverage part. II. A. Covered parties In addition to the city and any other entity named in the coverage documents, the following are also generally considered covered parties under the LMCIT auto liability coverage: Any present or former elected or appointed official, employee or volunteer of the city with respect to any auto while the auto is being used in the business of the city. Other permissive users of autos owned or hired by the city. III. Minn. Stat I, Coverage C. B. Auto liability limits The standard limit of liability for LMCIT auto liability coverage is $1.5 million, $500,000 per occurrence, which aligns with the Minnesota tort caps. This is the maximum limit of liability under the LMCIT municipal liability coverage and LMCIT auto liability coverage parts combined, whether the claim falls under the LMCIT municipal liability coverage, auto liability coverage, or both. Optional increased limits are available in $1 million increments, up to a maximum of $5 million. C. Auto liability exclusions There are a few general exclusions that apply, which include: Benefits typically handled under workers compensation, unemployment compensation, or disability coverage. Liability the city may have for bodily injury to an employee of the city arising out of and in the course of employment, or damages to the immediate family members of that employee. Property damage to property owned by the city. War, insurrection, rebellion, or revolution. Most pollution-related claims. Document, Section IV. IV. Auto physical damage coverage The LMCIT auto physical damage coverage applies automatically on a blanket basis to all vehicles the city owns, leases, rents, or borrows, unless the city specifically elects not to cover a particular vehicle or vehicles. LMCIT Auto Coverage Guide Page 2

3 See Section VII-A, Operation of employees or volunteers vehicles for city business. However, when a city employee or volunteer uses his or her personal vehicle on city business, that vehicle is not considered to be a borrowed vehicle and is not covered for physical damage. Document, Section III. Document, Endorsement ME049. Document, Endorsement MA074. See Section VII-C, Damage to impounded or seized automobiles and Section VII- D, Damage to forfeited automobiles. I, Coverage F. A. Actual cash value auto physical damage coverage The default for LMCIT auto physical damage coverage is that the city will automatically have actual cash value (ACV) physical damage coverage on every vehicle the city owns, leases, rents, or borrows, unless the city tells LMCIT otherwise. B. Replacement cost value auto physical damage coverage Replacement cost value auto physical damage coverage is available as an option, but the city must specifically request the coverage, as LMCIT must specifically list the vehicle on an endorsement. Generally, replacement cost coverage is available for vehicles that are less than 10 years old. LMCIT may also give consideration to older vehicles that have been wellmaintained, overhauled, or updated as needed. C. Non-city-owned vehicles that are not borrowed, rented, or leased for city use Any non-city-owned vehicle that is not borrowed, rented, or leased for city use for which the city wants physical damage coverage, must be reported to LMCIT and specifically scheduled or endorsed. An example might be an auto the city has seized as evidence or impounded for a traffic or parking violation. V. No-fault personal injury protection coverage LMCIT automatically provides no-fault personal injury protection (PIP) coverage on all city vehicles, including police, fire, and ambulance vehicles. For purposes of LMCIT auto coverage, the applicable coverage part is entitled Basic Economic Loss Benefits Coverage. The primary purpose of PIP coverage is to cover injuries to the operator or occupants resulting from an accident in that vehicle. LMCIT Auto Coverage Guide Page 3

4 Minn. Stat. 65B.61. Generally, PIP coverage would not come into play if a city employee operating a city vehicle on city business was injured in an accident. Most medical costs, treatment, and other necessary services would be covered by workers compensation in this type of circumstance. However, if work comp benefits do not fully compensate the employee injured while working, PIP benefits can make up the difference. There are a few situations in which PIP coverage on a city vehicle can come into play: Minn. Stat. 65B.47 Subd. 2. PIP would protect a passenger who is not a city employee, although if the non-employee has his or her own personal auto policy in place, the no-fault coverage under their personal policy would apply in most cases. However, if the passenger is a relative of an employee and is injured while occupying a city vehicle, the PIP coverage for the city vehicle would apply. Minn. Stat. 65B.47 Subd. 2. The city s policies may allow the employee to use the vehicle for personal, non-city business. An example might be a squad car take-home program for police officers. Since the vehicle is furnished by the employer, the PIP coverage of the city vehicle would apply under this circumstance. If there is no insurance coverage on the city vehicle, the employee would look to their own personal policy. Minn. Stat. 65B.47 Subd. 3. Another situation in which the no-fault coverage can cover a nonemployee is if a city vehicle were to hit a pedestrian. The pedestrian would first look to the coverage of the city vehicle for PIP coverage. Also, if that accident were the city driver s fault, the LMCIT auto liability coverage would cover the city s or the driver s liability for the injuries to the pedestrian. I, Coverage E. VI. Uninsured/underinsured coverage As with no-fault, LMCIT automatically provides uninsured/underinsured (UM/UIM) coverage on all city vehicles, including those public safety vehicles that are not required by statute to have UM/UIM coverage. The city is automatically provided with a standard $200,000 coverage limit for UM/UIM coverage. LMCIT does not offer an option to purchase higher limits. It s important to understand that UM/UIM coverage doesn t provide any benefit or risk protection to the city itself; the benefit is entirely to the individuals who might occupy a city vehicle. LMCIT Auto Coverage Guide Page 4

5 The UM/UIM coverage is designed to help assure that an injured driver will be compensated if he or she is injured in an accident caused by an uninsured or underinsured driver. The UM/UIM coverage steps in to take the place of the liability insurance that the other driver should have had. In most cases, an injury to a city employee driving a city vehicle will be covered by workers compensation, and the amounts that the individual would recover from UM/UIM would be in addition to the medical, indemnity, and other benefits paid under workers compensation. VII. Specific coverage situations A. Operation of employees or volunteers vehicles for city business The question sometimes arises of how coverage would apply when city employees or volunteers use their own vehicles in the course of city business. This section provides an overview of the various coverages and provides guidelines to use when establishing a city auto policy. It s first helpful to think of auto coverage as being generally designed around a basic scheme of the coverage follows the vehicle. The idea is that anyone the vehicle owner authorizes to drive the vehicle is automatically insured under the liability insurance policy on the vehicle, and that policy is primary for any liability to third parties arising out of the operation of that vehicle by an authorized person. Similarly, it s up to the vehicle owner to decide what coverage he or she wants to carry for the risk of physical damage to the vehicle itself. II. 1. Course and scope of duties There is sometimes some confusion about whether an employee or volunteer is within the course and scope of their duties when driving to or from work. In very general terms, if an individual is driving to or from work at the regularly scheduled time and place, he or she is not within the course and scope of duties. However, if the individual is responding to an unscheduled emergency call, that would be considered to be within the scope of duty. Here are some examples of what generally would and would not be considered to be within the course and scope of duty. In any specific situation, though, it s possible there may be additional facts that affect the determination (in other words, think of these as illustrative examples, not as absolute rules). Examples of situations that would normally be considered within the scope of duty: LMCIT Auto Coverage Guide Page 5

6 A volunteer firefighter or EMT driving from his or her home to the fire hall or emergency scene in response to an emergency call. An off-duty police officer who is called back to work outside his or her shift to respond to an emergency. A public works employee who is called from home to respond to a sewer backup. A city official or employee driving to the Capitol to meet with a legislator about a city issue. Examples of situations that would not normally be considered within the scope of duty: A volunteer firefighter driving from home to a scheduled drill. A police officer on the way to the station to begin a scheduled shift. The city manager driving from home to city hall for the regular Wednesday night council meeting A city employee driving somewhere else on city business, but on the way, stops for a personal errand. III. 2. Default: auto liability coverage is excess The default is that LMCIT auto liability coverage is excess over the vehicle owner s own coverage. That is, the LMCIT coverage would come into play if the liability exceeds the vehicle owner s own coverage limits. In many cases, the employee is reimbursed for mileage for use of his or her vehicle on city business. The typical mileage reimbursement rate is based on the average cost of operating a vehicle. One of the costs taken into account is the cost of insurance. Thus, in reimbursing mileage for use of a vehicle, the city is in effect paying a proportionate share of the cost of the insurance on that vehicle. Since the city has paid a proportionate share of the premium, it seems reasonable for the city to benefit from the insurance it has paid for. Coverage Document, Endorsement ME Option to make LMCIT auto liability coverage primary Member cities have the option to make LMCIT auto liability coverage primary for privately owned vehicles used on city business by specified individuals or groups in specified circumstances (e.g., firefighters responding to calls). LMCIT needs to be notified, and a special endorsement needs to be added to the city s coverage. The manual premium charge is $10 per person for this optional coverage. LMCIT Auto Coverage Guide Page 6

7 I, Coverage B. Minn. Stat , subd. 9. III. 4. Injury to the employee or volunteer If an employee is injured while driving his or her own vehicle in the course of city business, workers compensation will apply to that injury, just as it would to any other injury that occurs in the course of employment. This includes emergency volunteers that the statute defines to be employees for purposes of workers compensation: volunteer firefighters, volunteer ambulance attendants, volunteer first responders, law enforcement assistance volunteers, emergency management volunteers, disaster assistance volunteers, and civil defense volunteers. Other types of volunteers would not be covered by workers compensation, although there is the option to purchase volunteer accident coverage to protect these other types of volunteers. 5. Damage to the individual s vehicle The LMCIT coverage does not provide coverage for damage to an employee s or volunteer s own vehicle, regardless of whether the vehicle was being operated in the course and scope of duty. The vehicle owner may be able to recover the damages from another party involved if the damage was caused by the other person s negligence. However, if the individual s own negligence was the cause of the damage to the vehicle, or if damage was caused by a pure accident where no one was at fault (e.g., the car was hit by a meteor), the individual would have to look to his or her own auto physical damage insurance (if any) to cover that damage. There are some circumstances in which the city s LMCIT liability coverage would come into play for damage to an employee s or volunteer s vehicle. One example would be if the damage was caused by the negligence of a city employee operating a city vehicle (e.g., a city snowplow operator negligently runs into a city employee s car). The city s LMCIT automobile liability coverage would respond to the claim for damages to that vehicle. Another example would be if the damage was caused by the negligence of a city employee while that employee was using his or her own car for city business. Again, the city s LMCIT coverage could apply, though in this circumstance, it would normally be excess over the employee s own auto liability coverage on the vehicle. Similarly, the city s municipal liability coverage could come into play if a city employee negligently damaged another employee s car in some other way (e.g., a park crew cutting trees drops a tree onto a car that s properly parked). LMCIT Auto Coverage Guide Page 7

8 III. B. Personal use of city vehicles Cities sometimes allow employees to use city vehicles for personal non-city business. Take-home squad cars are one example. Another example is that cities will sometimes allow a public works employee to take a city vehicle home if that employee will be on call to respond to emergencies. The city s LMCIT liability coverage on the vehicle will cover the employee or any other authorized operator of a city vehicle for personal use of the vehicle, provided the use is within the scope of what the city has authorized. LMCIT will also cover the city for any liability the city incurs resulting from personal use of the vehicle, even if that use was outside the scope of what the city authorized. It s especially important the employee understand that if the vehicle is used outside the scope of what the city has authorized, they and their family members will not be covered by the city s LMCIT auto coverage. If the city does allow personal use of city vehicles by city employees or volunteers, it s important to make sure that it s clear exactly what use is and is not permitted. One way to do this would be for the city to develop and adopt a formal policy on personal use. If it s a unique situation involving only one city employee, an alternative would be to develop a written memo spelling out the arrangements for personal use of the city vehicle. Regardless of the form it takes, here are some points that should be addressed: Is anyone other than the city employee allowed to operate the city vehicle? LMCIT recommends only the city employee be permitted to operate the vehicle. Family members and others should not be permitted to operate the vehicle except in case of a bona fide emergency. Anyone operating a city vehicle is expected at all times to obey all traffic laws. LMCIT recommends the city specify that the employee may not operate the vehicle after any consumption of alcohol. Are there any restrictions on where the vehicle may be taken on personal use (e.g., can the vehicle be taken outside city limits or some other specified geographical region)? The city reserves the right to revoke the permission for personal use of the auto at any time. If the city allows any exceptions to the personal use policy, it should be clear in the policy which city official has the authority to authorize an exception, and a written record should be made of any exception that is authorized. LMCIT Auto Coverage Guide Page 8

9 Obviously, it s important that city employees understand and be aware of the city policy. For this reason, it may be helpful to keep a copy of the policy or memo in the vehicle at all times. It may also be helpful to require affected employees to sign an acknowledgment form, stating they have read, understood, and agreed to the policy. C. Damage to impounded or seized automobiles Police departments and other city agencies may have private motor vehicles in their possession for a variety of reasons, including the following: A vehicle is impounded for a parking violation. An abandoned vehicle is towed and impounded. A stolen vehicle is recovered. A vehicle is seized in connection with a drug or other criminal violation. The LMCIT liability coverages are designed to automatically cover the city s risks with respect to seized, impounded, or recovered autos. In most cases, the city doesn t have to do anything at all in order to have the coverage it needs. When a vehicle is seized or impounded, or when a stolen vehicle is recovered, it creates a situation where a vehicle owned by someone else is in the city s care, custody, and control. Unlike many private insurance policies, the LMCIT liability coverage does not have a care, custody, and control exclusion. That does not mean, though, that LMCIT would automatically pay for damage to such vehicles. In order to recover, the owner would have to show the damage was the result of the city s negligence. For example, the city might be legally liable for a dented door if the city backed another car into the impounded vehicle while moving it, or if the city negligently failed to take reasonable steps to protect the vehicle from vandalism. However, the city probably isn t legally liable if the vehicle is dented by a hailstorm while the vehicle is in the impound lot. In short, the city s LMCIT liability coverage will cover damage to a seized, impounded, or recovered vehicle to the extent the city is legally liable for that damage. As with any liability claim, the burden is on the claimant to show the city is liable. Document, Endorsement MA074. A seized, impounded, or recovered vehicle is not automatically covered by the city s LMCIT auto physical damage coverage. The city can schedule these vehicles for auto physical damage coverage for an additional premium charge. That would cover these vehicles for most types of damage that might occur in the same way that the city s own vehicles are covered, irrespective of whether the city was at fault or legally liable. LMCIT Auto Coverage Guide Page 9

10 D. Damage to forfeited automobiles In some cases, vehicles can be forfeited and become the city s property. The statutes authorize law enforcement agencies to seize vehicles that were used in connection with a variety of crimes. In some circumstances, those vehicles can later be forfeited to the city for use in the city s law enforcement efforts. The statutes set out the administrative and judicial procedures for forfeiture of vehicles. When a vehicle is forfeited, the vehicle becomes the city s property and the title is transferred to the city. The city s LMCIT auto physical damage coverage applies to all vehicles the city owns, except for any vehicle the city has specifically excluded from coverage for physical damage. Newly acquired vehicles are automatically covered and don t need to be specifically scheduled in order for the physical damage coverage to apply. Document, Section IV. Thus, when a forfeited vehicle legally becomes the city s property, it automatically becomes covered under the city s LMCIT auto physical damage coverage as well. The vehicle does not need to be specifically reported to LMCIT or scheduled, and no additional premium is charged to add physical damage coverage for that vehicle. Of course, at the city s next coverage renewal (assuming the city still owns the vehicle), the vehicle does need to be included in the list the city provides to LMCIT, which is used to calculate the city s premium for the succeeding year. See LMC website on New Liability Premium Rating System. VIII. Annual reporting information LMCIT bases premiums for auto liability and auto physical damage coverage on the schedule of vehicles reported in the renewal application at the beginning of the coverage period. Because of this, cities or agents need to maintain an inventory of vehicles so that premiums are accurately calculated at renewal. In addition to the listing of vehicles provided, cities also need to specify their preference in the following situations: Any vehicles for which the city does not want coverage for physical damage. Any vehicles for which the city wants coverage for replacement cost rather than ACV. It s important that LMCIT be notified if the city s preference on a current or newly acquired vehicle should change. Otherwise, vehicles are automatically covered for physical damage at ACV. LMCIT Auto Coverage Guide Page 10

11 Again, new vehicles the city acquires are automatically covered. They do not need to be reported or scheduled mid-term, and there is no additional mid-term premium charge for adding those vehicles. Of course, those newly acquired vehicles would have to be reported at the city s next renewal, assuming the city still has the vehicle. Similarly, if the city gets rid of a vehicle during the year, there is no return premium due for deleting that vehicle. IX. Filing an auto claim The LMCIT auto liability and auto physical damage coverages apply on an occurrence basis, rather than claims-made basis, which means the occurrence must take place within the coverage period for the coverage to apply. Claims can be submitted to LMCIT using any of the following formats: See LMC website-submit a Online: Members with a username and password can submit claims Claim Online. online. To obtain a username and password, contact LMCIT. See LMC website-claim Forms. claims@lmc.org Cities can file claims to LMCIT by using an LMCIT form or an ACORD form. Fax: or Fax: Cities can fax claim forms to LMCIT Mail: 145 University Ave W, Mail: Submit claims forms by mail to LMCIT Claims, 145 University St. Paul MN Ave W., St. Paul, MN Phone: or Phone: Call LMCIT to file a claim at (651) or (800) LMCIT Auto Coverage Guide Page 11