The Insurance Services Office, Inc. (ISO), commercial general liability (CGL) coverage form (CG 00 01 04 13) normally provides liability coverage for bodily injury or property damage arising out of the ownership, operation, maintenance, or use of mobile equipment, but the coverage is subject to some noteworthy exceptions.Craig Stanovich helps with the challenge of determining whether the business auto or commercial general liability policy will apply to liability arising out of mobile equipment and autos.
On the other hand, liability coverage for autos is generally provided on a business auto coverage form (CA 00 01 10 13), a motor carrier coverage form, or an auto dealers coverage form. The CGL policy, accordingly, excludes liability coverage for bodily injury or property damage arising out of the ownership, operation, maintenance, or use of an auto that is owned or operated by or rented or loaned to any insured, 1 but with certain exceptions.
This article is intended to assist those who are confronted with the challenge of distinguishing between mobile equipment and autos, including commentary on why that distinction is crucial.
The difference between "auto" and "mobile equipment" is determined by policy definitions. Here, the task of understanding the policy definitions is aided by the fact that the definitions of "auto" and "mobile equipment" are verbatim in both the CGL policy and the business auto coverage policy. Nevertheless, the first step in this challenge, distinguishing between "auto" and "mobile equipment," can only be met by first understanding the "auto" and "mobile equipment" definitions. The second step is applying this understanding to specific situations—a very important concern because the CGL may provide liability coverage for certain uses of an "auto" and may exclude liability coverage for certain uses of "mobile equipment." In other words, the particulars matter as to when the CGL policy applies.
As a start, a broad distinction may be helpful in understanding the conceptual difference between the two definitions.
While the above is helpful in thinking about autos and mobile equipment, it is only a rule of thumb that is subject to numerous and critical exceptions. More on that later.
But the notion of "design" of the vehicles in determining whether a vehicle falls into the definition of "auto" or "mobile equipment" is observed by the courts.
In determining whether a golf cart used at a school was designed for use principally off public roads and thus falls within the definition of mobile equipment, a Texas court considered the following.
… the design of these golf carts … goes well beyond normal golf-course use. Many of the design features, such as a speedometer, three-point seatbelts, turn signals, headlights and taillights, a rear-view mirror, and a driver and passenger side mirrors, would be superfluous to a golfer.
— Texas Political Subdivisions Property/Casualty Joint Self Insurance Fund v. Pharr-San Juan-Alamo ISD, 628 S.W.3d 486 (Tex. App. 2019).
Courts have also weighed in on what is meant by "principally"—as in "use principally off public roads": "Principally" is defined as "most important, consequential" in Michigan Insurance Company v. Posen Chamber of Commerce and Jason Robert Risteau, No. 330176, 2017 Mich. App. LEXIS 310 (Ct. App. Feb. 23, 2017).
A major exception to the conceptual difference between auto and mobile equipment as above was implemented by ISO with the promulgation of the December 2004 edition of its CGL coverage form. In the filing of that 2004 edition and all later CGL editions, ISO substantially changed the definitions of "auto" and "mobile equipment." The distillation of that change is this—even if a vehicle fits squarely into the CGL definition of "mobile equipment," it will be considered an auto IF that vehicle is "subject to" a compulsory or financial responsibility law or other motor vehicle insurance law in the state in which the vehicle is licensed or principally garaged.
Understanding the types of land vehicles that are included within the "mobile equipment" definition of paragraphs 12 a. through 12 f. is essential. It is only after determining whether a vehicle fits into that definition of "mobile equipment" is it possible to consider whether or not that vehicle is subject to financial responsibility or motor vehicle insurance laws.
The CGL definition of "mobile equipment" is any type of land vehicle, including its attached machinery and equipment, which meets the requirements of one or more of the six paragraphs (12 a. through f.) that follow.
This paragraph, which begins by listing specific types of equipment (bulldozers, farm machinery, and forklifts), is significant in that it shapes the CGL's initial approach to "mobile equipment." By including "other vehicles designed for use principally off public roads," the definition begins with a very expansive description. The paragraphs that follow either add to or refine this concept.
Whether a vehicle is actually used on public roads is not the gauge here—the determining factor is the vehicle's design. To be "mobile equipment," the vehicle must be intended to be used mostly off public streets and roads.
Vehicles that are designed for use on public roads, such as pickup trucks, vans, dump trucks, etc., are "mobile equipment" if the vehicles are "maintained for use solely on the premises you own or rent." How paragraph b. applies may be illustrated with an example of a trucking company that owns an old truck tractor they keep and use only for moving trailers around on the trucking company's premises.
The term "maintained," as used here, has been the subject of some dispute. The Virginia Supreme Court ruled the following.
For example, "mobile equipment" as used in the Policy, may refer to "vehicles maintained for use solely on or next to the premises you own or rent" … the term "maintained" …means kept, e.g., vehicles maintained for a specific purpose or use."
— James River Ins. Co. v. Doswell Truck Stop, LLC, 297 Va. 304, 827 S.E.2d 374 (2019).
Notice that the court did not determine that the "maintained for use solely on the premises …" means the auto can never leave the premises. Instead, the court noted that this phrase meant that the auto is kept for a specific purpose—and that purpose is for use on the premises.
Thus, "maintained for use" would include the truck tractor in the previous example even if the tractor is being operated on a public roadway—such as driving the tractor across the street to have it serviced, repaired, or to obtain motor fuel.
However, "maintained for use solely on the premises you own or rent" would not include an "auto" taken off the road due to the seasonal nature of a business, as the vehicle is not kept solely for use on the insured's premises. In the case of seasonal use, the vehicle is being kept for use away from the premises. Liability coverage for a seasonal vehicle that is "off the road" needs to be included on the business auto coverage form policy by including the appropriate coverage symbol.
In short, "maintained for use" is not identical to "use." Still, at the risk of being repetitive, if the truck tractor is subject to the compulsory insurance law or financial responsibility law, then the truck tractor would be considered an "auto."
Vehicles that move on crawler treads are considered "mobile equipment." Crawler treads are also known as continuous track and is a system of propulsion running on a continuous band of treads or track plates driven by two or more wheels. The purpose is to keep from sinking into mud, snow, etc. 2 In addition to an excavator, a snowcat (snow caterpillar) also travels on crawler treads, often used in and around ski areas as trail groomers. These vehicles fall into the CGL policy's definition of "mobile equipment."
Any vehicles with permanently attached cranes, shovels, loaders, diggers, or drills are considered "mobile equipment," provided the vehicle affords mobility to the attached equipment. Further, vehicles that provide mobility to road constructing or resurfacing equipment are also "mobile equipment." Road graders, road scrapers, and steam rollers are specifically listed as types of road construction or resurfacing equipment included in this category. Paragraph d. applies whether or not the equipment is able to move under its own power.
Vehicles that afford mobility to specifically listed permanently attached equipment and that cannot move under their own power are also considered "mobile equipment." The listed equipment are the following.
If none of the above falls within the first four paragraphs (paragraphs a, b, c, or d), paragraph e. acts as a catchall by enumerating specific items of permanently attached equipment, which, if the vehicle affording movement of the equipment is not self-propelled, is "mobile equipment."
Paragraph f. of the definition of "mobile equipment" deserves considerable attention. This section begins with a catchall. If a vehicle is not already described in the first five paragraphs (paragraphs a, b, c, d, or e) and the vehicle's most important use is for purposes other than the transportation of persons or cargo, it is considered "mobile equipment."
Courts have read this part of the definition quite broadly and have included fire trucks as well as food trucks as "mobile equipment" as vehicles "maintained primarily for purposes other than the transportation of persons or cargo."
Because they [fire trucks] have the power of self-propulsion and are designed to travel on public roads, they might appear to meet the definition of "auto." But they obviously fall within … vehicles maintained primarily for purposes other than the transportation of persons or cargo. The truck's primary purpose, design, and use become clear only when that truck arrives at the scene of a fire. The essence of the massive machinery is the ladder, which can elevate the firefighters to heights where high-rise blazes may be fought and lives saved. The truck has no real function apart from serving as a mobile platform for that ladder. Or consider the ordinary pumper. It too transports persons and cargo. But not until its hoses are connected and its pumping apparatus is engaged does its core function identity emerge.
— Alpine Ins. Co. v. Planchon, 72 Cal. App. 4th 1316, 85 Cal. Rptr. 2d 777 (1999).
More recently, consider this ruling on a food truck.
Like a fire truck, a secondary purpose of the Gómezes' food truck was the transportation of persons—i.e., the driver and the cook. Like an "ordinary pumper" a food truck may transport persons or cargo—i.e., food, but its "core functional identity emerge[s] when it operates as a mobile kitchen at specified locations."
— American States Ins. Co. v. Travelers Prop. Cas. Co. of Am., 223 Cal. App. 4th 495, 167 Cal. Rptr. 3d 288 (2014).
It is curious that in the latter case, American States, decided in January 2014, the court did not comment on whether the food truck was subject to compulsory insurance or other motor vehicle insurance laws in determining that the food truck was "mobile equipment."
The second passage of paragraph f. announces that if a vehicle is permanently fitted with equipment designed chiefly for snow removal, road maintenance, and street cleaning and is capable of moving under its own power, it is an "auto" and not "mobile equipment." And despite the 2004 changes, vehicles included in paragraph f. are considered "autos" regardless of whether insurance laws apply.
Subparagraph f. (1) lists equipment that is designed primarily for the following.
Once again, the idea of "design" is governing. In times of heavy snow, in particular, it is not unusual for real estate owners or municipalities to use front-end loaders to remove snow. As front-end loaders can be used for snow removal but are primarily designed to move dirt, sand, or other solid fill into a dump truck, such vehicles typically remain within the definition of "mobile equipment." However, self-propelled sidewalk snowblowers or sidewalk snowplows, which are designed for snow removal, would fit squarely into subparagraph f. (1) and are, therefore, "autos."
Any vehicle with permanently attached equipment designed primarily to maintain roads (but not for the construction or resurfacing of roads using graders, scrapers, or rollers) is an "auto." For example, vehicles with permanently attached salting and sanding equipment would likely be considered road maintenance equipment and thus an "auto."
Likewise, any type of street cleaning equipment, such as self-propelled street sweepers, is clearly considered "autos" and is not covered by the CGL policy for any liability arising out of their use. Keep in mind that just because such equipment may be covered for damage by an inland marine policy does not change this—the self-propelled street cleaners are still "autos."
Self-propelled vehicles with equipment permanently mounted on autos or truck chassis and used to raise or lower workers are considered "autos." Cherry pickers or bucket trucks are examples that qualify under paragraph f. (2). Equipment that is used to raise and lower workers that is not mounted on an auto or truck chassis, but is self-propelled, does not fit within section f. (2). For instance, a motorized scaffold used by workers to change indoor ceiling lights would not be considered an "auto" but would be considered "mobile equipment."
Harleysville argues that the scissor lift upon which DeJesus was standing when he was injured is a device "similar" to a cherry picker.… The exact same question was addressed in the New Jersey Superior Courts Appellate decision in Clemente v. N.J. Transit.… In ruling against the insurer, the Clemente court held that a scissor lift is not "similar" to a cherry picker, noting that OSHA recognizes a distinction between "cherry pickers" and "scissor-lifts" and "categorizes and regulates them differently." This court is persuaded by the analysis in Clemente and adopts it here.
— Harleysville Preferred Ins. Co. v. E. Coast Painting & Maint., LLC, No. 16-8603-SDW-LDW, 2019 U.S. Dist. LEXIS 135295 (D.N.J. Aug. 12, 2019).
Paragraph f. (3) enumerates certain other types of equipment when permanently attached to a vehicle are deemed to be "autos" and not "mobile equipment." With the exception of cherry pickers, paragraph f. (3) repeats exactly the same equipment listed in paragraph e. The following are considered "autos" if they can move under their own power.
An additional paragraph has been inserted into the definition of "mobile equipment" in the December 2004 and later editions of the CGL policy and reads as follows.
However, "mobile equipment" does not include any land vehicles that are subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged. Land vehicles subject to a compulsory or financial responsibility law or other motor vehicle insurance law are considered "autos."
Further, and also first appearing in its December 2004 edition of its CGL policy, ISO changed the definition of "auto" by adding a second paragraph, which reads the following.
Any other land vehicle that is subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged.
The changed definition of "mobile equipment" and "auto" starting with the ISO December 2004 edition of the CGL states that land vehicles that obviously meet the definition of "mobile equipment" as spelled out in paragraphs 12 a. through 12 f. become an "auto" and not "mobile equipment" if the vehicle is "subject to a compulsory or financial responsibility law or other motor vehicle insurance law in the state where it is licensed or principally garaged." Liability coverage for such vehicles should be obtained by adding the appropriate symbol to a business auto coverage policy.
Here is where a determination of both fact and law has to be made. First, how is the land vehicle used? This is a determination of fact. Keep in mind, however, that the use of the land vehicle, and thus the facts, may change from day to day or week to week or even job to job. Second, presuming the use of the land vehicle can be determined, does that use require the owner or user of that land vehicle to do the following?
This is a determination of law—how does the insurance or financial responsibility law apply to this land vehicle. Of course, if the answer is one or more of the above laws apply, the land vehicle is considered an "auto."
If the land vehicle's use requires motor vehicle registration, in many cases, it follows that the land vehicle will require some type of insurance or will be subject to a state's financial responsibility law—and, thus, is considered an "auto." However, it can be very difficult to determine if the use does, in fact, require motor vehicle registration. For instance, it is common for states to treat "special equipment," "special mobile equipment," or "special construction equipment" differently in respect to motor vehicle registration. This equipment, as defined in the applicable state statute, may be exempt from a motor vehicle registration or compulsory insurance.
Further complicating the issue is exactly determining what is meant by "subject to." The same land vehicle's actual use may vary considerably during any one policy period. Again, let's use a backhoe illustration.
The owner has several jobs in which the backhoe is used. For all but one job, the backhoe is brought to the jobsite on a flatbed trailer and only briefly crosses a public road and then only on one or two of the jobs. However, during that same policy, for one job that is 2 months long (let's call it the State Highway Job), the backhoe is driven on a public road every day due to the nature of the job. Is this backhoe "subject to" insurance or financial responsibility laws?
A closer look reveals the CGL policy uses either the phrase "is subject to" or "are subject to" in the context of "mobile equipment" and "auto." ISO could have chosen the phrasing "may be subject to," "was subject to," or "is or was at any time subject to" but has elected otherwise.
Considering the above, the most compelling interpretation of "subject to" is that land vehicles are considered "autos" only if the vehicle falls under the state's financial responsibility or motor vehicle insurance law at the time of the accident that results in bodily injury or property damage. Therefore, in the above illustration, the backhoe should be considered "subject to" compulsory insurance or financial responsibility law and, thus, an "auto" only while engaged in the State Highway Job. In other words, if the backhoe injures a pedestrian while traveling to the jobsite during the State Highway Job, the motor vehicle registration law applies to the backhoe, and thus, compulsory insurance applies. The backhoe is an "auto" for injuries to the pedestrian and is not covered by the CGL policy.
At least one court has rejected entirely the notion that "mobile equipment" that is subject to a financial responsibility law can be an "auto."
Although "Financial Responsibility Law" may be an obvious reference to the Vehicle Code to lawyers and judges … it is too vague to meet the stringent obligation of the insurer to limit coverage. Here, in order for Golden Labor [named insured] to understand the coverage provided to it, it 'was expected to either know the financial responsibility law ... or know the discrete body of statutory law set forth within … the [California] Vehicle Code. The Penn-Star policy, however, does not reference the statutes embodying California's financial responsibility laws, leaving the reader to determine what is meant by the language. The court need not determine whether tractor at issue qualifies as a "motor vehicle" or an "implement of husbandry" under the California Vehicle Code because Penn-Star "presumed a level of sophistication and knowledge beyond that of an ordinary layperson, and, therefore, the policy provision purporting to limit coverage does not satisfy the requisite plain and clear criteria."
— Penn-Star Ins. Co. v. Zenith Ins. Co., 436 F.Supp.3d 1367 (2020).
Autos owned, operated, rented to, or loaned to any insured are ordinarily not covered by the CGL policy—via exclusion g. The aircraft, auto, or watercraft exclusion (exclusion g.) of the CGL policy does include two very important exceptions.
Paragraph (5) (a)—The first exception states exclusion g. does not apply to liability for the operation of equipment or machinery attached to land vehicles that would otherwise fit the definition of "mobile equipment," but now is an "auto" solely due to a financial responsibility law or insurance law that applies to that land vehicle.
Paragraph (5) (b)—The second exception states exclusion g. does not apply to bodily injury or property damage arising out of the operation of any machinery or equipment attached to "autos" listed in paragraph f. (2) and f. (3) of the definition of "mobile equipment." In short, vehicles expressly described as "autos" are covered by the CGL, policy but only for liability arising out of their "operation"—use of the described autos attached equipment.
Paragraph f. (2) lists cherry pickers mounted on auto or truck chassis used to raise or lower workers, and paragraph f. (3) lists other types of permanently attached equipment—air compressors, pumps, generators, spraying, welding, building cleaning, geophysical exploration, lighting, and well servicing equipment.
The intent of both exceptions is to provide bodily injury or property damage coverage under the CGL policy if the injury or damage results from the use of the land vehicle's attached equipment or machinery but not if the injury or damage results while moving or traveling in the vehicle. Accidents involving an "auto" that take place during "mobility" that result in bodily injury or property damage are not covered by the CGL, and therefore, liability coverage must be included on the business auto coverage form policy.
While digging with a backhoe that is subject to compulsory motor vehicle insurance, the operator hits and damages an underground sprinkler system. The property damage to the sprinkler system is covered by the CGL policy despite the fact that this backhoe is an "auto." The CGL exception paragraph (5) (a) applies here because the property damage arose from the operation of the backhoe's equipment. In other words, while the backhoe is by definition an "auto," the CGL policy still covers the operation of the equipment on that "auto."
While in a truck-mounted cherry picker, a worker trimming tree branches carelessly allows a limb to fall on a passing auto, causing damage to the auto and injury to a passenger. Both the property damage and bodily injury caused by the limb falling are covered by the CGL policy as they arise out of the "operation" of equipment of the cherry picker—the bucket.
The business auto coverage form has a corresponding exclusion for the "operation" of the "auto" contemplated by paragraphs 5 (a) and (b), and therefore, the business auto coverage form does not provide coverage.
After lowering and securing the bucket, the worker climbs into the truck cab and drives to the next jobsite located two towns away. En route to the new jobsite, the worker is talking on his cell phone when he accidentally hits a car that had stopped in front of him. The damage to the other auto and injury to the driver of the other auto is not covered by the CGL policy as the bodily injury and property damage did not arise out the operation of equipment attached to the "autos" listed in f. (2) or f. (3). The CGL policy exclusion would apply in a similar manner to the backhoe subject to compulsory insurance that struck the pedestrian while driving to the jobsite—the injury did not arise out of the use of attached equipment but out of the use of the backhoe for travel or mobility.
Thus, the self-propelled vehicles described in f. (2) and f. (3) of the definition of "mobile equipment" and the backhoe subject to compulsory insurance are, in fact, "autos" but are nonetheless covered by the CGL policy provided the bodily injury or property damage arises out of the "operation" of attached equipment.
To determine whether a land vehicle is defined in the CGL policy as "mobile equipment" or an "auto" may require full consideration of both definitions. Further, understanding the scope of the CGL auto exclusion and its exceptions is a must.
Superimposed on all of this is a determination of whether equipment that is clearly within the definition of "mobile equipment" is "subject to" some type of compulsory insurance or financial responsibility law.
Agents, brokers, sales personnel, and other insurance intermediaries and advisers will undoubtedly be asked, if not expected, to make determinations of both fact and law regarding whether "mobile equipment" is subject to motor vehicle registration and financial responsibility laws or compulsory insurance laws. Determining on the client's behalf how the law applies to them is problematic at best and should generally be avoided—particularly when considering the complexity of each state's motor vehicle registration law.
It may be helpful to keep in mind that it is the owner of the vehicle to whom these laws apply. Thus, it is ultimately the owner who is responsible for understanding the motor vehicles laws and their application. The recommended approach is for the client/owner to engage competent legal counsel to determine matters of law and not demand legal advice from insurance professionals simply because of the coincidental relationship between insurance and the law.
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