The distinction between automobile
liability and personal or general liability is
a bedrock principle of property/casualty insurance in the U.S.
However, the growing use of new types
of vehicles makes it more and more difficult
to determine if a vehicle exposure is covered under an auto policy, a homeowners or CGL policy, or not at all, unless special insurance is acquired.
If you’re an underwriter struggling to categorize new types of vehicles, you’re not alone.
In 2005, the American Association of Motor Vehicle Administrators established an “Unconventional Vehicles Working Group.” The group, composed of motor vehicle administrators from the U.S. and Canada, is charged with developing uniform standards regarding the titling, registration, operator licensing, and on-road regulation (e.g., seatbelt enforcement) of different types of vehicles.
“Jurisdictions continue to be faced with a variety of new vehicle types that are outside the traditional definitions of a motor vehicle,” reads a report from the group. “Roadside enforcement continues to face the challenge of how to handle these vehicles and operators when they are found on the highways.”
Among the “unconventional vehicles”seen today are new types of utility vehicles appearing on farms and work sites--and sometimes on public roads.
A Kansas report on unconventional vehicles identifies two types of off-road utility vehicles:
- Work-site utility vehicles, which look like large golf carts, with open cabs and low pressure tires; and
- Micro-utility trucks (MUTs), which are somewhat larger than work-site utility vehicles and look like small trucks, with enclosed metal cabs and high-pressure tires.
Kansas state law regards both types of vehicles as motor vehicles for certain purposes, but not for others.
According to the report, work-site utility vehicles and MUTs both meet the definition of “motor vehicle” under seatbelt laws and under requirements that operators must be licensed when driving them on public roads.
However, both types of vehicles are generally restricted from public roads, and are thus exempt from motor vehicle registration and insurance requirements. To complicate matters further, municipalities in Kansas may permit utility vehicles to be operated on public roads within their boundaries, and are allowed to impose liability insurance requirements on them.
And, of course, Kansas is just one state.
A November 2008 report from the Insurance Institute for Highway Safety (IIHS) says that 10 states expressly allow “minitrucks” to operate on portions of public roads. The report describes minitrucks as vehicles used off public roads that are substantially smaller and slower than small pickups designed for on-road use.
According to the IIHS, only three states (Illinois, Kansas, and Tennessee) require minitrucks to meet federal safety standards for low-speed vehicles. In other states, the report says minitrucks fall under laws regulating off-road vehicles, some of which permit limited use of such vehicles on public roads.
As of February 2008, according to the Specialty Vehicle Institute of America, 16 states required all-terrain vehicles (ATVs, the principal category of off-road vehicles) to be registered with the department of motor vehicles. Sixteen required them to be registered with a state recreation management agency, and 19 had no registration requirements listed.
If that weren’t complicated enough, micro- utility vehicles create a whole new “gray area,” especially when we consider the “Kei” trucks imported from Japan. (Kei is short for keijidosha and pronounced “kay.”)
Kei trucks, which account for the vast majority of minitrucks in the U.S., are designed for use on public roads in Japan, but exported to the U.S. as off-road utility vehicles and generally restricted from public highways. However, as we’ve seen, some states allow local communities to determine for themselves whether to allow such vehicles on public roads.
When municipalities do permit small utility vehicles to be operated on public roads, they often require that those vehicles be insured for liability.
Yet, independent agents report that it is often difficult to find markets for such coverage, because the vehicles generally do
not meet domestic qualifications for personal auto coverage, and some carriers balk at writing utility vehicles on policies designed for recreational vehicles.
Like most standardized homeowners forms, AAIS Homeowners forms generally exclude coverage for bodily injury and property damage liability arising from “motorized vehicles,” with the exception of injury to domestic employees in the course of employment.
AAIS Homeowners forms include an incidental coverage, however, for BI/PD liability arising from specified use of certain vehicles not registered for use on public roads or property or required to be registered at the location of an occurrence. (Comparable coverage is provided in other industry forms as an exception to the motor vehicles exclusion.)
Among other things, that coverage extends to any such motorized vehicle used only to service insured premises, provided the occurrence takes place on insured premises.
The AAIS incidental liability coverage for motorized vehicles also extends to any vehicle used only to service the insured premises or premises of another, provided that the vehicle is designed only for use off of public roads, and isn’t used for any business purpose.
Therefore, even if an MUT is designed for public roads, a homeowners carrier could still be exposed for an on-premises BI/PD claim if the MUT is not registered or required to be registered.
AAIS Farmowners liability forms provide coverage under similar restrictions for vehicles not required to be registered.
Both the GL-2 (farm personal liability) and GL-610 (farm commercial liability) provide incidental motorized vehicle liability coverage for BI/PD arising on insured premises or from the use of vehicles used to service the premises and designed solely for use off of public roads.
Given that many hunters utilize MUTs to transport hunting parties on their property, these exposures are far from hypothetical.
There is a greater potential for liability coverage of micro-utility vehicles under the new AAIS Agricultural General Liability (AgGL) Program. (For a description of the AgGL, go to www.AAISonline.com.)
As one would expect, the AgGL's two base forms both exclude coverage for BI/PD arising from an auto, which is defined as a land motor vehicle designed for travel on public roads, or as any vehicle subject to a compulsory insurance or financial responsibility law in the state where it is licensed or principally garaged.
However, one of the base forms, the one designed for farming operations, provides coverage for BI/PD liability arising from an auto used only on the insured premises for farming purposes. The auto must not be subject to a compulsory or financial responsibility law or other motor vehicle.
Beyond that, both of the AgGL base forms provide coverage for BI/PD arising from the use of mobile equipment, which includes land vehicles (including attached machinery and equipment) used only on or next to premises owned or rented by the named insured.
Thus, whether a micro-utility truck purchased for use on a farm would be covered for BI/PD liability under an AgGL base form would depend on at least two factors:
- Whether it was subject to motor vehicle registration or insurance laws; and
- Whether the company, or a court, regarded a vehicle designed for public roads in Japan to be so designed for
purposes of insurance in the U.S., especially if such vehicles are restricted from public roads in the U.S.
Similar distinctions between autos and mobile equipment are found in the base forms of the AAIS Artisans, Businessowners, and Commercial Liability programs.
Under each of them, an auto is defined as a land motor vehicle designed for use or travel on public roads, and coverage for BI/PD liability is excluded. Each also provides coverage for BI/PD arising from the use of mobile equipment, however.
Under all three programs, mobile equipment is defined as land motor vehicles designed primarily for use off public roads (including attached machinery and equipment) and used only on premises owned by or rented to the named insured, including adjoining ways.
For more details, see the table above.
“Each company must determine for itself whether a micro-utility vehicle is a motor vehicle,” wrote Susan Luecke, AAIS assistant vice president for personal lines, in a response to a question from an AAIS Farmowners affiliate on this topic.
“That determination may vary from risk to risk, depending on the circumstances,” she said.
Small trucks, big questions 
