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3. CA-20-01

Lessor - Additional Insured And Loss Payee (CA 20 01)

The CA 20 01 Lessor - Additional Insured And Loss Payee endorsement is a crucial form in Commercial Auto insurance. Its primary purpose is to modify the Business Auto Coverage Form (CA 00 01) or other commercial auto coverage forms (like the Auto Dealers Coverage Form or Motor Carrier Coverage Form) to address the insurable interests of a lessor of a vehicle. Specifically, it adds the lessor named in the endorsement's schedule as an additional insured for liability coverage and as a loss payee for physical damage coverage on a leased auto. This means that if the lessee (the named insured) is liable for an accident, the lessor is also protected under the lessee's policy. For physical damage to the leased auto, both the lessee and the lessor will be paid as their interests may appear.

Classes of Business It Applies To

This endorsement is widely used across various industries whenever a business leases vehicles long-term and is contractually obligated to provide primary insurance for those vehicles. Real-world examples include:

• Delivery and Courier Services: Companies that lease vans or trucks for their delivery operations.
• Construction Companies: Businesses leasing trucks or specialized vehicles for use on job sites.
• Sales Organizations: Companies providing leased vehicles to their sales staff.
• Any Business with a Leased Fleet: Any commercial entity that leases vehicles for its operations rather than purchasing them outright and is required by the lease agreement to insure the lessor. For instance, a bakery leasing a fleet of delivery trucks would use this endorsement to protect the leasing company.

Special Considerations

There are several important points to consider when using the CA 20 01 endorsement:

• Contractual Requirement: This form is typically used when the lease agreement explicitly requires the lessee to add the lessor as an additional insured and loss payee. The endorsement defines a "leased auto" as one leased or rented to the named insured under an agreement requiring the named insured to provide primary insurance for the lessor.
• Owned vs. Hired Auto Status: When this endorsement is attached, the scheduled leased auto is generally considered a "covered owned auto" for coverage purposes, rather than just a "hired" auto. This ensures primary coverage under the lessee's policy.
• Lessor's Interest Protection: The endorsement protects the lessor's interest unless the loss results from fraudulent acts or omissions by the named insured (lessee).
• Cancellation Notification: The endorsement stipulates that cancellation notices will be mailed to the lessor, regardless of whether the policy is canceled by the insurer or the insured.
• Premium Responsibility: The lessor is not liable for the payment of the lessee's premiums.
• Scope of Coverage for Lessor: The lessor is an insured only for liability arising out of the acts or omissions of the named insured (lessee), their employees or agents, or anyone else operating the leased auto with permission (excluding the lessor or their affiliates). Some older versions of the form may have had broader wording, so the specific edition date of the form (e.g., 10 13) is important.

Real-world example: If a company leasing a vehicle (lessee) fails to make its insurance payments and the policy is canceled, the CA 20 01 ensures the lessor receives notification of this cancellation, allowing them to take steps to protect their asset.

Key Information for Agents and Underwriters

Agents and underwriters should be mindful of the following when dealing with the CA 20 01:

• Risk Assessment: The addition of a lessor as an additional insured does not typically add significant underwriting risk, as the primary risk is still associated with the lessee's operations and drivers. However, underwriters should verify the existence of a formal lease agreement requiring this coverage.
• Pricing: Generally, there isn't a separate, significant premium charge specifically for adding this endorsement, as the premium is primarily based on the covered auto itself and the lessee's exposures. The leased auto is typically rated as an owned auto.
• Coverage Gaps: Ensure that the symbols used on the Business Auto Coverage Form (CA 00 01) are broad enough (e.g., Symbol 1 for "Any Auto" or Symbol 8 for "Hired Autos" if not treating as owned) to cover the leased vehicles appropriately if the CA 20 01 is not used or if there's a delay in adding it. However, the CA 20 01 specifically designates the leased auto as an owned auto for coverage purposes.
• Proper Scheduling: It is critical to accurately list the lessor's name and address and the correct description of the leased vehicles on the endorsement schedule. Errors can lead to coverage disputes.
• Interaction with Other Endorsements: Be aware of how this endorsement interacts with others. For example, if an employee leases their personal vehicle to the company, the CA 99 47 (Employee as Lessor) endorsement might be more appropriate or used in conjunction.
• Primary Insurance: The CA 20 01 is designed for situations where the lessee is providing primary insurance for the lessor. If contingent coverage is needed for a leasing or rental concern, other endorsements like CA 20 09 (Leasing or Rental Concerns - Contingent Coverage) might be considered.

Real-world example for underwriters: An underwriter reviewing an application with a CA 20 01 should request a copy of the lease agreement to confirm the insurance requirements and ensure the named lessor on the endorsement matches the lessor in the agreement. This helps prevent misunderstandings and potential coverage issues later on.