1. Forms
2. CA
3. CA-20-09

Form CA 20 09: Leasing or Rental Concerns – Contingent Coverage

1. What the form is

The CA 20 09, titled "Leasing or Rental Concerns – Contingent Coverage," is a commercial auto endorsement designed for businesses that lease or rent vehicles to others on a long-term basis (typically six months or longer). Its primary purpose is to provide liability and no-fault coverage to the lessor (the vehicle owner/leasing company) on a contingent basis. This means the endorsement activates when the lessee's (the person or entity leasing the vehicle) required insurance is either not in place or is uncollectible at the time of an accident. Essentially, it serves as a safety net for the lessor if the primary insurance arranged by the lessee fails.

2. Classes of business it applies to

This endorsement is specifically for "Leasing or Rental Concerns." This includes businesses whose main operation involves leasing or renting vehicles to others. Examples include:

• Car leasing companies
• Truck and trailer rental businesses (long-term leases)
• Equipment rental companies that lease vehicles along with equipment

It is intended for situations where the lease agreement requires the lessee to provide primary insurance and name the lessor as an additional insured.

3. Special considerations

• Contingent Nature: It's crucial to understand this is not primary coverage for the lessor. It only applies if the lessee's insurance is deficient or unavailable.
• Proof of Lessee's Insurance: The endorsement typically requires that the lessee has provided proof (e.g., a certificate of insurance) that the lessor is an additional insured on their policy.
• Long-Term Leases: This endorsement is generally for autos on long-term lease agreements, often defined as at least six months.
• Limits of Liability: The coverage for the lessor under this endorsement may be limited to the amount specified in the endorsement or the amount required by the leasing agreement, whichever is less. For the lessee, coverage is often restricted to the minimum financial responsibility or compulsory insurance limits of the applicable jurisdiction.
• Termination of Coverage: If the lessee's policy is cancelled, the contingent coverage typically ends when the lessor regains possession of the vehicle or a specified period after the cancellation (e.g., 30 days), whichever comes first.
• Withdrawal in Some Jurisdictions: It's important to note that this form has been recommended for withdrawal in some areas, so its availability may vary.

Real-world example: A car leasing company leases a vehicle to a small business for one year. The lease agreement requires the small business to obtain commercial auto insurance and name the leasing company as an additional insured. If the small business fails to maintain its insurance and an accident occurs, or if their insurer becomes insolvent and cannot pay a claim, the CA 20 09 on the leasing company's policy could provide contingent coverage for the leasing company's liability.

4. Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully review the lessor's practices for verifying and monitoring lessees' insurance coverage. The financial stability and insurance history of the types of lessees the insured deals with are important considerations.
• Pricing: Premiums for this endorsement are typically lower than primary coverage, reflecting its contingent nature. ISO provides a factor for rating contingent coverage, which is applied to the classification rates that would apply to the lessee. However, companies may have their own premium determination methods.
• Coverage Gaps: While this endorsement provides a layer of protection, it's not a substitute for robust contractual risk transfer (i.e., ensuring lessees maintain adequate primary insurance). Agents should advise lessors on the importance of diligent insurance verification from their lessees.
• Underwriting Guidelines: Underwriters will assess the lessor's overall risk management, including their lease agreements, vehicle maintenance programs, and accident history. The endorsement is typically offered when the lessee is responsible for providing primary insurance.
• Alternative Endorsements: Depending on the specific needs of the leasing or rental concern, other endorsements might be relevant, such as CA 20 01 (Lessor – Additional Insured and Loss Payee) for situations where the lessor wants to be an additional insured on the lessee's policy, or CA 20 14 (Leasing or Rental Concerns – Second Level Coverage) which provides excess coverage over the lessee's primary policy. However, like CA 20 09, CA 20 14 has also been recommended for withdrawal in some areas.