1. Forms
2. CA
3. CA-23-08

What the form is

Endorsement CA 23 08, titled "Motor Carriers – Excess Coverage for the Named Insured and Named Lessors for Leased Autos," is an Insurance Services Office (ISO) form used to modify a commercial auto policy, typically the Motor Carrier Coverage Form or Business Auto Coverage Form. Its primary function is to change the named insured's (the lessee's) coverage to apply on an excess basis for autos leased from a specifically named lessor. This means that the lessor's insurance is expected to respond first in the event of a claim involving the leased auto. The endorsement requires a written lease agreement between the named insured and the lessor, which must include a hold-harmless clause that protects the named insured.

Classes of business it applies to

This endorsement is specifically designed for motor carriers (trucking companies) that lease autos (typically tractors or trailers) from others, such as owner-operators or leasing companies, to use in their business operations.

Real-world example: A long-haul trucking company (Lessee Logistics Inc.) frequently supplements its fleet by leasing trucks from independent owner-operators. One such owner-operator (Lessor Larry) leases his truck to Lessee Logistics Inc. under a written agreement where Lessor Larry agrees to hold Lessee Logistics Inc. harmless for accidents arising from the truck's use and to provide primary insurance for the truck. Lessee Logistics Inc. would attach endorsement CA 23 08 to its commercial auto policy, naming Lessor Larry and describing his truck. If an accident occurs while the truck is being used for Lessee Logistics Inc., Lessor Larry's insurance would pay first, and Lessee Logistics Inc.'s policy with the CA 23 08 endorsement would only apply if Lessor Larry's insurance limits are exhausted.

Special considerations

• Written Agreement Required: The existence of a written lease agreement containing a hold-harmless provision in favor of the named insured (lessee) is a fundamental requirement for this endorsement to apply.
• Lessor and Auto Scheduling: The lessor and the specific leased auto must be scheduled (listed) in the endorsement.
• Operating Rights: The excess coverage arrangement often applies only when the auto is being used under operating rights granted to the named insured by a public authority.
• Primary Insurance by Lessor: It is crucial that the lessor maintains their own primary auto liability insurance. If the lessor fails to maintain adequate primary coverage, the lessee could face unexpected liability.
• Alternative Endorsement: CA 23 12 (Motor Carriers – Named Lessee as Insured) is an alternative endorsement used when the lease agreement requires the lessee to provide primary insurance for the leased auto.
• State Variations: While an ISO form, its applicability or specific interpretation can vary by state. For instance, it has been noted for withdrawal in the Massachusetts residual market.

Key information for agents and underwriters

• Verify Documentation: Agents and underwriters must obtain and review the written lease agreement to confirm the presence and adequacy of the hold-harmless clause in favor of the insured lessee.
• Confirm Lessor's Insurance: It's essential to verify that the scheduled lessor carries appropriate primary insurance coverage. Certificates of insurance should be obtained from the lessor.
• Risk Assessment: The underwriter should assess the risk associated with the lessor's operations and the specific auto being leased, even though the insured's coverage is excess.
• Premium Impact: Use of this endorsement can result in a premium credit or discount for the lessee, as their exposure is reduced to an excess layer. For example, if the lessee's premium is based on gross receipts, the endorsement may stipulate that only a small percentage (e.g., 15%) of the revenue generated by the leased auto is included in the premium calculation.
• Clarity of Coverage Layers: Ensure all parties understand the primary/excess relationship to avoid disputes during claims.
• Proper Scheduling: Accurate and complete information for the scheduled lessor and leased auto is critical for the endorsement to function as intended.