Form CA 26 03: Auto Medical Payments Coverage
1. What the form is
The CA 26 03, Auto Medical Payments Coverage endorsement, is a commercial auto insurance form that provides coverage for reasonable and necessary medical and funeral expenses incurred by an insured due to bodily injury caused by an auto accident. A key feature of this coverage is that it pays regardless of who is at fault for the accident. The coverage applies to expenses for services rendered within three years from the date of the accident. This endorsement is added to a commercial auto policy, such as the Business Auto Coverage Form (CA 00 01). The insuring agreement of the CA 26 03 is virtually identical to the medical payments coverage found in a personal auto policy.
2. Classes of business it applies to
While Auto Medical Payments coverage is common in personal auto policies, it is less frequently purchased by commercial insureds. This is partly because it generally doesn't cover injuries to employees (who are typically covered by workers' compensation) and because the definition of "you" and "family members" has limited applicability when the named insured is a business entity other than a sole proprietorship. However, this coverage is particularly relevant and more likely to be purchased by:
- Sole proprietorships: Where the individual owner and their resident family members can benefit from the coverage, similar to a personal auto policy.
- Businesses that routinely carry non-employee passengers: Examples include:
- Taxi services and limousine companies
- Bus companies
- Ride-sharing services (though specific endorsements may also apply)
- Non-profit and religious organizations transporting volunteers or members
- Hotels and resorts offering shuttle services
- Businesses where customers might drive company vehicles: Such as:
- Auto dealerships during test drives
- Car rental companies
- Repair shops or garages providing loaner vehicles
The primary motivation for these businesses to purchase Auto Medical Payments coverage is often to foster goodwill and potentially deter more expensive legal actions by promptly paying for injuries regardless of fault.
3. Special considerations
Several important points should be considered when evaluating or using the CA 26 03 endorsement:
- No-fault basis: Payment is made without determining legal liability, which can expedite care for injured parties and maintain positive relationships.
- Employee exclusion: As mentioned, bodily injury to an employee of the named insured occurring in the course of employment is generally not covered by this endorsement, as workers' compensation is typically the primary remedy. There's a specific exclusion for an insured injured while working in a business of selling, servicing, repairing, or parking autos, unless that business is the named insured's.
- "Insured" definition: For Auto Medical Payments, an "insured" includes the named insured (and family members if an individual) while occupying any auto, or as a pedestrian if struck by an auto. It also includes anyone else occupying a covered auto or a temporary substitute for a covered auto. This means passengers in a covered commercial vehicle are generally considered insureds for this coverage.
- Limits of Insurance: The coverage is subject to a per person, per accident limit shown in the Declarations or on the endorsement. This limit applies to all expenses incurred by each person injured in any one accident.
- Exclusions: Beyond the employee-related exclusions, other standard exclusions apply, such as for injuries sustained while using a vehicle without a reasonable belief of entitlement, or injuries from racing. The nuclear hazard exclusion is also relevant.
- Interaction with other coverages: Medical Payments coverage is often primary for the expenses it covers. However, in some states or situations, it may be excess over other available insurance, such as health insurance. It's important to understand the "Other Insurance" condition in the policy.
For example, if a local bakery's delivery van, covered by a Business Auto Policy with the CA 26 03 endorsement, is involved in an accident, and a customer who was riding along to observe the delivery route is injured, the Auto Medical Payments coverage could help pay for the customer's medical expenses up to the policy limit, regardless of whether the bakery's driver was at fault. However, if the driver (an employee) was injured, their injuries would typically be addressed by workers' compensation.
4. Key information for agents and underwriters
Agents and underwriters should focus on the following when dealing with the CA 26 03:
- Risk Assessment:
- Nature of Operations: Businesses with frequent non-employee passenger transport (e.g., taxis, shuttles, tour operators) or customer use of vehicles (e.g., dealerships, rental agencies) present a higher MedPay exposure.
- Type of Vehicles: Vehicles designed to carry multiple passengers (vans, buses) may indicate a greater need and potential exposure for this coverage.
- Geographic Location: Areas with higher traffic density or accident frequency might influence the perceived need and pricing.
- Loss History: Previous claims involving passenger injuries, even if not resulting in liability payments, could be an indicator of future MedPay claims.
- Pricing:
- Pricing for Auto Medical Payments is typically based on the limit selected and the type of vehicle being insured. Higher limits will naturally result in higher premiums.
- The premium may also be influenced by the territory, vehicle use, and the overall risk profile of the insured.
- Coverage Gaps/Recommendations:
- Agents should explain the benefits of MedPay, especially for businesses with passenger exposure, emphasizing the goodwill aspect and potential for avoiding lawsuits.
- It's crucial to clarify who is and isn't covered, particularly the limitations regarding employees.
- For businesses like sole proprietorships, this coverage can provide valuable protection for the owner and their family members.
- Ensure the selected limit is adequate to cover typical minor to moderate medical expenses that might arise from an auto accident. Consider the local cost of medical care.
- Underwriting Guidelines:
- Underwriters will assess the likelihood of passenger injuries based on the business operations.
- They may review the insured's safety protocols and driver selection criteria if passenger transport is a significant part of the business.
- While generally available, insurers might be more cautious or charge higher premiums for risks with a history of frequent passenger injuries or in certain high-risk industries (e.g., some types of non-emergency medical transport if not properly managed).
- The CA 00 01 (Business Auto Coverage Form) serves as the foundational policy to which this endorsement is typically attached. Understanding the symbols used in the CA 00 01 is critical to determine which autos have MedPay coverage if the CA 26 03 is added.
For instance, an underwriter evaluating a new auto dealership application would note the inherent MedPay exposure from test drives. They might inquire about the dealership's procedures for test drives (e.g., accompaniment by a salesperson, standard routes) to gauge the risk. The agent, in turn, would highlight to the dealership owner how MedPay can quickly address minor injuries to a customer during a test drive, potentially preventing a more significant claim or reputational damage.