1. Forms
2. MM
3. MM-20-25

What the form is

The MM 20 25 Additional Insured – Owner of Leased Vehicle endorsement is added to a Commercial Automobile insurance policy. Its primary purpose is to extend liability coverage to the owner (lessor) of a vehicle that has been leased to the named insured (lessee). When this endorsement is active, the lessor is treated as an insured under the lessee's policy for liability arising out of the maintenance or use of the specified leased auto. This typically fulfills a contractual requirement in the lease agreement where the lessee is obligated to provide such coverage for the lessor.

Classes of business it applies to

This form is relevant for any business that leases vehicles rather than owning them outright and is contractually required by the lessor to provide primary liability insurance that also protects the lessor's interest. This is common in various industries, including but not limited to:

• Businesses that utilize leased vehicles for sales, service, or delivery operations (e.g., sales fleets, local delivery companies, field service technicians).
• Contractors who lease trucks, vans, or specialized equipment vehicles.
• Companies providing transportation services using leased vehicles.
• Any organization that enters into a lease agreement for automobiles where the terms mandate the lessee to name the vehicle owner as an additional insured on their auto policy.

Real-world example: A local plumbing company leases a fleet of vans from a vehicle leasing company. The lease agreement stipulates that the plumbing company must add the leasing company as an additional insured on its commercial auto policy for liability arising from the use of the vans. The plumbing company's insurance agent would add the MM 20 25 endorsement to their commercial auto policy to meet this requirement.

Special considerations

• Contractual Obligation: The use of this endorsement is almost always driven by the terms of a lease agreement. It's crucial to review the insurance requirements section of the lease to ensure the endorsement adequately meets the specified obligations.
• Primary Coverage: This endorsement typically intends to provide primary liability coverage for the lessor, meaning the lessee's policy will respond first in the event of a claim involving the leased vehicle, before any policy the lessor might carry.
• Scope of Coverage: The coverage provided to the additional insured (lessor) is generally limited to liability arising out of the ownership, maintenance, or use of the leased vehicle by the named insured (lessee). It does not typically cover the lessor for their own negligence unrelated to the lessee's use of the auto.
• Massachusetts Specific: The "MM" prefix indicates this is a Massachusetts-specific form, designed to integrate with Massachusetts commercial auto insurance regulations and practices.
• Interaction with other endorsements: It is often used in conjunction with other endorsements related to leased vehicles. For instance, the Lessor – Additional Insured and Loss Payee (MM 20 26) endorsement might also be used if the lessor needs to be protected for physical damage to the vehicle and receive payment in case of a loss.

Key information for agents and underwriters

• Risk Assessment: Underwriters should carefully examine the lease agreement to understand the nature and extent of the liability being assumed by providing additional insured status to the lessor. The type of vehicle, its intended use by the lessee, and the driving records of those who will operate the vehicle are key underwriting considerations.
• Pricing: The premium for this endorsement can vary. The Massachusetts Commercial Automobile Insurance Manual, specifically Rule 28.A.1.b, provides guidance that may involve a rate modification when the owner of a hired automobile is added as an additional insured. Agents should consult their insurer's rating manuals.
• Coverage Gaps: Agents must ensure that the coverage provided by the MM 20 25 aligns precisely with the contractual requirements of the lease. Any discrepancies in limits, coverage breadth, or specific wording could lead to significant coverage gaps for the insured or the additional insured lessor.
• Underwriting Guidelines: Insurers will have guidelines on the acceptability of the lessor as an additional insured. They may consider the lessor's business operations and loss history if there's a concern about potential vicarious liability claims. The relationship between the lessee and lessor should be clearly documented.
• Clarity of Insured Status: It's important to clearly identify the lessor on the endorsement to avoid ambiguity.