By Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CRIS, CPIW - VP of Technical Affairs, MAIA
Recently I’ve received questions about the Operator Exclusion Endorsement M-0106-S and how it applies to family members at college driving their roommates’ vehicles or other non-owned autos.
Perhaps it is time for a review of my least favorite endorsement in the world and a discussion of the newer 2017 version of the Operator Exclusion Endorsement.
MAP and Household/Family Members … Beyond the Use of “Your Auto”
The MAP follows you and household members under Parts 4, 5, 6, 7, and 9.
Part 4 PD and Part 5 OBI state:
We will pay only if you or a household member is legally responsible for the accident.
Legal responsibility can occur when you or a household member drive a non-owned auto.
Part 6 MP
We will also pay for expenses resulting from bodily injuries to you or any household member if struck by an auto or if occupying someone else’s auto at the time of the accident.
Part 7 Collision
We will also pay for collision damage to other private passenger autos while being used by you or a household member with the consent of the owner.
Part 9 Comprehensive
We will also pay for such damage or loss to other private passenger autos while being used by you or a household member with the consent of the owner.
Under this Part, we will pay for damage or destruction of the tangible property of others caused by an accident and arising from the ownership, maintenance, or use of an auto, including loading and unloading.
We will pay only if you, a household member, or someone else using your auto with your consent is legally responsible for the accident.
Under this Part, we will pay damages to people injured or killed in an accident if you or a household member is legally responsible for the accident and such accident arises out of the ownership, maintenance, or use of an auto by you or the household member.
Same language as 2008 MAP
Parts 7 and 9
Who is a household member under the 2008 or 2016 MAP?
9. Household Member – means anyone living in your household who is related to you by blood, marriage, or adoption. This includes wards, stepchildren, or foster children.
So, the GOOD NEWS is:
The parents’ MAP will follow household members, even kids away at school, when driving or occupying someone else’s car such as a friend’s or roommate’s.
But, the BAD NEWS is:
Both the 2008 and 2016 MAP under Parts 4, 5, 6, 7, and 9 have a “regular use” exclusion applicable to you and to household members. Since we are talking about college kids, we will focus on the exclusion applicable to household members.
It is exclusion 4 under Part 4 PD:
4. While a household member, other than your spouse, is using an auto which you or any household member owns or uses regularly unless a premium for this Part is shown for that auto on the Coverage Selections Page.
It is exclusion 2 under Part 5 OBI:
2. For injuries resulting from an accident while a household member, other than your spouse, is using an auto which you or any household member owns or uses regularly, unless a premium for this Part is shown for that auto on the Coverage Selections Page.
(The 2016 MAP removes the underlined words “other than your spouse” because the 2016 MAP now includes resident spouse in the definition of you.)
It is exclusion 5 under Part 6 MP:
5. A household member, other than your spouse, while occupying or struck by an auto owned or regularly used by you or any household member unless a premium for this Part is shown for that auto on the Coverage Selections Page.
Part 7 Collision and Part 9 Comprehensive state:
We will not pay for damage to any auto which is owned or regularly used by you or a household member unless a premium for this Part is shown for that auto on the Coverage Selections Page.
What is “regular use,” you ask?
Good question, no magic formula. There have been several MA court cases where the insurance company was able to convince the court that either a household member or the “you” used a particular vehicle too often. With that proof, the court allowed the insurance company to invoke the regular use exclusion and deny coverage under the family MAP.
In Stephen Turner v. Aetna C&S 1994, a daughter was not able to access her parents’ liability limits because she was deemed to regularly use her boyfriend’s vehicle. The daughter was driving the boyfriend’s vehicle when she had an at-fault accident. In the summary written by a judge on the MA appellate court:
In determining that the “regular use exclusion is not applicable in the circumstances of this case,” the Superior Court judge took too narrow a view of the content of the policy term “used regularly.” In the instant circumstances, we think that riding as a passenger in a vehicle constitutes “use” within the meaning of that term of the policy.
Do NOT ask me what the definition of regular use is! My response will be, “How lucky do you feel today?”
Interesting that the number of times that the boyfriend gave the girl a ride as a passenger as well as the number of times he gave her permission to drive his vehicle were added together to determine “regular use” for the application of the MAP exclusion in the girl’s parents’ MAP.
So, what’s the point?
First, if you are telling your client NOT to use the Operator Exclusion form so that the “parents’ policy will respond when their kid uses a roommate’s or friend’s vehicle, you had BEST BE CAREFUL of what you say. If their child uses a particular vehicle too much, the MAP excludes this activity and it has NOTHING to do with the addition of the Operator Exclusion Endorsement to the MAP.
If you or a household member use a particular vehicle too much, an endorsement must be added to the MAP to PROVIDE coverage for using this particular vehicle regularly. This endorsement is the Use of Other Auto Endorsement M-0051s.
What does the Operator Exclusion Endorsement M-0106-s 04/08 do?
The first sentence states:
It is agreed that the person named below will not operate the vehicle(s) described below, or any replacement thereof, under any circumstances whatsoever.
The next section is names the Excluded Operator and describes the vehicles from which the Excluded Operator is excluded are described. The Named insured identifies the vehicles on his/her MAP that the excluded operator cannot use. So, even if the parent excludes the child from ALL his/her vehicles, the endorsement does NOT take away the “basic coverage” under the MAP where Parts 4,5,6,7,9 follow a household member when using a non-owned auto.
The next paragraph of the Operator Exclusion Endorsement M-0106-S states:
I am aware that under the terms of my Massachusetts Automobile Insurance Policy, if I, or someone on my behalf, provide false, deceptive, misleading or incomplete information in any application or policy change request, and if such false, deceptive, misleading or incomplete information increases the company's risk of loss, the company may refuse to pay claims under any or all of the Optional Insurance Parts of this policy. Such information includes the description and the place of garaging of the vehicles to be insured, the names of all household members and customary operators required to be listed and the answers given for all listed operators. Payments under Parts 3 and 4 may also be limited to those amounts that the company is required to sell.
This paragraph is essentially General Provision 18 False Information or “you lie, you cry.” If the excluded operator drives the vehicles from which they are excluded, the carrier may deny ALL optional coverages and restrict Part 4 to what MA law requires be purchased ($5,000).
Does this language “expunge” the excluded operator/child from the face of the universe even when excluded from all family vehicles? NO! Does this endorsement exclude the child’s ability to borrow a roommate’s car and come back to the parents’ policy? NO! It excludes an identified operator from specific vehicles.
When the child comes home for vacations, the parents must remember to remove the operator exclusion endorsement, so the MAP will respond when the child is driving a family vehicle. If the excluded operator is not “un-excluded” when home on vacation there will be a potentially disastrous claim situation.
The February 2017 version of the Operator Exclusion Endorsement M-0106-S…
A little different but still horrible. The first sentence states:
It is agreed by the insurance company, the policyholder, and the person named below (the Excluded Operator) that the Excluded Operator will not operate the vehicle(s) described below, or any replacement thereof, under any circumstances whatsoever.
Essentially the same as the older version but maybe a bit stronger as the “excluded operator” agrees that they can’t operate listed vehicles or any replacement regardless of the circumstances.
Like the 2008 version, the operator is described as are the vehicles from which he/she is excluded. These are the vehicles that are listed on the parents’ MAP Coverage Sections Page.
The 2017 endorsement then states the following:
The policyholder and the Excluded Operator understand and agree that the insurance company will not pay under the optional insurance parts of the policy for any injury or damage arising out of the operation or use of the described vehicle(s) by the Excluded Operator.
The 2017 language is a bit stronger than the 2008 version. The 2017 version states the carrier WILL NOT PAY any optional insurance parts when the Excluded Operator is using a vehicle described in the endorsement. The previous version merely stated, “may not pay.”
The 2017 version does NOT mention that the carrier will reduce Part 4 ONLY to what it is required to sell. Part 4 is NOT an optional coverage. It is a mandatory coverage. Most agents suggest the client buy a $100,000 or $250,000 limit as it is inexpensive to increase. The 2017 Operator Exclusion language does NOT mention the company may or will do ANYTHING to the compulsory coverages of Part 4 Property Damage or Part 3 Uninsured Motorists. Hmmmmmm, was this an oversight?
The 2017 Operator Exclusion endorsement’s final paragraph states:
The policyholder and Excluded Operator understand and agree that this Operator Exclusion Form will continue in full and effect in any subsequent renewal or replacement of the policy until the policyholder and the insurance company withdraw this form in writing.
This could be dangerous. The endorsement lasts – forever – unless the client requests it be removed. As with the 2008 version, the parents must remember to remove the endorsement when the child comes home for vacations, but they also must remember to state when it is no longer needed. If the insured doesn’t request removal, the endorsement will be on the policy until the cows come home, long after the kid is graduated and an “experienced operator”!
What if the parents just decide to never tell us about the inexperienced operator?
Withholding information from the insurance company is NOT a good idea per the General Provision 18 False Information.
18. False Information
If the parents fail to tell the company about drivers that would increase the risk of loss, which means increase the policy premium, then ALL optional insurance parts can be denied and compulsory coverages are restricted to the limits REQUIRED to be sold. This paragraph is the “meat” in the 2008 version of the Operator Exclusion Endorsement M-0106-S.
The client is withholding pertinent information and ALL claims could be denied. Look on the bright side, the operator exclusion form only restricts claim denial to a particular person driving a particular vehicle. As said earlier, that excluded family member is still an insured for driving non-owned vehicles as long as he/she doesn’t drive them too often.
Children, the gift that keeps on giving!
Remember, the operator exclusion endorsement and using a roommate’s or friend’s car have NOTHING to do with each other.
As always, if you have any further questions, please feel free to email me:
Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CRIS, CPIW
MAIA VP of Technical Affairs
This article has been developed expressly for the members of MAIA. Reprint by other than members without the express permissions of the author is not permitted.