10. Personal Auto Insurance (PAP)

Achievable Property & Casualty

Personal Auto Insurance (PAP)

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Automobile Insurance

An automobile insurance policy is a type of package policy that may provide:

Property coverage for damage to the insured’s auto
Legal liability protection for bodily injury or property damage to others arising out of the operation, maintenance, or use of the insured auto
Coverage for injury to the insured or members of the insured’s family

Personal Auto Policy

The main policy form used today to cover personal automobile exposures is the Personal Auto Policy (PAP). The definitions section of a PAP explains key terms used throughout the contract. These definitions generally appear on the first page of the PAP and include:

Bodily Injury (BI)

The definition of “bodily injury” to others includes death.

Family Member

A person related to the named insured by blood, marriage, or adoption who is a resident of the insured’s household (including a ward or foster child).

Occupying

In or upon; or getting in, on, out of, or off of the covered auto.

Sidenote

Know this...

Getting out of an auto is also referred to as “alighting” from the auto.

Trailer

A vehicle designed to be pulled by a private passenger auto. A farm wagon or farm implement, while towed by a private passenger auto, is also considered to be a trailer.

Covered Auto

Any vehicle shown in the declarations, a newly acquired auto, any trailer the named insured owns, and any auto or trailer the named insured does not own while used as a temporary substitute for a covered auto that is out of normal use because of its breakdown, repair, servicing, loss, or destruction.

Coverage Territory

The U.S. and its possessions, Puerto Rico, and Canada.

Owned Auto

The vehicle that appears on the declarations page; the auto that the named insured owns and insures under the Personal Auto Policy.

Four Principal Coverage Parts

A PAP is a package policy that combines property and liability protection. The four principal coverage parts that make up the PAP are: liability coverage; medical payments coverage; uninsured motorist coverage; and coverage for damage to the insured’s auto.

Part A Liability Coverage

Part A states that the insurer will pay damages for bodily injury or property damage to others for which an insured becomes legally responsible. Damages include prejudgment interest awarded against the insured. The insurer will also settle or defend any claim or lawsuit seeking these damages.

In addition to the policy’s limit of liability, the insurer pays the defense costs it incurs.

Split limits

Liability coverage is commonly written on a split-limits basis. The limits are expressed as a series of three numbers, such as 15/30/10. This means the policy will pay:

$15,000 per person for bodily injury to a maximum of $30,000 per accident for bodily injury and $10,000 per accident for property damage.

When liability coverage applies

An auto policy provides liability protection when a named insured or covered family member is legally responsible for bodily injury or property damage to others while operating an owned auto.

The PAP also covers the named insured and/or family members while operating a non-owned auto. For example, if an insured injures someone while driving a non-owned auto and the owner has no liability insurance, the insured may have protection under their own PAP.

Liability extension to towed vehicles. Part A insures the named insured and family members for the ownership, maintenance or use of any auto or trailer. So liability coverage extends to a trailer being towed by an auto, whether or not the insured owns the trailer, and a trailer the named insured owns is itself a covered auto.

Who is an insured

The policy language defines who qualifies as an insured. An insured is:

The named insured or any resident family member using, owning, or maintaining the covered auto or trailer
Any person using the auto with the permission of the insured
Anyone vicariously liable for the acts of (1) or (2)

Supplementary payments

In addition to the policy’s limits of liability for bodily injury or property damage, the insurer will also pay certain additional expenses on behalf of the named insured. The policy lists these supplementary payments:

Up to $250 for the cost of bail bonds required because of an accident, including related traffic violations;
Premiums on appeal bonds and bonds to release attachments in any suit the insurer defends
Interest accruing after a judgment is entered in any legal suit the insurer defends
Up to $200 a day for loss of earnings, but not other income, because of attendance at trials or hearings at the insurer’s request
Other usual or likely expenses incurred at the insurer’s request as long as they are reasonable

Endorsements

The following endorsements may be added to the PAP (usually for an additional cost):

Extended non-owned coverage for the named individual

An insured who has no personal automobile may purchase an endorsement to a personal auto policy, which provides liability protection to the insured while driving any non-owned vehicle

Towing and Labor costs

This endorsement reimburses the actual costs of towing a disabled covered auto and/or the cost of labor for emergency repairs performed at the site of disablement. Coverage applies only to labor performed at the place where the vehicle became disabled. Labor performed after the vehicle has been towed to a garage or repair shop is not covered under this endorsement. The endorsement pays up to the limit shown for each disablement, and applies to a disabled non-owned auto as well as a covered auto.

Joint ownership coverage

The PAP’s “you” means only the named insured and a resident spouse. When two or more people who are not spouses jointly own a private passenger auto, pickup or van, such as unmarried individuals living in the same household or relatives living in separate households, the joint ownership coverage endorsement treats each joint owner as “you” for the jointly owned vehicle, so each has the coverage of a named insured

Rental vehicle coverage

A car the insured rents is a non-owned auto, so the PAP’s liability coverage applies to it, and its physical damage coverage applies if the policy carries collision or other than collision coverage. Part D gives a non-owned auto the broadest coverage applicable to any covered auto shown in the declarations, as excess over any coverage the owner provides. Part D’s transportation expenses also pay the rental company’s charge for loss of use, up to $20 a day. Endorsements are available that raise the transportation expense limits or cover damage to a rental vehicle

Part A Exclusions

The insurer will not provide liability protection for any person with regard to any of the exclusions listed in the policy, which commonly include:

Intentional BI/PD
Property owned/being transported by insured
No coverage for bodily injury to any employee of the insured arising out of and in the course of employment by the insured.

Exception: This exclusion does not apply to a domestic employee who is not entitled to (or required to be covered by) workers’ compensation benefits

Liability from ownership/operation of a vehicle for hire
Liability from using any vehicle in a business that is not farming or ranching
Liability coming from the use of a vehicle the insured does not have permission to use (stolen car)
BI/PD covered by nuclear liability policy
Motorized vehicles having less than 4 wheels or designated to be used off public roads
Vehicle furnished for insured’s regular use (company car)
Competing and/or practicing for an organized racing or speed contest

Part B Medical Payments Coverage

Under Part B, the insurer will pay necessary medical and funeral expenses resulting from bodily injury to an insured or guest occupants of the auto. The insurer will pay only those medical expenses incurred within three years from the date of the accident.

For Part B, an “insured” includes the named insured, family members, and anyone else (guest passengers) while occupying or getting out of the vehicle. A named insured who is hit by a vehicle while a pedestrian is also covered, as long as the vehicle is designed for use on a public road. The same is true of a family member struck as a pedestrian.

The exclusions applying to Part B are similar to those appearing in Part A, but also include injuries sustained while using a vehicle as a residence.

Part C Uninsured Motorist Coverage

Part C pays compensatory damages that an insured is legally entitled to collect for bodily injury caused by an uninsured driver. The coverage limits are written on a per person/per accident basis. The limit of liability shown in the declarations is the maximum amount the insurer will pay for damages resulting from any one accident.

An uninsured motor vehicle is a vehicle that is:

Uninsured (someone who simply doesn’t have insurance);
A hit-and-run vehicle is considered an uninsured motor vehicle if it causes bodily injury to an insured.

Under the standard ISO Personal Auto Policy, a hit-and-run vehicle counts only if it hits the insured, a family member, a vehicle they are occupying, or the covered auto, so physical contact is required. Courts in most states accept indirect contact, such as debris thrown by the fleeing vehicle, as a hit.

State law can change this rule. Many states require UM coverage to apply to a “phantom vehicle” or “miss-and-run” accident, in which an unidentified vehicle causes the accident without any contact, as long as the facts are corroborated by evidence other than the insured’s own testimony. Whether contact is required in a given state depends on that state’s law.

Insuring company denies coverage or becomes insolvent.
Vehicles not considered to uninsured include:
Vehicle owned by the government
Vehicle owned by self-insurer approved by licensing authority
Vehicle operated on rails or a vehicle located for use as a residence

Underinsured Motorist Coverage is also available to anyone who purchases uninsured motorist coverage. It covers BI sustained by an insured when the negligent operator has insurance, but the limits of liability are not sufficient to cover the damages.

Often, an applicant for a PAP asks for “state minimum” or “the cheapest available policy” and later discovers the financial impact of being hit by an uninsured motorist. State law decides whether an applicant may reject uninsured motorist coverage. Where it may be rejected, or lower limits chosen, the insurer documents the applicant’s choice in writing. Some states do not allow rejection at all.

Part D Coverage for Damage to the Insured Auto

Part D provides property insurance protection for the covered auto. There are two primary forms of coverage under Part D: collision coverage and other than collision coverage (comprehensive). Both are subject to a deductible before the policy pays, up to its limit of liability.

Collision

Collision is defined as “the upset of the covered vehicle or damage resulting from impact with another auto or object.” Collision losses are paid regardless of fault.

If an insured can’t collect from an at-fault third party, the insured’s policy pays for the loss, less any deductible.
The insurer may then subrogate against the at-fault party to recover what it paid.
If the insured is responsible for the collision damage, the policy still pays up to its limit, less any deductible.

Collision coverage also applies to damage to a non-owned auto being operated by the named insured. This coverage is excess over other coverage applicable to the non-owned auto.

Sidenote

Know this...

Part D will pay no more than $1,500 for damage to a non-owned trailer.

Other than collision (comprehensive)

Other than Collision (comprehensive) coverage covers direct and accidental damage to the covered auto from causes “other than collision,” such as:

Falling objects
Fire
Explosion
Earthquake
Windstorm, hail, water, flood
Theft or larceny
Malicious mischief or vandalism
Riot or civil commotion
Breakage of glass
Contact with a bird or animal

Transportation expenses

Part D will pay, in addition to its limits and without applying a deductible, up to $20 per day (maximum of $600) for transportation expenses if the vehicle is damaged by a collision or other than collision loss, provided the insured carries these coverages.

Sidenote

Know this...

If the covered auto is stolen, the insurer will pay only expenses incurred during the period beginning 48 hours after the theft and ending when the covered auto is returned to use, or the insurer pays for its loss. For any other loss, it pays expenses beginning when the auto has been out of use for more than 24 hours.

Part D Exclusions

Losses to covered auto being used as passenger carrier for hire
Damage due to wear and tear, mechanical, electrical breakdown, road damage to tires
War/nuclear perils
Sound reproduction equipment, except when permanently installed.
TVs, antennas, awnings, cabanas
CB radio, scanner, telephones, except when permanently installed
Custom furnishing
Radar detection equipment
No benefit to bailee

Two Additional Policy Parts

Part E

Part E describes the insured’s duties after a loss. These duties include:

Notify the insurer as soon as reasonably possible after a loss occurs
Cooperate with the insurer in the investigation of a claim
File police report if required
Submit to physical exams if requested
Authorize the insurer to obtain medical reports or other pertinent records
Submit a written proof of loss when requested.

Sidenote

Know this...

Written proof of loss must be sent to the insurer before any claim payment will be made. A notice of loss to an insurer does not constitute proof of loss.

Part F

Part F includes other general provisions such as:

Bankruptcy of insured

Bankruptcy or insolvency of the insured does not relieve the insurer of its obligations

Policy changes

It must be in the form of a written endorsement

Fraud

There is no coverage in the case of fraud on the insured’s part

Legal action

Only after the insured has fulfilled his/her contractual obligations can the insured take action against the insurer

Termination

The named insured may cancel at any time by returning the policy or giving advance written notice. The insurer must give at least 10 days’ notice to cancel for nonpayment of premium or during the first 60 days of a new policy, and at least 20 days’ notice in all other cases. After a policy has been in effect for 60 days, or on a renewal, the insurer may cancel only for nonpayment, for suspension or revocation of the driver’s license of the named insured or of a driver who lives with or regularly uses the covered auto, or if the policy was obtained through material misrepresentation

Non renewal

The insurer may decide not to renew by mailing notice at least 20 days before the end of the policy period. State law often requires longer notice or a stated reason

Automatic termination

If the insurer offers to renew and the insured does not accept, including by not paying the renewal premium when due, the policy ends automatically at the end of the policy period. Coverage on an auto also ends when the insured buys other similar insurance on it

Policy period and territory

The US, its possessions and territories, Puerto Rico, and Canada. Cover only accidents occurring during the policy period and within the territory

Other state coverage

When the insured is in another state besides the state of residency, the insurance minimum limits become those of the state traveling through

Insurer’s right to recover

The company has subrogation rights

Transfer of interest

Insured cannot give rights to another person without the insurer’s written consent

Lesson Summary

An automobile insurance policy provides property coverage, legal liability protection, and personal injury coverage for the insured and their family. The main policy form used is the Personal Auto Policy (PAP), with key definitions including bodily injury, family member, occupying, trailer, covered auto, coverage territory, and owned auto.

The Personal Auto Policy includes four main coverage parts: liability coverage, medical payments coverage, uninsured motorist coverage, and coverage for damage to the insured’s auto.

Part A: Liability Coverage - Pays for bodily injury or property damage to others due to the insured’s auto on a split limits basis. Additional expenses for defense are also covered.
Part B: Medical Payments Coverage - Covers medical and funeral expenses resulting from bodily injury in the insured’s auto.
Part C: Uninsured Motorist Coverage - Pays compensatory damages for bodily injury caused by an uninsured driver.
Part D: Coverage for Damage to the Insured Auto - Provides collision and other-than-collision coverage, subject to a deductible.

Endorsements that can be added to the PAP include extended non-owned coverage, towing and labor costs, joint ownership coverage and rental vehicle coverage. Exclusions in Parts A and B include intentional injury or property damage, liability from vehicle use for hire, and other specific scenarios.

Requirements under Part E include notifying the insurer of a loss, cooperating in investigations, and submitting proof of loss. Part F outlines general provisions such as policy changes, fraud, legal actions, and termination conditions.

Chapter Vocabulary

Definitions

Auto Liability: Coverage that protects against financial loss because of legal liability for motor vehicle-related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance, or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.
Auto Physical Damage: Motor vehicle insurance coverage (including collision, vandalism, fire, and theft) that insures against material damage to the insured’s vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.
Automobile Liability Insurance: Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

Bailee - A person who received temporary custody of goods or property belonging to others.

Collision Coverage: A type of auto insurance that covers physical damage occurring when the insured auto strikes another auto or stationary object. It may also include upset or overturn of the insured auto.
Common Carrier: A company or concern engaged in the transportation of goods or persons for a fee.
Creditor-Placed Auto: Single interest or dual interest credit insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor’s interest or adversely affect the value of collateral on automobiles, boats, or other vehicles.
Dual Limits: Separate limits are provided for various perils, which are several forms of liability insurance.
Gap Insurance: An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the insured owes the finance company. Typically used for leased cars.
Other States Coverage: With auto insurance, when an insured is in another state besides the state of residency, the insurance coverage becomes at least equal to the state minimum limits of the state traveling through.
Other than Collision Coverage: See Comprehensive Coverage
Personal Auto Policy: Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.
Personal GAP Insurance: Credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.
Private Passenger Auto (PPA): Filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.
Supplementary Payments: Provides coverage for the cost of bail bonds up to $250, premiums to appeal and release of attachment bonds, interest on judgments, loss of earnings, and other reasonable claim settlement expenses that occurred at the insurance company’s request.
Total Loss: The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
Transit: Transporting from one location to another. Transportation policies are also referred to as transit insurance.
Underinsured Motorist Coverage: Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover the total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Automobile Insurance Overview

Package policy: property damage coverage, liability protection, injury coverage for insured/family
Main contract: Personal Auto Policy (PAP)

PAP Key Definitions

Bodily Injury (BI): includes death
Family Member: related by blood/marriage/adoption, resident of household
Occupying: in, upon, getting in/on/out/off vehicle
Trailer: vehicle pulled by private passenger auto (includes farm wagon/implement)
Covered Auto: vehicle on declarations, newly acquired auto, owned trailers, temporary substitute autos
Coverage Territory: US, possessions, Puerto Rico, Canada
Owned Auto: vehicle listed on declarations page

Four Principal Coverage Parts

Liability coverage
Medical payments coverage
Uninsured motorist coverage
Coverage for damage to insured’s auto

Part A: Liability Coverage

Pays damages for BI/PD insured is legally responsible for; insurer also pays defense costs (separate from policy limit)
Split limits format (e.g., 15/30/10): per person BI/per accident BI/per accident PD
Covers named insured/family using owned or non-owned autos; extends to towed trailers
“Insured” = named insured, resident family, permissive users, vicariously liable parties
Supplementary payments: bail bonds ($250 cap), appeal bonds, post-judgment interest, lost earnings ($200/day), other reasonable expenses

Part A Endorsements

Extended non-owned coverage: for insureds without own vehicle
Towing and labor: covers towing costs + on-site emergency repair labor only
Joint ownership coverage: extends “named insured” status to non-spouse co-owners
Rental vehicle coverage: liability/physical damage extends to rentals; transportation expense covers loss-of-use up to $20/day

Part A Exclusions

Intentional injury/damage
Property owned/transported by insured
Employee injuries (except domestic workers not covered by workers’ comp)
Vehicles for hire, non-farm business use, unauthorized use (stolen vehicles)
Nuclear liability, <4-wheel/off-road vehicles, employer-furnished vehicles, organized racing

Part B: Medical Payments Coverage

Pays medical/funeral expenses for BI to insured or guest occupants
Expenses must be incurred within 3 years of accident
Covers named insured/family as pedestrians struck by a vehicle
Similar exclusions to Part A, plus vehicle-as-residence exclusion

Part C: Uninsured Motorist Coverage

Pays compensatory damages for BI caused by uninsured driver
Written per person/per accident limits
Hit-and-run vehicles count as uninsured if physical contact occurs (direct or indirect, e.g., debris)
State law may require coverage for “phantom vehicle”/miss-and-run with no contact, if corroborated
Excludes government-owned vehicles, approved self-insurers, rail vehicles, residence-use vehicles
Underinsured Motorist Coverage: supplements when at-fault driver’s limits are insufficient
State law governs whether UM coverage can be rejected/lowered

Part D: Coverage for Damage to Insured Auto

Two forms: collision and other-than-collision (comprehensive); both subject to deductible
Collision: covers upset or impact damage, paid regardless of fault; insurer may subrogate
Extends to non-owned auto operated by insured (excess coverage); capped at $1,500 for non-owned trailer
Comprehensive: covers fire, theft, vandalism, weather, animal contact, glass breakage, etc.
Transportation expenses: up to $20/day (max $600); theft losses start after 48 hrs, other losses after 24 hrs

Part D Exclusions

Vehicle used as for-hire passenger carrier
Wear/tear, mechanical/electrical breakdown, road damage to tires
War/nuclear perils
Non-permanent sound/electronic equipment, TVs, antennas, awnings, cabanas, custom furnishings, radar detectors
No benefit to bailee

Part E: Duties After Loss

Prompt notification to insurer
Cooperate with investigation, file police report if required
Submit to exams, authorize medical records release
Submit written proof of loss (required before claim payment)

Part F: General Provisions

Bankruptcy of insured doesn’t void insurer’s obligations
Policy changes require written endorsement
No coverage for fraud
Legal action only after insured meets contractual duties
Termination: insured cancels anytime; insurer needs 10 days’ notice (nonpayment/first 60 days) or 20 days’ otherwise
After 60 days/renewal: insurer cancels only for nonpayment, license suspension/revocation, or misrepresentation
Nonrenewal requires 20 days’ notice minimum
Automatic termination if renewal not accepted/paid
Policy territory: US, possessions, Puerto Rico, Canada
Other-state coverage: adopts minimum limits of state being traveled through
Insurer retains subrogation rights
Transfer of interest requires insurer’s written consent

Lesson Summary

PAP = liability, medical payments, uninsured motorist, and physical damage coverage
Endorsements expand coverage (non-owned use, towing, joint ownership, rentals)
Exclusions limit coverage (intentional acts, commercial use, specific property)
Parts E & F define insured’s duties and general contract provisions

Key Vocabulary

Auto Liability: coverage for BI/PD from vehicle ownership/use
Auto Physical Damage: coverage for collision, vandalism, fire, theft damage to insured vehicle
Collision Coverage: pays for impact/upset damage regardless of fault
Comprehensive (Other than Collision): covers non-collision perils
Dual Limits: separate liability limits per peril type
Gap Insurance: covers difference between ACV and loan balance (common for leased cars)
Personal Auto Policy: insures private passenger autos/certain trucks
Private Passenger Auto (PPA): bundles liability, PIP, MP, UM/UIM, comprehensive, collision
Supplementary Payments: bail bonds, appeal bonds, interest, lost earnings, claim expenses
Total Loss: repair cost exceeds vehicle value
Underinsured Motorist Coverage: covers gap when at-fault driver’s limits are too low

Next | 11. Flood and Other Limited Policies

Personal Auto Insurance (PAP)

Automobile Insurance

An automobile insurance policy is a type of package policy that may provide:

Property coverage for damage to the insured’s auto
Legal liability protection for bodily injury or property damage to others arising out of the operation, maintenance, or use of the insured auto
Coverage for injury to the insured or members of the insured’s family

Personal Auto Policy

Bodily Injury (BI)

The definition of “bodily injury” to others includes death.

Family Member

A person related to the named insured by blood, marriage, or adoption who is a resident of the insured’s household (including a ward or foster child).

Occupying

In or upon; or getting in, on, out of, or off of the covered auto.

Sidenote

Know this...

Getting out of an auto is also referred to as “alighting” from the auto.

Trailer

A vehicle designed to be pulled by a private passenger auto. A farm wagon or farm implement, while towed by a private passenger auto, is also considered to be a trailer.

Covered Auto

Any vehicle shown in the declarations, a newly acquired auto, any trailer the named insured owns, and any auto or trailer the named insured does not own while used as a temporary substitute for a covered auto that is out of normal use because of its breakdown, repair, servicing, loss, or destruction.

Coverage Territory

The U.S. and its possessions, Puerto Rico, and Canada.

Owned Auto

The vehicle that appears on the declarations page; the auto that the named insured owns and insures under the Personal Auto Policy.

Four Principal Coverage Parts

Part A Liability Coverage

In addition to the policy’s limit of liability, the insurer pays the defense costs it incurs.

Split limits

Liability coverage is commonly written on a split-limits basis. The limits are expressed as a series of three numbers, such as 15/30/10. This means the policy will pay:

$15,000 per person for bodily injury to a maximum of $30,000 per accident for bodily injury and $10,000 per accident for property damage.

When liability coverage applies

An auto policy provides liability protection when a named insured or covered family member is legally responsible for bodily injury or property damage to others while operating an owned auto.

Who is an insured

The policy language defines who qualifies as an insured. An insured is:

The named insured or any resident family member using, owning, or maintaining the covered auto or trailer
Any person using the auto with the permission of the insured
Anyone vicariously liable for the acts of (1) or (2)

Supplementary payments

Up to $250 for the cost of bail bonds required because of an accident, including related traffic violations;
Premiums on appeal bonds and bonds to release attachments in any suit the insurer defends
Interest accruing after a judgment is entered in any legal suit the insurer defends
Up to $200 a day for loss of earnings, but not other income, because of attendance at trials or hearings at the insurer’s request
Other usual or likely expenses incurred at the insurer’s request as long as they are reasonable

Endorsements

The following endorsements may be added to the PAP (usually for an additional cost):

Extended non-owned coverage for the named individual

An insured who has no personal automobile may purchase an endorsement to a personal auto policy, which provides liability protection to the insured while driving any non-owned vehicle

Towing and Labor costs

This endorsement reimburses the actual costs of towing a disabled covered auto and/or the cost of labor for emergency repairs performed at the site of disablement. Coverage applies only to labor performed at the place where the vehicle became disabled. Labor performed after the vehicle has been towed to a garage or repair shop is not covered under this endorsement. The endorsement pays up to the limit shown for each disablement, and applies to a disabled non-owned auto as well as a covered auto.

Joint ownership coverage

The PAP’s “you” means only the named insured and a resident spouse. When two or more people who are not spouses jointly own a private passenger auto, pickup or van, such as unmarried individuals living in the same household or relatives living in separate households, the joint ownership coverage endorsement treats each joint owner as “you” for the jointly owned vehicle, so each has the coverage of a named insured

Rental vehicle coverage

A car the insured rents is a non-owned auto, so the PAP’s liability coverage applies to it, and its physical damage coverage applies if the policy carries collision or other than collision coverage. Part D gives a non-owned auto the broadest coverage applicable to any covered auto shown in the declarations, as excess over any coverage the owner provides. Part D’s transportation expenses also pay the rental company’s charge for loss of use, up to $20 a day. Endorsements are available that raise the transportation expense limits or cover damage to a rental vehicle

Part A Exclusions

The insurer will not provide liability protection for any person with regard to any of the exclusions listed in the policy, which commonly include:

Intentional BI/PD
Property owned/being transported by insured
No coverage for bodily injury to any employee of the insured arising out of and in the course of employment by the insured.

Exception: This exclusion does not apply to a domestic employee who is not entitled to (or required to be covered by) workers’ compensation benefits

Liability from ownership/operation of a vehicle for hire
Liability from using any vehicle in a business that is not farming or ranching
Liability coming from the use of a vehicle the insured does not have permission to use (stolen car)
BI/PD covered by nuclear liability policy
Motorized vehicles having less than 4 wheels or designated to be used off public roads
Vehicle furnished for insured’s regular use (company car)
Competing and/or practicing for an organized racing or speed contest

Part B Medical Payments Coverage

The exclusions applying to Part B are similar to those appearing in Part A, but also include injuries sustained while using a vehicle as a residence.

Part C Uninsured Motorist Coverage

An uninsured motor vehicle is a vehicle that is:

Uninsured (someone who simply doesn’t have insurance);
A hit-and-run vehicle is considered an uninsured motor vehicle if it causes bodily injury to an insured.

Insuring company denies coverage or becomes insolvent.
Vehicles not considered to uninsured include:
Vehicle owned by the government
Vehicle owned by self-insurer approved by licensing authority
Vehicle operated on rails or a vehicle located for use as a residence

Part D Coverage for Damage to the Insured Auto

Collision

Collision is defined as “the upset of the covered vehicle or damage resulting from impact with another auto or object.” Collision losses are paid regardless of fault.

If an insured can’t collect from an at-fault third party, the insured’s policy pays for the loss, less any deductible.
The insurer may then subrogate against the at-fault party to recover what it paid.
If the insured is responsible for the collision damage, the policy still pays up to its limit, less any deductible.

Collision coverage also applies to damage to a non-owned auto being operated by the named insured. This coverage is excess over other coverage applicable to the non-owned auto.

Sidenote

Know this...

Part D will pay no more than $1,500 for damage to a non-owned trailer.

Other than collision (comprehensive)

Other than Collision (comprehensive) coverage covers direct and accidental damage to the covered auto from causes “other than collision,” such as:

Falling objects
Fire
Explosion
Earthquake
Windstorm, hail, water, flood
Theft or larceny
Malicious mischief or vandalism
Riot or civil commotion
Breakage of glass
Contact with a bird or animal

Transportation expenses

Sidenote

Know this...

Part D Exclusions

Losses to covered auto being used as passenger carrier for hire
Damage due to wear and tear, mechanical, electrical breakdown, road damage to tires
War/nuclear perils
Sound reproduction equipment, except when permanently installed.
TVs, antennas, awnings, cabanas
CB radio, scanner, telephones, except when permanently installed
Custom furnishing
Radar detection equipment
No benefit to bailee

Two Additional Policy Parts

Part E

Part E describes the insured’s duties after a loss. These duties include:

Notify the insurer as soon as reasonably possible after a loss occurs
Cooperate with the insurer in the investigation of a claim
File police report if required
Submit to physical exams if requested
Authorize the insurer to obtain medical reports or other pertinent records
Submit a written proof of loss when requested.

Sidenote

Know this...

Written proof of loss must be sent to the insurer before any claim payment will be made. A notice of loss to an insurer does not constitute proof of loss.

Part F

Part F includes other general provisions such as:

Bankruptcy of insured

Bankruptcy or insolvency of the insured does not relieve the insurer of its obligations

Policy changes

It must be in the form of a written endorsement

Fraud

There is no coverage in the case of fraud on the insured’s part

Legal action

Only after the insured has fulfilled his/her contractual obligations can the insured take action against the insurer

Termination

The named insured may cancel at any time by returning the policy or giving advance written notice. The insurer must give at least 10 days’ notice to cancel for nonpayment of premium or during the first 60 days of a new policy, and at least 20 days’ notice in all other cases. After a policy has been in effect for 60 days, or on a renewal, the insurer may cancel only for nonpayment, for suspension or revocation of the driver’s license of the named insured or of a driver who lives with or regularly uses the covered auto, or if the policy was obtained through material misrepresentation

Non renewal

The insurer may decide not to renew by mailing notice at least 20 days before the end of the policy period. State law often requires longer notice or a stated reason

Automatic termination

If the insurer offers to renew and the insured does not accept, including by not paying the renewal premium when due, the policy ends automatically at the end of the policy period. Coverage on an auto also ends when the insured buys other similar insurance on it

Policy period and territory

The US, its possessions and territories, Puerto Rico, and Canada. Cover only accidents occurring during the policy period and within the territory

Other state coverage

When the insured is in another state besides the state of residency, the insurance minimum limits become those of the state traveling through

Insurer’s right to recover

The company has subrogation rights

Transfer of interest

Insured cannot give rights to another person without the insurer’s written consent

Lesson Summary

The Personal Auto Policy includes four main coverage parts: liability coverage, medical payments coverage, uninsured motorist coverage, and coverage for damage to the insured’s auto.

Part A: Liability Coverage - Pays for bodily injury or property damage to others due to the insured’s auto on a split limits basis. Additional expenses for defense are also covered.
Part B: Medical Payments Coverage - Covers medical and funeral expenses resulting from bodily injury in the insured’s auto.
Part C: Uninsured Motorist Coverage - Pays compensatory damages for bodily injury caused by an uninsured driver.
Part D: Coverage for Damage to the Insured Auto - Provides collision and other-than-collision coverage, subject to a deductible.

Chapter Vocabulary

Definitions

Auto Liability: Coverage that protects against financial loss because of legal liability for motor vehicle-related injuries (bodily injury and medical payments) or damage to the property of others caused by accidents arising out of ownership, maintenance, or use of a motor vehicle (including recreational vehicles such as motor homes). Commercial is defined as all motor vehicle policies that include vehicles that are used primarily in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit. No Fault is defined by the state concerned.
Auto Physical Damage: Motor vehicle insurance coverage (including collision, vandalism, fire, and theft) that insures against material damage to the insured’s vehicle. Commercial is defined as all motor vehicle policies that include vehicles that are used in connection with business, commercial establishments, activity, employment, or activities carried on for gain or profit.
Automobile Liability Insurance: Coverage for bodily injury and property damage incurred through ownership or operation of a vehicle.

Bailee - A person who received temporary custody of goods or property belonging to others.

Collision Coverage: A type of auto insurance that covers physical damage occurring when the insured auto strikes another auto or stationary object. It may also include upset or overturn of the insured auto.
Common Carrier: A company or concern engaged in the transportation of goods or persons for a fee.
Creditor-Placed Auto: Single interest or dual interest credit insurance that is purchased unilaterally by the creditor, who is the named insured, subsequent to the date of the credit transaction, providing coverage against loss to property that would either impair a creditor’s interest or adversely affect the value of collateral on automobiles, boats, or other vehicles.
Dual Limits: Separate limits are provided for various perils, which are several forms of liability insurance.
Gap Insurance: An automobile insurance option, available in some states, that covers the difference between a car’s actual cash value when it is stolen or wrecked and the amount the insured owes the finance company. Typically used for leased cars.
Other States Coverage: With auto insurance, when an insured is in another state besides the state of residency, the insurance coverage becomes at least equal to the state minimum limits of the state traveling through.
Other than Collision Coverage: See Comprehensive Coverage
Personal Auto Policy: Coverage designed to insure private passenger automobiles and certain types of trucks owned by an individual or husband and wife.
Personal GAP Insurance: Credit insurance that insures the excess of the outstanding indebtedness over the primary property insurance benefits in the event of a total loss to a collateral asset.
Private Passenger Auto (PPA): Filings that include singularly or in any combination coverage such as the following: Auto Liability, Personal Injury Protection (PIP), Medical Payments (MP), Uninsured/Underinsured (UM/UIM); Specified Causes of Loss, Comprehensive, and Collision.
Supplementary Payments: Provides coverage for the cost of bail bonds up to $250, premiums to appeal and release of attachment bonds, interest on judgments, loss of earnings, and other reasonable claim settlement expenses that occurred at the insurance company’s request.
Total Loss: The condition of an automobile or other property when damage is so extensive that repair costs would exceed the value of the vehicle or property.
Transit: Transporting from one location to another. Transportation policies are also referred to as transit insurance.
Underinsured Motorist Coverage: Policy option for bodily injury or property losses caused by a motorist with coverage insufficient to cover the total dollar amount of losses. Compensation for the injured party is equal to the difference between the losses incurred and the liability covered by the motorist at fault.

Achievable Property & Casualty