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36 Cards in this Set
- Front
- Back
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Personal Auto Policy |
Policy written by Insurance Services Office (ISO). ISO PAP is designed for private passenger autos. Consists of Declarations page, Agreement and Definitions page, and six sections. Sections of PAP: A - Laibility, B - Medical Payments Coverage, C - Uninsured Motorists Coverage, D - Damage to Your Auto Coverage, E - Insured Duties Following Accident or Loss, F - General Provisions |
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Personal Auto Policy pt.2 |
Declarations page includes general information. Name and address of insured, Policy period, Description of covered autos and Limits of liability. May mention premiums and agent info. Agreement and Definitions page includes a general agreement stating the insurer is providing coverage, subject to payment of premium. States that as long as you pay premium insurer will cover you under the policy. |
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Overview of Coverages |
Parts of the PAP: Part A - Liability coverage protects against claims for bodily injury or property damage Part B - Medical Payments coverage compensates for medical expenses because of bodily injury to the insured. Part C - Uninsured mototrists coverage pays damages if injury caused by uninsured. |
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Overview of coverages pt.2 |
Parts of the PAP: Part D - Coverage for damage to your auto compensates for physical damage to a covered auto and to certain nonowned autos. Part E - Duties after an accident or loss outlines duties required of an insured after an accident or a loss. Part F - General provisions contains information such as how changes to the policy can be made. |
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Endorsements |
In addition to the PAP coverage form, the policy also includes state-specific endorsements. Usually used to adapt the PAP to state-specific laws and regulations. Also available to provide additional coverages that are desired by some policyholders. E.x. endorsement to raise liability limits or for UIM. |
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PAP definitions purpose |
The PAP is designed for individuals who might not be familiar with insurance policy terms. Definitions section appears at the beginning of the PAP for easy reference. Designed to be easily understood.
Terms in the definitions section are defined for use in every section of the policy, whenever they are used. Individual sections of the policy sometimes define terms as they are used in that section. |
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Definitions |
Common definitions on PAP: You and your - named insured and an unnamed spouse if resident of same house. If unnamed spouse moves out of the house they still have coverage for 90 days. Family member - persons related to insured (blood or marriage) and who resides in the insured's household (includes ward or foster child). We, us and our - insurer providing insurance under the contract. |
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Definitions pt.2 |
Bodily injury - bodily harm, sickness or disease including death. Occupying - in, upon, getting in, on, or out of auto (includes leaning over an insured vehicle, getting in or out). Property damage - physical injury to, destruction of or loss of use of tangible property. |
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Your covered auto definition |
Your covered auto is also defined: Any vehicles shown in the declarations including leased vehicles. A newly acquired auto - covered equally to the broadest coverage available. Any trailer you own - vehicle designed to be pulled by a private passenger auto. A temporary substitute auto or trailer. |
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Part A Liability insuring agreement |
Part A - liability coverage provides coverage for an insured's legal liability. Insuring agreement states the insurer's duty to pay damages and defense costs. Whats covered under Part A? Insurer agrees to pay compensatory and punitive damages for bodily injury or property damage for which an insured is legally liable (responsible). In addition, insurer agrees to pay legal costs incurred to defend the insured in a liability suit and prejudgment interest (prejudgment interest (not to be confused with post judgement interest) is not considered a supplementary payment, it is considered to be part of the award for damages and is subject to the applicable limit of liability (applies to the per person limit of the suit, not per accident)). The insurer agrees to pay all legal costs the insured may incur in a liability suit, even if the costs exceed the limit of liability. |
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Insuring agreement |
The insuring agreement in Part A describes the damages and defense costs covered and the persons and organizations insured. Part A provides liability coverage for: Named insured and family members (protected while driving either covered autos or borrowed autos). Any person using the covered auto (friend with permission borrows car, the policy for that car will pay liability claim). Any person responsible for acts of a covered person while using a covered auto (you're in your car taking package to post office as a part of your job duties and get in an accident, the other driver can sue you and your employer so you and your employer would be covered under the PAP). |
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Exclusions |
Exclusions from PAP liability coverage: Intentional bodily injury or property damage. Property owned or transported by insured (someone else's property in your car). Property rented to, used by or in care of the insured (other than residence or garage). Bodily injury to an employee of an insured injured during the course of employment. Vehicle being used as livery conveyance (charging a fee, taxi). Bodily injury caused by nuclear radiation. |
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Exclusions pt.2 |
Garage or other business use (operate car repair garage). Insureds use of vehicle without reasonable belief he/she is entitled to do so (theft) (family assumed to have permission from insured). Vehicles with fewer than four wheels. Vehicles designed for off-road use or racing. Other vehicles owned/used by insured regularly (if you have 2 cars they must both be listed on policy). Vehicles owned by family members. |
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Reasonable belief and exclusion |
E.x.Jake borrows Sue's car w/o her permission and has an accident. Jake's coverage will not apply however Sue's coverage will apply for both property damage and liability. |
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Limit of liability |
Most PAPs are written on a split-limits basis (3 limits that apply). Bodily injury to each person. Bodily injury to all persons in each accident. Property damage in each accident. E.x. split limits of 100/300/50 indicates insured has bodily injury liability limits of $100,000 per person and $300,000 for each accident, and a limit of $50,000 for property damage liability per accident. |
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Limit of liability pt.2 |
Some policies are written with a single limit. Applies per accident to the total of both bodily injury and property damage liability. Single liability limit endorsement modifies the policy to provide single-limit coverage. No one is entitled to receive duplicate payments for the same elements of loss under Part A, Part B and Part C of their own policy. |
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Supplementary payments |
Supplementary payments are their own separate section of Part A. Supplementary payments are expenses an insurer agrees to pay. Do not reduce the limit of liability. E.x. you have policy w/ single limit of liability of $500k, the insurer will pay up to $500k but if there are supplementary payments the insurer will also pay those even if it means more than $500k will be paid out. Types of supplementary payments: Cost of bail bonds (up to $250), Premium on appeal bonds and bonds to release attachments (appeal bonds work if found liable but decide to appeal, have to purchase bond that insures if you're found liable in appellate court you will pay at that point / attachment bonds are used when a creditor is owed money, will ask the judge to seize property of defendant to satisfy judgement, the release attachment bond is a type of surety bond used to counter the attachment bond and receive their property back, the bond ensures the judgement will still be paid if ruling made in favor of creditor), Post judgement interest (interest accrues on damages after judgement has been entered but before it's been paid, may take months for money to be paid after judgement made, in that time interest accrues (not to be confused with prejudgement interest)), Loss of earning up to $200 because of attendance at trials, other reasonable expenses incurred at the insurer's request. Legal defense fees are NOT a supplementary payment however the insuring agreement states the insurer agrees to defend the insured and pay all legal costs they incur in a liability suit. |
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Other insurance |
The other insurance provisions addresses situations in which more than one auto policy covers a liability claim. If insured has other liability insurance on an owned vehicle, insurer pays pro rata share (vehicle may be insured on 2 policies by 1 insurance company or 2 different companies). If insured has other liability insurance on a nonowned vehicle, the PAP coverage is excess over any other collectible insurance. |
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Pro Rata Formula |
Insurer's share of damages = (limil of liability of that insurer's policy / total limits of liability of all applicable policies) x amount of damages. E.x. Car w/ 2 policies, policy 1 has liability coverage of 25/50/10. Policy 2 has coverage of 75/150/50. Insured gets in an accident and injures 2 passengers in the other car. Beth has injuries of $10k and Greg has injuries of $50k. Policy 1 - (25k / 100k) x 50k = 15k Policy 2 - (75k / 100k) x 50k = 45k So, 15k would be paid under policy 1 and 45k would be paid under policy 2. |
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Part B Medical payments coverage insuring agreement |
Part B of the PAP provides coverage up to a limited amount without determining fault (no-fault). Insuring agreement states the insurer's promise to pay reasonable expenses incurred within three years because of bodily injury. E.x. Medical payments, surgical, x-ray, dental and some funeral expenses. Individuals covered under Part B: Named insured and family members - expenses if injured while occupying a vehicle or as pedestrians when struck by a vehicle. Any other person occupying covered auto - expenses of passengers in covered auto, could be a friend. |
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Exclusions |
Exclusions under Part B: Injuries sustained during employment if workers compensation benefits are available. Injuries sustained occupying a vehicle used as a public or livery conveyance. Bodily injury from war, nuclear reaction, radiation or radioactive contamination. Injuries sustained while occupying a vehicle used in the insured's business. |
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Exclusions pt.2 |
Injuries sustained while using a vehicle without a reasonable belief of entitlement (exclusion doesn't apply to family member, e.x. daughter borrows father's car). Injuries sustained while occupying vehicle with fewer than four wheels. Bodily injury sustained while occupying any racing vehicle (not covered if racing, but may be covered even if speeding). Injuries sustained occupying or struck by another vehicle owned by the insured. |
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Exclusions pt.3 |
Injuries sustained while occupying or struck by a vehicle owned by family members (exclusion doesn't apply to named insured) Injuries sustained while vehicle is located for use as a residence or premises. E.x. you're living in your car. |
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Limit of liability |
The limit of liability is the maximum amount that will be paid to each person in a single accident (typically between $1000-$10,000) No one is entitled to receive duplicate payments for the same elements of loss under Part A, Part B and Part C of their policy. |
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Other insurance |
The other insurance provision addresses situations in which more than one auto policy provides medical payments coverage. If insured has other medical payments coverage on an owned vehicle, insurer pays pro rata share (2 policies on the same car w/ same limit, each policy will pay half of medical expenses). With respect to a nonowned vehicle, the PAP is excess over other collectible insurance (e.x. insured is passenger in someone else's auto). Someone is a passenger in another persons car they may collect under their own MPC as well as the driver's MPC and the driver's liability coverage. |
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Part C uninsured motorists coverage insuring agreement |
Insurer agrees to pay damages caused by the owner or operator of an insured vehicle. Includes medical expenses, rehabilitation expenses and lost wages. Punitive damages are not covered. Coverage applies only if the uninsured motorist is legally responsible for the accident. Insureds receive compensation without having to sue the uninsured driver. |
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Insuring agreement pt.2 |
Insured under UM coverage: Named insured and family members while occupying covered auto or nonowned vehicle (also covered as pedestrians). Any other person occupying a covered auto (friend as a passenger). Any person entitled to recover damages (surviving spouse of named insured). |
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Insuring agreement pt.3 |
Uninsured motor vehicle is any vehicle in which: Bodily injury liability insurance applies. Insurance is in force, but limit of liability is less than the minimum required by the state (no like UIM where there limit is too low for expenses, has to be less than state legal minimum to apply). Hit-and-Run vehicle. Insurer denies coverage or is insolvent. |
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Exclusions |
Exclusions under Part C: Owned but not insured vehicle - vehicle owned by insured but not insured for UM. Owned vehicle with primary UM coverage in another policy (2 policies one with no UM and one with UM, only the second policy will cover). Claims the insured settles without insurer's consent if settlement prejudice insurer's right to recover payment (take out of pocket payment from uninsured driver). Public or livery conveyance. This exclusion does not apply if insured is occupying a public or livery conveyance that is not their "covered auto," e.x. insured is injured by a hit and run driver while on a school bus can recover under their PAP UM. Coverage for an accident involving the name insured does not own is provided on an excess basis over any collectible insurance providing coverage on a primary basis. |
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Exclusions pt.2 |
Vehicle used without reasonable belief of being entitled (exclusion doesn't apply to family members). No benefit to workers compensation or disability benefits insurer (if workers comp benefits can be collected generally UM would not cover) (prevents workers compensation insurers from being reimbursed for payments made). Punitive damages. |
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Limit of liability |
Minimum amount of coverage is set by the financial responsibility law of the state. Higher limits can be purchased. Coverage is usually written on split-limits basis. Coverage on single-limit basis available by endorsement. |
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Arbitration |
Arbitration settles disputes regarding amount of coverage or if insured entitled to recover damages from uninsured motorist. Does not include disputes involving coverage (determines amount of damages someone is entitled to, not weather or not coverage applies). Each party pays the expenses it incurs for arbitration, not the insurance company. Each party selects an arbitrator, and the two arbitrators then select a third arbitrator (or a judge if they can't agree on the third arbitrator). Decision by two of the three arbitrators is generally binding. |
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Underinsured motorists coverage |
Underinsured motorists (UIM) coverage goes beyond uninsured motorists (UM) coverage. Important when negligent driver is insured for at least the minimum state-required limits but policy limits are insufficient to pay damages. Regardless of the policy provisions, individual states' UM/UIM statues govern who is protected and under what circumstances. |
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Mandatory or optional coverage |
Mandatory or optional limits for UIM coverage also vary by state. Many states require that the UIM limit equal the UM coverage limit. In some states, UM limit can be reduced, but not below the state's minimum limit. |
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Triggers |
Some UIM endorsements contain a trigger. Some states have a limits trigger - applying UIM endorsement when negligent driver carries limits below limits provided by injured party's coverage (other party has coverage with limits below your limits). Some states have damages trigger - applying UIM endorsement when negligent driver carriers limits that are lower than injured party's actual damages. |
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Stacking |
Stacking is the application of two or more limits to a single accident. May involve two or more separate policies (interpolicy stacking) (e.x. you have $50k of UIM coverage and your husband has $25k limit, your injuries are over $50k so you may apply both limits to come up with $75k limit). Can also occur within a single policy that covers more than one vehicle (intrapolicy stacking). In some states, insured can choose between stacking or nonstacking, but must pay a higher premium for stacking. |
