4 - PAP: Liability, Med Pay, and UM Coverage

PAP Part A: Exclusions

- Intentional Injury - Property Owned or Transported - Property Rented to, Used by, or in the Care of the Insured (exclusion does not apply to damage to a residence or private garage) - Bodily Injury to an Employee of an Insured (unless Work Comp is not available) - Public or Livery Conveyance (Uber and Lyft) - Garage Business Use (to exclude a loss exposure that should be covered by a commercial auto policy, such as a garage policy) - Other Business Use (exclude liability coverage for commercial vehicles and trucks used in a business) - Vehicle Used Without Reasonable Belief of Being Entitled - Nuclear Energy Liability Losses - Vehicles With Fewer Than Four Wheels or Designed for Off-Road Use (nonowned golf cart or vehicle used by insured in medical emergency not excluded) - Other Vehicles Owned by Insured or Available for Insured's Regular Use - Vehicles Owned by or Available for Family Member's Regular Use - Racing - Personal Vehicle Sharing

PAP Part B: Exclusions

- Motorized vehicles with fewer than four wheels - Public or livery conveyance - Vehicles used as a residence or premises - Injury during the course of employment - Other vehicles owned by insured or available for insured's regular use - Vehicles owned by or available for family member's regular use (exclusion does not apply when named insured or spouse are driving a covered auto). - Vehicle occupied without reasonable belief of being entitled - Vehicles used in the business of an insured (exclusion does not apply to certain types of vehicles, such as passenger auto, van, or pickups) - Bodily injury from nuclear weapons or war - Nuclear radiation - Racing - Personal vehicle sharing program

PAP Part C: Exclusions

- Owned but not insured vehicle - Owned vehicle with primary UM coverage in other policy - Claim settlement that prejudices insurer's right of recovery (insurer must prove that other party had assets sufficient to reimburse it for the amounts it would have paid insured) - Public or Livery Conveyance (exclusion does not apply when insured and family members occupy a public or livery conveyance that is not "your covered auto", or for share-the-expense car pools) - Vehicle used without reasonable belief of being entitled - No benefit to Workers Compensation or Disability Benefits Insurer (this exclusion prevents the workers compensation insurer from obtaining reimbursement under the injured worker's UM coverage) - Punitive damages - Personal Vehicle Sharing Program

Uninsured motor vehicle

A land motor vehicle or trailer that is not insured for bodily injury liability, is insured for less than the financial responsibility limits, is a hit-and-run vehicle, or whose insurer denies coverage or becomes insolvent.

Punitive damages (exemplary damages)

A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act to deter similar conduct; the award need not bear any relation to a party's actual damages.

Compensatory damages

A payment awarded by a court to reimburse a victim for actual harm.

Named insured

A person, corporation, partnership, or other entity identified as an insured party in an insurance policy's declarations page.

PAP Part A: Supplementary Payments

A provision for payment of certain expenses that are considered to be supplementary payments, which, if paid, will not reduce the limit of liability. - Cost of bail bonds - Premiums on appeal bonds and bonds to release attachments - Interest accruing after a judgment - Loss of earnings because of attendance at trials - Other reasonable expenses incurred at the insurer's request

Vehicle identification number (VIN)

A unique number that is assigned to each vehicle and that identifies certain vehicle characteristics.

Arbitration

An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement, which can be final and binding.

Declarations page (declarations, or dec.)

An insurance policy information page or pages providing specific details about the insured and the subject of insurance.

PAP Part D

Coverage for Damage to Your Auto compensates for physical damage to a covered auto and to certain nonowned autos. Aka physical damage coverage, Part D includes other than collision and collision coverages. Some insureds elect not to include physical damage coverage on their policies.

Collision coverage

Coverage for direct and accidental loss or damage to a covered auto caused by collision with another object or by overturn.

Other than collision (OTC) coverage

Coverage for physical damage to a covered auto resulting from any cause of loss except collision or a cause of loss specifically excluded.

Underinsured motorists (UIM) coverage

Coverage that applies when a negligent driver has liability insurance at the time of the accident but has limits lower than those of the injured person's coverage.

PAP Part E

Duties After an Accident or Loss outlines the duties required of an insured after an accident or a loss, such as requirements for notifying the insurer of the details of any losses that happen.

PAP Part F

General Provisions contains information such as how changes to the policy can be made, provisions for cancellation and termination of the policy, and descriptions of the policy period and territory.

PAP Agreement and Definitions

General agreement stating insurer is providing the coverage subject to payment of premium and to the terms of the policy, uses simple-to-understand language to define important words and phrases used throughout policy.

PAP Part A: Out of State Coverage

If an accident occurs in another state that has a financial responsibility law or a similar law that requires higher liability limits than the limits shown in the declarations, the PAP automatically provides the higher required limits for that accident. In addition, if a state has a compulsory insurance law or a similar law that requires nonresidents to maintain coverage (such as "no-fault" PIP) whenever they use a vehicle in that state, the PAP provides the required minimum amounts and types of coverage.

PAP Part C: Other Insurance

If other applicable UM insurance is available under one or more policies, these provisions apply to the payment for damages: - The total amount paid will be no more than the highest limit of any of the policies that provide coverage. - Coverage for an accident involving a vehicle the named insured does not own, including any vehicle while being used as a temporary substitute for a covered auto, is provided on an excess basis over any collectible insurance providing coverage on a primary basis - If "this policy" and another policy (or policies) provide coverage on a primary basis, each policy will contribute proportionally to the insured's recovery. Each insurer's share is equal to the proportion its UM limit bears to the total amount available under all applicable coverages provided on a primary basis - If "this policy" and another policy (or policies) provide coverage on an excess basis, each policy will contribute proportionally to the insured's recovery, based on the excess limits each policy provides.

PAP Part A: Other Insurance

If the insured has other applicable liability insurance on an owned vehicle, the insurer pays only its pro rata share of the loss. The insurer's share is the proportion of the loss that the limit of liability bears to the total of all applicable limits. Insurer's share of damages = (Limit of liability of that insurer's policy / Total limits of liability of all applicable policies) x Amount of damages If other liability insurance is available on a nonowned vehicle, including any vehicle used as a temporary substitute for a covered auto, the PAP coverage is excess over any other collectible insurance.

PAP Part C: Arbitration

If the insurer and insured cannot agree on whether the insured is entitled to recover damages from an uninsured motorist or on the amount of damages, the dispute can be settled by arbitration. However, arbitration does not include disputes involving coverage, such as whether the driver of the covered auto had a reasonable belief he was entitled to use the auto. Each party selects an arbitrator and the two arbitrators select a 3rd arbitrator. A decision agreed to by two of the three arbitrators is binding as to whether the insured is legally entitled to recover damages and the amount of damages unless the amount of damages exceeds the minimum limit for bodily injury specified by the state's financial responsibility law, in which case either party can demand the right to a trial within 60 days of the arbitrators' decision.

PAP Part B: Other Insurance

If the medical payments coverage of more than one insurance policy applies to a claim, each insurer pays its pro rata share based on the proportion that its limit of liability bears to the total of applicable limits. With respect to a nonowned vehicle or a vehicle while used as a temporary substitute for the insured's covered auto, medical payments coverage under a PAP is excess over any other collectible auto insurance that pays medical or funeral expenses.

Public or livery conveyance

In case law, a method of transportation that is indiscriminately offered to the general public, such as a taxi or public bus.

PAP Declarations

Includes general info such as name and address of insured, name of insurer, policy period, description of the covered autos, limits of liability, premium and rating info, and endorsements that may apply to policy.

"Newly acquired auto" definition

Includes private passenger auto or pickup or van (with Gross Vehicle rating of 10,000 lbs or less) for which no other insurance policy provides coverage that become an owned vehicle during the policy period. For liability, medical payments, uninsured motorists, or any other PAP coverage except the coverage for damage to your auto, a newly acquired auto automatically receives coverage equal to the broadest coverage indicated for any vehicle shown in the declarations. An additional auto is automatically covered for 14 days after the named insured becomes the owner. The insured must request coverage beyond 14 days. A replacement auto is covered for the remainder of the policy period, even if the insured does not ask for coverage. An insured who carries collision coverage or OTC coverage on at least one auto receives automatic coverage on a newly acquired auto for 14 days. The coverage that automatically applies is equal to the broadest coverage (that is, the smallest deductible) on any vehicle currently shown in the policy declarations. The insure must ask the insurer to add the auto to the policy within this time frame for coverage to apply beyond the 14-day automatic coverage period. An insured who does not carry collision or OTC coverage on at least one auto receives automatic physical damage coverage on a newly acquired auto for 4 days, subject to a $500 deductible. The insured must ask the insurer to add the auto within this time frame for coverage to apply beyond the 4-day automatic coverage period.

PAP Endorsements

Includes state-specific endorsements to adapt the PAP to state-specific laws and regulations applying to auto insurance. Endorsements are also available to provide additional coverages that are desired by some policyholders but are not purchased by all policyholders.

PAP Part C: Insuring Agreement

Insurer agrees to pay compensatory damages that the insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury caused by an accident. Such compensatory damages could include medical expenses, rehabilitation expenses, lost wages, and other losses resulting from the insured's bodily injury. Punitive (or exemplary) damages are not covered. UM coverage compensates insured for damages caused by uninsured motorists without their having to sue the uninsured driver. However, UM coverage applies only if the uninsured motorist is legally responsible for the accident. Standard PAP provides UM coverage only for bodily injury claims, but some states' UM coverage applies to property damages claims as well, usually subject to a deductible such as $200 or $300. Insured Persons: - The named insured and family members (also covered as pedestrians) - Any other person occupying a covered auto - Any person legally entitled to recover damages because of bodily injury to a person described in the preceding two paragraphs (ex. surviving spouse) Part C also specifies the types of vehicles that are considered uninsured motor vehicles.

PAP Part C - Uninsured Motorists (UM) Coverage

Intended to compensate an insured and the insured's family members for injuries caused by an at-fault uninsured motorist, a hit-and-run driver, or a driver whose insurer is insolvent. The UM provisions in the PAP are usually modified or completely replaced by state-specific endorsements because each state's UM law may require unique provisions. Part C includes these provisions: - Insuring Agreement - Exclusions - Limit of Liability - Other Insurance - Arbitration

Postjudgment interest

Interest that may accrue on damages after a judgment has been entered in a court and before the money is paid.

Prejudgment interest

Interest that may accrue on damages before a judgment has been rendered.

PAP Part A

Liability Coverage protects the insured against claims or lawsuits for bodily injury or property damage arising out of the operation of an auto.

PAP Part B

Medical Payments Coverage compensates for reasonable and necessary medical and funeral expenses because of bodily injury to the insured caused by an auto accident.

Damages

Money claimed by, or a monetary award to, a party who has suffered bodily injury or property damage for which another party is legally responsible.

PAP Part A: Limit of Liability

Most PAPs are written on a split-limits basis, with the 3 types of limits stated in this order: - Bodily injury to each person - Bodily injury to all persons in each accident - Property damage in each accident Ex. $100/$300/$50 Single Liability Limit endorsement modifies the policy to provide coverage on a single-limit basis. Provision also states that no one is entitled to receive duplicate payments for the same elements of loss under Part A--Liability Coverage, Part B--Medical Payments Coverage, Part C--Uninsured Motorists Coverage, or any underinsured motorists coverage provided by the policy.

Single-limits basis

One coverage limit that applies to all damages arising from bodily injury or property damage or both, resulting from a single accident.

PAP Part A: Financial Responsibility

PAP can be used to demonstrate proof of financial responsibility to the extent required by the state where the accident or traffic violation has occurred. In addition, if a financial responsibility law is changed to require higher minimum limits of liability, the PAP automatically complies with the new law.

Identify the types of information typically contained on the Declarations page of the Personal Auto Policy.

Provides specific info regarding the insurer, the named insured, the policy number and the policy period, insured vehicles, the coverage provided, and a list of any endorsements that may apply to the policy. Also included are the identification of insured vehicles' lienholders, if any; vehicles' garage locations if other than at the insured's address; rating information; and the signature of an authorized legal representative of the insurer.

Split-limits basis

Separate coverage limits that allow one limit for bodily injury to each person; a second usually higher limit for bodily injury to all persons in each accident; and a third limit for all property damage in each accident.

PAP Part A: Insuring Agreement

States the insurer's duty to pay damages (may include both compensatory damages and punitive damages) and defense costs and defines the persons and organizations insured under Part A (named insured and family members, any person using the named insured's covered auto, any person or organization legally responsible for the acts of a covered person while using a covered auto, and any person or organization legally responsible for the named insured's or family member's use of any automobile or trailer.

PAP Part B: Insuring Agreement

States the insurer's promise to pay reasonable and necessary medical and funeral expenses incurred by an insured because of bodily injury caused by an accident. The insurer agrees to pay only those expenses incurred for services rendered within 3 years from the date of the accident. Medical payments coverage applies without regard to fault; therefore, whether or not the insured is legally liable for the accident, medical payments benefits may be paid for both the insured and other injured occupants of the insured's covered auto. The named insured and "family members" are covered for their medical expenses if they are injured while occupying a motor vehicle or as pedestrians when struck by a motor vehicle designed for use mainly on public roads (includes auto accidents, car door slammed on hand, struck by car while crossing street). Medical expenses of passengers in a covered auto are covered (not medical expenses of passengers in a nonowned vehicle).

Attachment

The act of seizing property to secure a judgment.

UIM Limits Trigger

The key criterion for UIM protection with a limits trigger is that the liability limits of the other party's policy are less than the insured's UIM limits. The other party's coverage is primary, and the insured's UIM coverage is excess.

UIM Damages Trigger

The key criterion for coverage to apply under UIM coverage with a damages trigger is that the liability limits of the other party's policy are less than the insured's damages.

PAP Part B: Limit of Liability

The limit of insurance for medical payments coverage is stated in the declarations. This limit, typically between $1,000 and $10,000, is the maximum amount that will be paid to each injured person in a single accident, regardless of the number of insured persons, claims made, vehicles or premiums shown on the policy, or vehicles involved in the auto accident. The intent is to prevent an insured person from collecting more than the stated medical payments limit for any one accident. In addition, the Limit of Liability provision specifically states that no one is entitled to receive duplicate payments for the same elements of loss under Part B--Medical Payments Coverage, Part A--Liability Coverage, Part C--Uninsured Motorists Coverage, or any underinsured motorists coverage provided by the policy.

PAP Part C: Limit of Liability

The minimum amount of UM coverage available under the PAP is set by the financial responsibility or compulsory insurance law of the state in which the insured auto is principally garaged. Higher limits can be purchased for an additional premium. The limit of liability for UM coverage is shown in the declarations. UM coverage is normally written on a split-limits basis, but coverage on a single-limit basis is available by endorsement. The limits shown are the most that will be paid regardless of the number of insured persons, claims made, vehicles or premiums shown in the declarations, or vehicles involved in the accident (prevents "stacking" of UM payments under a policy that covers multiple vehicles). The UM section specifically states that no person will receive duplicate payments for any loss under Part A--Liability Coverage, Part B--Medical Payments Coverage, or Part C--Uninsured Motorists Coverage, or under any UM coverage provided by the policy. However, the insured can attempt to collect any additional damages under their UM coverage as long as they do not duplicate the expenses for which the insurer has already paid under other coverages. The insurer will not make duplicate payment under the UM coverage if payment has been made by the person or organization legally responsible for the accident or if the injured person is entitled to receive payment under a workers compensation or disability benefits law.

Policy period

The time frame, beginning with the inception date, during which insurance coverage applies.

DICE method

This method is used to determine whether a policy covers a loss. "DICE" is an acronym for categories of policy provisions: declarations, insuring agreement, conditions, and exclusions. The method has 4 steps: 1. Review of the declarations page to determine whether it covers the person or the property at the time of the loss. 2. Review of the insuring agreement to determine whether it covers the loss. 3. Review of policy conditions to determine compliance 4. Review of policy exclusions to determine whether they preclude coverage of the loss.

Purpose of UIM coverage

UIM coverage goes beyond UM coverage. It is important in situations in which a negligent driver is insured for at least the minimum required financial responsibility limits but the policy's liability limits are insufficient to pay the insured's damages. UIM coverage always applies to damages for bodily injury and, in some states, also includes damages for property damage.

PAP Part C

Uninsured Motorists Coverage pays damages if an insured is injured by an uninsured motorist, a hit-and-run driver, or a driver whose insurer is insolvent.

Personal Auto Policy (PAP)

Used to insure autos owned by individuals and families. - Declarations - Agreement and Definitions - Part A - Liability Coverage - Part B - Medical Payments Coverage - Part C - Uninsured Motorists Coverage - Part D - Damage to Your Auto Coverage - Part E - Insured Duties Following an Accident or Loss - Part F - General Provisions - Endorsements

Supplementary payments

Various expenses the insurer agrees to pay under a liability insurance policy (in addition to the liability limits) for items such as premiums on bail bonds and appeal bonds, loss of the insured's earnings because of attendance at trials, and other reasonable expenses incurred by the insured at the insurer's request.

State Variations of UIM coverage

Where the insured's vehicle is registered or principally garaged determines which state's laws apply. - Mandatory or Optional Coverage - Limits Trigger or Damages Trigger - Some states allow stacking (interpolicy or intrapolicy) and some do not

Paraphrase the definitions of the words and phrases included in the Definitions section of the PAP.

You and your - refer to the named insured shown on the Declarations page, also include an unnamed spouse of the named insured, provided that the spouse is a resident of the same household. We, us, and out - refer to the insurer providing insurance under the contract, generally the company named in the declarations. Leased vehicles - clarifies what the policy includes when it refers to an owned auto. Bodily injury - bodily harm, sickness, or disease, including death. This phrase is referred to in Part A, Part B, and Part C, and it defines some of the coverage for which payment will be made under the policy. Business - a trade, a profession, or an occupation. Important in understanding exclusions. Family member - a person who is related to the named insured or spouse by blood, marriage, or adoption and who resides in the named insured's household. Occupying - defined as in, upon, getting in, on, out, or off. This definition is used in connection with Part B and Part C and clarifies the coverages provided. Property damage - physical injury to, destruction of, or loss of use of tangible property. Only appears in Part A. Trailer - a vehicle designed to be pulled by a private passenger auto, a pickup, or a van. Also includes a farm wagon or farm implement towed by a vehicle. Your covered auto - has more detailed definition. Includes any vehicle shown in the declarations, a newly acquired auto, any trailer you own, and a temporary substitute auto or trailer. Newly acquired auto - has more detailed definition.