5 - PAP: Physical Damages, Duties After an Accident, Endorsements

PAP Part D: Exclusions

- Public or livery conveyance - Wear and tear, freezing, breakdown, and road damage to tires ("due and confined to") - Radioactive contamination or war - Electronic equipment (exclusion does not apply to electronic equipment permanently installed in "your covered auto") - Media and accessories - Government destruction or confiscation (exclusion does not apply to the interests of any loss payees) - Trailer, camper body, or motor home (exclusion does not apply to a nonowned trailer) - Nonowned auto used without reasonable belief of being entitled - Radar and laser detection equipment - Customizing equipment - Nonowned auto used in garage business - Racing - Rental vehicles (applies if the rental agreement includes a damage waiver or if applicable state law precludes the rental company from recovering from the insured for the loss. Physical damage protection for rental autos is also provided as a benefit by some credit card companies if their card is used for the rental). - Personal vehicle sharing program

Transportation network company

A company that uses a mobile application or website to connect riders with drivers and arrange transportation in a personal auto for a fee.

Appraisal

A method of resolving disputes between insurers and insureds over the amount owed on a covered loss

Liberalization Clause

A policy condition providing that if a policy form is broadened at no additional premium, the broadened coverage automatically applies to all existing policies of the same type.

Proof of loss

A statement of facts about a loss for which the insured is making a claim.

Transportation expenses

Additional coverage in the Personal Auto Policy for substitute transportation costs incurred as the result of a covered physical damage loss.

Coverage for Damage to Your Auto (Maximum Limit of Liability) (PP 03 08 06 94)

Allows owners of high-value antique cars or restored show cars to establish the car's insurable value when the policy is written by inserting a stated amount of insurance in the policy. aka stated amount endorsement Each vehicle is described and a stated amount of insurance that applies to collision loss and other than collision loss is shown. Insurer's max limit of liability for a covered loss is limited to the lowest of these values: - The stated amount shown in the schedule or in the declarations. - The actual cash value of the stolen or damaged property - The amount necessary to repair or replace the property with other property of like kind and quality Applicable deductible is shown in the endorsement schedule or policy declarations. If repair or replacement results in better than like kind or quality, the insurer will not include the amount of betterment in any loss payment.

Auto Loan/Lease Coverage (PP03 35 01 05)

Amends the Part D (physical damage) coverage of the PAP so that in the event of a total loss on a leased vehicle, the unpaid amount due on the lease or loan is covered. Under this endorsement, none of these would be included in any loss payment: - Lease or loan payments that were overdue at the time of loss - Penalties imposed under a lease for excessive use, abnormal wear and tear, or high mileage - Security deposits not refunded by a lessor - Costs for extended warranties; credit life insurance; or health, accident, or disability insurance purchases with the loan or the lease - Balances transferred from previous loans or leases The endorsement schedule includes a description of the covered auto(s) and premiums for other than collision and/or collision coverage.

PAP Part F: Termination

Consists of 4 parts: - Cancellation - Nonrenewal - Automatic termination - Other termination provisions Changes mandated by state laws are usually incorporated into the policy by means of a state endorsement that must be attached to all auto policies issued in that state. Cancellation: Named insured normally can cancel anytime during the policy period by returning the policy to the insurer or by giving advance written notice of the date the cancellation is to become effective. Insurer has more limited cancellation rights: - Policy in-force < 60 days and not renewal or continuation policy --> insurer can cancel by mailing a cancellation notice to named insured. - Cancellation for nonpayment of premium --> insurer must give named insured at least 10 days' notice. - All other cases --> insurer must give named insured at least 20 days' notice. - Policy in-force >= 60 days --> insurer can cancel the policy only for 1 of 3 reasons: 1. The premium has not been paid. 2. The insured's driver's license has been suspended or revoked during the policy period (or since the last annual anniversary of the original effective date if the policy is for other than one year). 3. The policy has been obtained by a material misrepresentation. Nonrenewal: Insurer must give named insured at least 20 days' notice before end of policy period. - Policy period < 6 months --> insurer has right to nonrenew every 6 months, beginning 6 months after the policy's original effective date. - Policy period >= 6 months and < 1 year --> insurer has right to nonrenew at the end of the policy period. - Policy period >= 1 year --> insurer has right to nonrenew at each anniversary of the policy's original effective date. Automatic Termination: If the insurer offers to renew the policy but the named insured does not accept the offer, the policy automatically terminates at the end of the current policy period. Once the named insured is billed for another period, the premium must be paid, or the policy automatically terminates on its expiration date (in practice, some insurers allow a short grace period). If the named insured obtains other insurance on a covered auto, the PAP coverage on that auto automatically terminates on the effective date of the other insurance. Other Termination Provisions: - The insurer may choose to deliver the cancellation notice rather than mail it. However, proof of mailing (to the named insured at the address as shown in the declarations) of any cancellation notice is considered sufficient proof of notice. - If the policy is canceled, the named insured may be entitled to a premium refund. Any premium refund is computed according to the insurer's manual rules. Making or offering to make the refund is not a condition of cancellation. - The effective date of cancellation stated in the cancellation notice becomes the end of the policy period.

Summary of PAP Part F--General Provisions

Contains provisions and conditions that apply to the entire policy, rather than to specific coverage parts. These provisions include bankruptcy of the insured, changes in the policy, fraud, legal action against the insurer, insurer's right to recover payment (subrogation), policy period and territory, termination, transfer of the insured's interest in the policy, and two or more auto policies.

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.

Trailer/Camper Body Coverage (Maximum Limit of Liability) (PP 03 07 01 05)

Coverage is extended to direct and accidental loss to a trailer or camper body described in the policy declarations or the endorsement schedule. The endorsement also covers related facilities or equipment, including (but not limited to) cooking, dining, plumbing, or refrigeration facilities, as well as awnings or cabanas. Loss to clothing or luggage, business or office equipment, and sales samples or articles used in exhibitions is excluded. PAP exclusions for electronic equipment and media, radar detectors, and custom furnishings or equipment still apply (can be covered under other PAP endorsements). Provisions regarding the amount paid for physical damage losses are the same as those of the Miscellaneous Type Vehicle Endorsement.

Extended Non-Owned Coverage--Vehicles Furnished or Available for Regular Use (PP 03 06 01 05)

Endorsement eliminates this PAP exclusion. Coverage applies only to the individual(s) named in the endorsement schedule, but coverage can be extended to the named individual's family members (indicated by a checkbox on the endorsement). This endorsement's liability coverage is excess over any other applicable insurance on the nonowned vehicle. Endorsement schedule indicates separate premiums for liability and for medical payments coverage. Endorsement provides liability coverage for any vehicle furnished or available for the regular use of the named individual and for family members who are indicated in the schedule.

PAP Part D: Transportation Expenses

Following a covered physical damage loss to a covered auto, the insurer will reimburse the insured for temporary transportation expenses, such as auto rental fees or taxi fares, up to $20 per day, to a maximum of $600 for each covered loss. The same limits apply to a nonowned auto when the insured is legally responsible to the auto's owner for the owner's transportation expenses. A nonowned rental car is also subject to the transportation expense limits when the car's owner claims a loss of income because the car cannot be rented while it is being repaired and the named insured is legally responsible for the renter's loss of income. The transportation expense coverage provided by the PAP applies only to expenses incurred when the cause of loss is covered by the policy. Transportation expenses are not subject to a dollar-amount deductible, instead they are subject to a waiting period. - 48-hr waiting period applies to total theft losses under OTC coverage - 24-hr waiting period applies to loss by other perils under both collision and OTC. Because stolen cars often require repairs after they are recovered, transportation expenses coverage extends until the time the stolen auto is returned to use (or the insurer pays for the auto), still subject to $20 per day and maximum of $600.

Two or More Auto Policies

If two or more auto policies issued to the named insured by the same insurer apply to the same accident, the insurer's maximum limit of liability is the highest applicable limit of liability under any one policy. The intent of this provision is to prevent the "stacking" (adding together) of policy limits when two or more auto policies are issued by the same insurer.

PAP Part D: Appraisal

In the event of a disagreement on the amount of loss, either party may demand an appraisal of the loss. According to the Appraisal provision in the PAP, each party selects a competent and impartial appraiser, the 2 appraisers select an "umpire", any differences in ACV and amount of loss are submitted to the umpire. A decision by any 2 of the 3 is binding on all. Each party pays its chosen appraiser and shares equally the expenses of the appraisal and the umpire. If insurer agrees to an appraisal, it doesn't waive any of its rights under the policy (policy conditions and exclusions would still apply).

PAP Part F: Changes in the Policy

Indicates that the policy contains all the agreements between the named insured and the insurer. The terms of the policy cannot be changed or waived except by an endorsement issued by the insurer. Changes during the policy term that can result in a premium change include: - The number, type, or use of insured vehicles - The operators using insured vehicles - The place of principal garaging of insured vehicles - The coverage provided, deductibles, or limits of liability Liberalization clause automatically provides broadened coverage under some conditions.

PAP Part D: Insuring Agreement

Insurer promises to pay for any direct and accidental loss to "your covered auto" or a "nonowned auto" as defined in the PAP, minus the deductible shown on the PAP Declarations page. Direct and accidental losses to an auto fall into two categories: collision losses and other than collision (OTC) losses. Examples of collision losses covered under Part D include those resulting from a car colliding with another car, hitting a tree, overturning after a driver loses control, or being damaged when a passenger in a parked car opens a car door, striking the insured vehicle parked next to it. Collision losses are paid regardless of fault. If 2 or more autos that have collision coverage under the same policy are damaged in the same collision, only the highest deductible applies. OTC coverage is less expensive than collision coverage and often has a lower deductible. Any "direct and accidental loss" that is not due to collision and is not specifically excluded would be covered as an OTC loss. Colliding with a bird or an animal is an OTC loss. Glass breakage is also an OTC loss and the in the case of a collision that causes glass breakage, the insured can elect whether to have it covered under collision or OTC. If a nonowned auto is damaged by a covered cause of loss, the PAP provides the broadest coverage applicable to any covered auto shown in the declarations. Part D requires deductibles for 3 reasons: to reduce small claims, to hold down premiums, and to encourage insureds to be careful in protecting their cars against damage or theft.

PAP Part F: Fraud

No coverage exists for any insured who makes fraudulent statements or engages in fraudulent conduct in connection with any accident or loss for which a claim is made.

PAP Part F: Legal Action Against the Insurer

No legal action can be brought against the insurer until the insured has fully complied with all of the policy terms. In addition, under Part A--Liability Coverage, no legal action can be brought against the insurer unless the insurer agrees in writing that the insured has an obligation to pay damages or the amount of the insurer's obligation has been finally determined by a judgment after a trial. No person or organization has any right under the policy to involve the insurer in any action to determine the liability of an insured unless all policy conditions have been met.

PAP Part F: Policy Period and Territory

PAP applies only to accidents and losses that occur during the policy period shown on the Declarations page and within the policy territory. Policy territory includes the US, US territories and possessions, Puerto Rico, or Canada. Motorists who are planning to drive into Mexico should purchase the Limited Mexico Coverage endorsement, or they can be thrown in jail if they are involved in an accident without valid insurance from a Mexican insurer.

The insured's duties following a covered auto accident or loss as shown in Part E of the Personal Auto Policy.

Part E of the PAP outlines duties that the insured must perform after a loss. If the failure of the insured to comply with the stated duties is deemed prejudicial to the insurer, the insurer can deny coverage. General Duties: - Provide prompt notice to the insurer - Cooperate with the insurer - Submit legal papers to the insurer - Submit to physical examination - Agree to examination under oath - Authorize release of medical records - Submit proof of loss Additional Duties for Part C- Uninsured Motorists Coverage: - Notify police - Submit legal papers Additional Duties for Part D- Physical Damage Coverage: - Prevent further loss - Notify police - Permit inspection and appraisal

Miscellaneous Type Vehicle Endorsement (PP 03 23 01 05)

Provides coverage for a motor home, a motorcycle or similar type of vehicle, an all-terrain vehicle, a dune buggy, or a golf cart, non of which are included in the PAP's definition of covered auto. The endorsement schedule lists each covered vehicle and the corresponding applicable coverages, limits of liability, and premiums. An optional passenger hazard exclusion can be selected. Part D (physical damage) of the endorsement excludes coverage for loss to clothing or luggage, business or office equipment, sales samples, or articles used in exhibits. It also limits the amount paid for physical damage losses to the lowest of these values: - The stated amount shown in the schedule or declarations - The actual cash value of the stolen or damaged property - The amount necessary to repair or replace the property (less any deductible)

Snowmobile Endorsement (PP 03 20 01 05)

Provides coverage for snowmobiles, defined as a land motor vehicle propelled solely by wheels, crawler-type treads, belts, or similar mechanical devices and designed for use mainly off public roads on snow or ice. Available snowmobile coverages include liability, medical payments, uninsured motorists, collision, and other than collision. Each covered snowmobile is listed in a schedule that states the applicable coverages, limits of liability, and premiums. Liability coverage for snowmobiles has several exclusions and modifications: - Coverage does not apply if the snowmobile is used in any business. - Coverage does not apply when the snowmobile is used in a race or speed contest or in practice or preparation for a race, regardless of whether the race is prearranged or organized. - Coverage is excluded for any person or organization, other than the named insured, while renting or leasing a snowmobile. - A passenger hazard exclusion can be activated that excludes liability for bodily injury to any person while occupying or being towed by the snowmobile. This endorsement's provisions regarding the amount paid for physical damage losses are the same as those of the Miscellaneous Type Vehicle Endorsement.

Towing and Labor Costs Coverage Endorsement (PP 03 03)

Provides coverage for the costs of towing the covered auto when it is disabled (available in limits of $25, $50, or $75). The cost of labor performed to repair the auto at the place of disablement is also covered up to the limit. A single limit per disablement applies, whether it is used for towing or labor costs. A separate limit applies to each disablement.

Transportation Network Driver Coverage (No Passenger) Endorsement (PP 23 41)

Replaces the public or livery conveyance exclusion in the standard PAP with wording from the Public or Livery Conveyance Exclusion endorsement. It includes an exception that covers share-the-expense car pooling and operation of an auto without passengers while the driver is logged into a "transportation network platform." It also includes a schedule, which names the specific transportation network platform, describes the covered vehicle, and states the applicable coverages and premium. The exceptions apply to Parts A, B, C, and D. This eliminates any coverage gap between the time the driver signs into the TNC's network and when they pick up a passenger.

Limited Transportation Network Driver Coverage (No Passenger) Endorsement (PP 23 45)

Similar to Transportation Network Driver Coverage (No Passenger) endorsement. Both provide coverage when the insured is logged into a transportation network platform but have not yet picked up a passenger. The limited version's coverage ends once the driver accepts a passenger, which occurs before the passenger enters the vehicle. Both versions exclude coverage when a passenger is occupying the vehicle. This option limits the loss exposure further than the Transportation Network Driver Coverage (No Passenger) endorsement does, so the insurer charges less additional premium. Depending on state regulations and the coverage provided by the TNC, commercial coverage may begin once a driver logs into the TNC platform or accepts a request. Coverage may also be available in the surplus lines market, while other insurers offer coverage through proprietary forms.

PAP Part F: Bankruptcy of Insured

States that if the insured declares bankruptcy or becomes insolvent, the insurer is not relieved of any obligations under the policy.

Cancellation

Termination of a policy, by either the insurer or the insured, during the policy term.

PAP Part D: Other Sources of Recovery

The PAP insurer will pay only the proportion that its limit of liability bears to the total applicable limits. Any physical damage coverage provided by the PAP for a nonowned auto is excess over any other collectible source of recovery. Ex. For $1,000 loss, primary insurer pays $800 ($1,000 less $200 deductible) and excess insurer pays $100 ($200 less $100 deductible).

Policy termination

The ending of the contractual relationship between the insured and insurer by cancellation, expiration, or nonrenewal.

PAP Part D: Payment of Loss

The insurer has the option of paying for the loss in money or repairing or replacing the damaged or stolen property. Insurer pays the cost to return stolen vehicle and also pays for any damage resulting from the theft. Insurer has right to keep all or part of stolen property and pay the insured an agreed or appraised value, including the applicable sales tax for the damaged or stolen property.

PAP Part D: Limit of Liability

The insurer's limit of liability for a physical damage loss to a covered auto is the lower of either the ACV of the damaged or stolen property or the amount necessary to repair or replace the property with other property of like kind and quality. In determining ACV, an adjustment is made for depreciation and physical condition of the damaged property. The insurer's max obligation for electronic equipment that reproduces, receives, or transmits audio, visual, or data signals and that is permanently installed but not in the locations used by the original manufacturer of the auto is limited to $1,000. The max amount paid for physical damage to a nonowned trailer is $1,500.

PAP Part F: Transfer of Insured's Interest in the Policy

The named insured's rights and duties under the policy cannot be assigned to another party without the insurer's written consent. If insured sells their vehicle, they cannot transfer insurance policy to the new owner. If named insured dies, coverage is automatically continued to the end of the policy period for both the surviving spouse (if they are a resident of the same household at the time of the named insured's death) and the legal representative of the deceased person (but only with respect to the representative's legal responsibility to maintain or use a covered auto).

Physical damage coverages

There are four kinds: comprehensive - pays for loss to covered auto or its equipment from any cause not excluded, except collision or overturn; specified causes of loss - provides named peril coverage; collision - covers loss to a covered auto or its equipment by collision with another object or by overturn; and towing - provides coverage for towing and labor performed at the place of disablement.

Optional Limits Transportation Expenses Coverage Endorsement (PP 03 02)

This endorsement allows the insured to increase coverage to one of 3 limits, which can be applied to the costs of a substitute vehicle for the period reasonably required to repair or replace the auto: - $30 per day, subject to a max of $900 - $40 per day, subject to a max of $1,200 - $50 per day, subject to a max of $1,500

Limited Mexico Coverage (PP 03 21 01 05)

This endorsement extends the PAP coverages to an insured who is involved in an accident or loss in Mexico within 25 miles of the US border on a trip of 10 days or less. The endorsement is effective only if primary liability coverage is also purchased from a licensed Mexican insurer which can usually be purchased from a licensed agent at the border. The liability insurance provided by the endorsement is excess over the Mexican insurance and over any other valid and collectible insurance. Advantage is that it provides additional liability insurance in addition to the other standard PAP coverages, such as physical damage coverage.

Named Non-Owner Coverage (PP 03 22 01 05)

This endorsement is used in conjunction with the PAP to provide liability coverage, medical payments coverage, uninsured motorists coverage, and underinsured motorists (but not physical damage) coverage for a driver who does not own an auto. Coverage applies only to a person who is actually named in the endorsement. Coverage for family members can be included by indicating such coverage on the endorsement schedule. The liability insurance under a PAP with the named nonowner endorsement is excess over any other applicable liability insurance on the nonowned auto. The endorsement provides important protection to named insureds who drive a nonowned auto with inadequate liability limits or perhaps no insurance at all. The endorsement provides the named insured with liability, medical payments, uninsured motorists, and underinsured motorists coverage on a newly acquired vehicle for up to fourteen days. Coverage automatically terminates when the named insured purchases separate insurance on the vehicle. Unlike the Extended Non-Owned Coverage--Vehicles Furnished or Available for Regular Use Endorsement, named non-owner coverage is designed for individuals who only occasionally use another person's vehicle.

PAP Part D: No Benefit to Bailee

This provision states that the policy will not benefit, either directly or indirectly, any bailee (a person who assumes custody of the property of others for business purposes). In other words, if a bailee damages the insured's vehicle, the insurer can recover damages from the bailee so the bailee will not benefit from the insured's insurance.

Excess Electronic Equipment Coverage (PP 03 13 01 05)

Used to increase the limit on permanently installed electronic equipment from $1,000 to a limit shown in the endorsement schedule. The endorsement schedule also includes a description of the covered vehicle and the limit of liability and premiums for excess electronic equipment. Endorsement also provides coverage for direct and accidental loss to tapes, records, disks, or other media owned by the named insured or the named insured's family member. Coverage is provided for the lesser of the ACV or the amount necessary to repair or replace the stolen or damaged property, subject to a max limit of $200 for all such media.

PAP Part F: Insurer's Right to Recover Payment

aka subrogation clause If the insurer makes a loss payment to a person who has the right to recover damages from a 3rd party that either caused or is legally liable for the loss, the insurer has a legal right of subrogation against that 3rd party. The subrogation provision does not apply to physical damage coverage in regard to any person who is using a covered auto with a reasonable belief that he or she is entitled to do so. If a person receives a loss payment from an insurer and also recovers damages from another party, that person is required to hold the proceeds of the second recovery in trust for the insurer and to reimburse the insurer to the extent of the insurer's loss payment.

Public or Livery Conveyance Exclusion Endorsement (PP 23 40)

his endorsement adds a "transportation network platform" definition and explains that the exclusion applies to any period of time the insured has logged in to such a platform as a driver, whether or not a passenger is in the vehicle. Designed to be attached to all PAPs unless one of the ISO transportation network driver endorsements is attached. It reinforces the public or livery exclusion under Part A--Liability Coverage, Part B--Medical Payments Coverage, and Part D--Coverage for Damage to Your Auto. Part C--Uninsured Motorists Coverage is primarily addressed in state-specific uninsured motorists endorsements.