Section: 9 Personal Auto

Standard Umbrella Policies

Although ISO recently introduced the first standardized personal umbrella policy, most insurers are still using their own policies. This is because these forms are based on the insurers own loss experience, have been tested in court, and the insurer know hoe they will be interpreted.

Part B Medical Payments

An "insured" person includes the name insured and any family members while occupying and motor vehicle , or as a pedestrian when struck by a vehicle. It also includes any other person, but only while occupying "covered auto" (passenger).

Part C Uninsured Motorist (Bodily Injury)

An insured person includes the name of the insured and any family member while occupying any motor vehicle or being struck as a pedestrian, and any other person while occupying a "covered auto"(passenger). Any person entitles to recover because of injury to an insured person will also be covered in Part C.

Self- Insured Retention

An umbrella can provide coverage that the underlying policy cannot. the homeowner policy does not cover personal injury. Assuming a claim for defamation is brought against an insured that has an H0-3 and an umbrella policy, the HO-3 wound not provide protection but the umbrella would. In this situation the umbrella would drop down and become the primary policy, less a self-insured pays as a primary policy and not as a excess. The self-insured retention becomes active only for losses not covered by any underlying insurance.

Difference between umbrella and excess policy

An umbrella policy is not only excess liability limits over the primary policies, but it can also be broader than the underlying policy. this means that the umbrella may provide coverage excluded or not included in the underlying policy. this is that is meant when they say an umbrella broadens and deepens the underlying policies. An excess policy does not provide broader coverage. It provides the same type of liability coverage as the underlying policy and can be written as excess over one line/class of coverage. An excess policy is sometimes referred to as a following form and you will see this used in commercial insurance.

Physical Damage

A policy with non-standard physical damage coverage typically insures drivers who have less than favorable driving records or less driving experience than is desirable to a company. The rate is generally more competitive, but it may dictate that deductibles be higher as well.

CAARP

California Automobile Assigned Risk Plan was created to provide auto insurance for motorists who are unable to obtain coverage in the conventional (normal/commercial/voluntary) market because of their diving records or other extraordinary circumstances. All insurers admitted to transact automobile liability in California are required to participate in the assigned risk plan. The plan assigns drivers to private insurers based upon each company's share of the auto insurance market in the state. In other states the assigned risk plan us caked the "Automobile Insurance Plan". The California Automobile Assigned Risk Plan administers the state's assigned risk insurance plan for drivers otherwise wouldn't be able to obtain.

Financial Responsibility Law Requirements

California has a responsibility law which requires drivers and owners of motor vehicles to demonstrate proof of financial responsibility when they are involved in an accident resulting in any bodily injury, death, or property damage in excess of $750. Proof of minimum amounts of financial responsibility is required of each driver involved regardless of who is at fault. Drivers who don't carry evidence of financial responsibility will be fined and have their vehicles impounded.

Test:

California replaced the law that required auto inspections for additional vehicles insuring for OTC and collision. Each insurer determines if they want additional vehicles to be inspected.

Personal Auto Policy: Pap eligibility requirements

Eligible persons include: Individuals, Husband and wife living in the same household who own or lease an eligible vehicle, Families in the same household with eligible vehicle, relatives who jointly own an eligible vehicle.

Out of state coverage

If the insured is traveling in another state with a higher financial responsibility limit than CA, their policy will amend to the higher limits without any additional premium. If the insured is in a modified no fault state, the policy will add personal injury protection (PIP) without any additional premium.

Primary/excess coverage

Insurance follows the cart on a primary basis, regardless of who is driving. when someone borrows the insured's car, they are also borrowing their insurance. The non-owner driver's policy will be excess over the policy insuring the vehicle. The exception on the test will be if an auto mechanic is road testing the car and is involves in an accident, the insured's policy will be excess for liability. Excess coverage is if the driver of the vehicle does not own the vehicle, their policy is excess over the policy insuring the vehicle, unless modified by the contract (exclusion or endorsement). Once limits of the policy insuring the vehicles are exhausted, then the driver's policy pays the difference. The non-owner driver's policy is considered "excess".

Part A

Liabilities depends on whether policy has single limits or split limits for how the limit will be applied at the time of claim.

Describe Loss situation

Loss is covered and for how much after deductibles- a policy states the insured is covered for both Collision and Other Than Collision and the deductible for the collision coverage is 500$. The deductible for Other Than Collision is $250. If the insured has an accident while trying to avoid hitting another vehicle, the $3,000 in damage to the insured's own car would be paid under the Collision coverage and subject to the policy deductible of $500.

Coverage for Personal Effects

Part D of the ISO PAP provides coverage for the covered auto, its parts and operating equipment. There is no coverage for personal effects in the covered auto. This means items such as iPods, blackberries, cells, laptops, computers, neckties, luggage are not covered. The Personal Auto Policy is not designated to provide this kind of coverage, personal effects are meant to be covered through a renters or homeowners policy.

Low cost Automobile Insurance

Purpose and goal: The primary goal of the CLCA is to provide an affordable auto insurance option to low-income good drivers. California Law requires that all drivers be insured. However, too many low income drivers remain uninsured, because the costs of standard insurance premiums are beyond their financial reach. Provides affordable liability only auto insurance that meets the stat's financial responsibility laws.

Costs

The CLCA program is not subsidized by taxpayers. Rates are set and adjusted annually in each county so that premiums collected are sufficient to cover losses and expenses in each county. The California Low Cost Automobile Insurance Program is now available statewide. The annual premium is $300 depending on the county.

ISO Personal Auto Policy (PAP) formatting

There is three sections, the declaration, a general agreement, and the definition section. The declarations page personalizes the policy, the general agreement serves as a preface to the policy and makes the insurer's obligations contingent on the insured's payment of the premium. The definition section defines certain terms commonly used in the PAP. The test sometimes states that the ISO PAP contains 8 parts: declaration, definitions, You and Your means the names insured and the spouse, Bodily injury, property damage, business includes any trade, profession, and occupation, Occupying, Trailer. Part A: Liability Coverage Part B: Medical Payments Coverage Bart c: Uninsured Motorist Coverage Part D: Coverage for damage to your auto Part E: Duties after accident or loss Part F: General Provisions

Department of Insurance Privacy Regulations

These regulations became effective on March 24, 2003. Among other things, they clarify the standards for privacy notices and opt-out notices to ensure they are helpful to and readable by customers. They establish guidelines for safeguarding the confidentiality of personally identifiable information. In particular, they require agents, brokers, and insurers to provide a privacy notice to customers and to give customers the opportunity to "opt out" from having personal information shared.

Transportation expenses

Transportation expenses are included in Part D of an ISO PAP and apply to any collision or OTC loss, if the declaration shows the insured has purchased collision or OTC coverage. the insurer agrees to pay the insured up to $20 per day, subject to a maximum of $600, for transportation expenses incurred by the insured for damage, theft, or destruction covered. No deductible applies. This is not an endorsement; it is part of Part D coverage.

Part B: Medical Payments

coverage applies per person, per accident. When other medical or funeral expense coverage applies, losses are shared proportionally. If the other insurance apples to a non-owned auto, coverage will be excess over any other collectible medical payments coverage.

Policy Territorial Limits

coverage under the PAP applies only to accidents and losses that occur during the policy period and within the US. Guam is a covered territory, Virgin Islands are a possession, No coverage in Mexico.

Part C: uninsured motorists/underinsured motorist

depends on whether policy has single limits or split limits for how the limit will be applied at the time of claim. the limit or limits of liability shown in the declaration page is the maximum the insurer will pay for damages regardless of the number of insureds, claims made, covered vehicles, and vehicles involved in an accident.

Cancelation and nonrenewal

each auto policy is good for one year and can be renewed each year, provided the insured still meets the program requirements. The policy can be cancelled for fraud, misrepresentation affecting eligibility, and nonpayment of premiums, or if the insured buys same coverage from another company outside the program. Insurers are generally allowed to nonrenew low -cost policies only if there is a considerable, definite increase in the hazard insured against, or id the insured no longer meets the requirements of the program.

Special Physical Damage

high performance vehicles, antique or classic vehicles, big rigs, and other specialized or customized vehicles may not qualify for normal or physical damage coverage and may need a special physical damage rider or endorsement.

Private passenger Automobile/commercial vehicle

is defined as a motor vehicle which includes autos, pickup trucks, vans, motorcycles, and recreational vehicles (RVs) that are not used for public transportation nor rented to others. Commercial vehicles are motor vehicles used or maintained for the transportation of persons for hire, compensation, or profit, or designated, used, or maintained primarily for the transportation of property. Passenger vehicles and house cars that are not used for the transportation of persons for hire, compensation, or profit are not commercial vehicles. Any vanpool vehicle is not a commercial vehicle.

Private passenger motor vehicle

means a four wheeled passenger type vehicle not used as a public or livery conveyance.

allowable reasons for cancelation or nonrenewal:

nonpayment of premium, fraud, material misrepresentation, substantial increase in hazard, suspension or revocation of driver's license.

Exam alert: Principal Rating Factors

required by prop 103/Good Driver in decreasing order of importance are: safe driving record, annual miles driven, years of driving experience.

test:

sometimes refers to passengers as permissive occupants.

Out of state coverage:

this provision automatically provides the minimum limits and types of coverage required by the state in which the accident occurs. If the insured has an accident in another state which has a financial responsibility law requiring limits higher than those provided in the policy, the policy will automatically increase the limits to meet the requirement. The out of state coverage not only refers to the required minimum limit of coverage, but also to required types of coverages as well.

How PAP responds to a rental car

The broadest insurance of any vehicles covered by the insured's policy is automatically extended to the rental car if the insured is on a short vacation. If the insured does not have physical damage coverage on any of their covered vehicles, then there is no physical damage extended to the rental vehicle.

loss settlement

The payment of loss clause states that it is the insurer's option( not the insured's) to pay the loss in money or to repair or replace the property. The insurer has the option of keeping all or part of any damage or stolen property and making a monetary payment at an agreed or appraised amount, or to repair or replace the property. The insurer may return any recovered stolen property to the insured, and if it does it will cover any damage resulting from theft.

Relationship between Other Then Collision Coverage and Comprehensive Coverage

The test will use OTC rather than comprehensive, but the coverage is the same. It provides coverage for any "direct and accidental loss" that is not due to collision and is not specifically excluded.

Be able to identify required underlying policies

The two primary underlying policies that most insurers require the insured to maintain are: Personal Liability and Auto. Each insurer will require different minimum amounts of liability on the underlying policies. The umbrella policy is designed to be excess over the following underlying policies: Primarily: Homeowners Liability (personal liability) and Personal Auto. Watercraft, Motor home, or RV if the insured owns. Owners, Landlords, and Tenants Liability (Liability on Rentals.

E. Umbrellas and Excess Liability

Be able to identify major function of these policies. Umbrella and excess liability are types of insurance that provide individuals and families with excess liability protection over and above their primary liability policies. This protection applies once the policy limits of the underlying policy are exhausted. The minimum limit is $1,000,000 and is usually increased in increments of 1 mil.

Coverage/limitations/ exclusions applied to BI and PD

Coverage is when the insurer agrees to pay for the damages for both bodily injury and property damage for which any insured becomes legally liable/responsible because of an auto accident. Damages include pre-judging interest awarded against the insured. The insurer also agrees to settle or defend claims, and to pay defense costs in addition to the limit of liability. Limitations mean damages are subject to the limit of liability shown in the declaration page. The duty to defend is limited to bodily injury and property damage covered under the policy and ends when the applicable limits have been exhausted. Exclusions page 204

Other Insurance

The other insurance clause explains how the coverage will apply if there is other insurance covering the same loss to prevent claimants from "profiting" from an accident by collecting more than their actual loss.

Part A- Liability

The definition of "insured" in an auto liability section (part a) of the PAP is very broad. it includes the names insured and family members for use of any auto or trailer, and any other person while using a covered auto. Personal auto liability is not limited to family members or specifically covered autos. The name insured, resident family members, any person or organization legally responsible for acts or omissions of a person using a covered auto.

Split limit vs. single limit coverage

The difference between the per person/per accident limit in a split limit policy and a single limit of insurance has to do with how the coverage applies in a claims situation. Split limit: coverage is divided into 2 sections and can only be used as schedule. In the example of 15/30/5 it means the most the policy will pay is 15,000$ per person for BI/ 30,000$ for ALL BI per accident/ 5,000$ for all PD per accident. This means the per accident limit applies only to bodily injury and property damage. Single Limit: coverage is a lump sum ( a single sum) which can be used for any or all BI and PD, in any one claim. Example: $35,000 single limit can apply to one person, all persons bodily injury, property damage alone, or any combination of these. This is more flexible, not usually available, and more expensive than split limits.

Application of Policy Limits

The limit of liability details how much the insurer will be liable for and how often. The limit of liability represents the most the insurer will pay for the damages arising from one accident.

Standard Basis of Valuation for the Auto

The limit of liability under Part D of the ISO PAP is limited to the actual cash value of the damaged or stolen property or the amount required to repair or replace it, whichever is less. A constructive total loss occurs when the cost to repair is greater than the actual cash value or some percentage of the actual cash value. This is how it will be stated on the test.

Policy limits

The low cost policy provides coverage of $10,000 for liability for bodily injury or death to one person, subject to a cumulative limit of $20,000 for all persons, and a $3,000 for liability for damage to property (10/20/3). The low cost policy satisfies California's financial responsibility laws that require drivers to carry minimum amounts of third party liability coverage.

Livery conveyance

according to court determination is to transport things for hire as well as people. it is a service that transports people for free.

Binding

agents never have binding authority with any government program. Certified producers may submit and obtain immediate coverage through CAARP'S Electronic Date of Procedure. .

Who is an insured under the PAP

any person qualifies while using a covered auto , unless excluded, since the test does not clarify which coverage part it is referring to.

"Your covered" auto is defined:

any vehicle stated in the declarations, a newly acquired vehicle, any trailer owned by the name insured, a non-owned vehicle or trailer used as a temporary substituted for any other vehicle or trailer.

Benefits of Umbrella or Excess

are that the extra coverage adds protection for a high amount of coverage at an inexpensive rate. The purpose is to provide liability protection in the event of a catastrophic loss. This type of insurance is beneficial, because it provides the insured with peace of mind as court settlements continue to escalate.