CPCU 553 - chapter 4

What are the sublimits for electronic equipment permanently installed but in different locations used by the original manufacturer? And for a nonowned trailer?

$1000 and $1500 for nonowned trailers.

Describe how the part D coverage applies to a non-owned auto. (4)

1. An insured can occasionally drive a rented or borrowed auto, and the insured's APD insurance will cover the vehicle (in xs of any APD cover on this car). 2. Coverage is excluded if the insured regularly drives a rented or borrowed vehicle, or if one is made available for an insured's regular use. 3. The definition of non-owned auto also includes any auto or trailer that is being used as a temporary substitute for a covered auto or trailer that is out of normal use because of its breakdown, repair, servicing, loss, or destruction. 4. If a non-owned auto is damaged by a covered cause of loss, the PAP provides the broadest coverage applicable to any covered auto shown in the declarations.

What are the four parts of the policy termination provision?

1. Cancellation 2. Nonrenewal 3. Automatic termination 4. Other termination provision

How is collision defined in the PAP and provide examples:

1. Collision is the upset of or impact of "your covered auto" or "non-owned auto" with another vehicle or object. 2. Examples: Colliding with another car Hitting a tree Overturning Parking lot: door of other car hits insured car

Explain the coverage provided by part D in respect of transportation expenses.

1. Following a covered physical damage loss to a covered auto, the insurer will reimburse the insured for temporary transportation expenses, such as rental fees or taxi fares, up to $20 per day, to a maximum of $600 for each covered loss. 2. Same limits apply to a nonowned auto when the insured it legally responsible to the auto' s owner for the owner's transportation expenses. 3. A nonowned rental car is also subject to these 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.

What does the other sources of recovery provision state?

1. If a loss is covered by other sources of recovery other than the PAP, the PAP insurer will pay only its share of the loss. 2. Any physical damage coverage provided by the PAP for a nonowned auto is excess over any other collectible source of recovery.

Describe the cancellation rights of the insurer.

1. If the policy has been in force for fewer than 60 days and is not a renewal policy, the insurer can cancel by mailing a cancellation notice. 2. After 60 days or if it is a renewal, the insurer can cancel the policy only for one of three reasons: A. The premium has not been paid B. The insured's driver's license has been suspended or revoked during the policy period C. The policy has been obtained by material misrepresentation.

What are examples (10) of OTC losses as listed in the PAP?

1. Missiles or falling objects 2. Fire 3. Theft or larceny 4. Explosion or earthquake 5. Windstorm 6. Hail, water, or flood 7. Malicious mischief or vandalism 8. Riot or civil commotion 9. Contact with a bird or other animal 10. Breakage of glass

Describe the two additional duties required if the insured is seeking payment under coverage C - uninsured motorist coverage of the PAP.

1. Promptly notify the police of a hit-and-run driver is involved 2. Send a copy of the legal papers to the insurance company if the person seeking coverage sued the uninsured motorist

List the seven general duties described in part E of the PAP a person seeking coverage under the PAP must perform after an accident or loss.

1. Provide prompt notification of the details of the accident or loss to the insurer 2. Cooperate with the insurer (providing info, witnesses etc.) in the investigation, settlement or defense of any claim or suit 3. Submit legal papers in connection with the accident or loss 4. Submit to physical examination if required by insurer 5. Agree to examination under oath if required by insurer 6. Authorize release of medical records 7. Submit proof of loss if required by insurer

Provide examples (13) of exclusions which apply to part D

1. Public or livery conveyance 2. Damage "due and confined to" wear and tear, freezing, breakdown, and road damage to tires is excluded. Ensuing losses are covered! 3. Radioactive contamination or war 4. Electronic equipment (unless permanently installed) 5. Media and accessories 6. Government destruction or confiscation 7. Nonowned auto used without reasonable belief of being entitled 8. Radar and laser detection equipment 9. Customizing equipment (some exceptions apply to pickups) 10. Nonowned auto used in garage biz 11. Prearranged racing or speed contest 12. Rental vehicles if rental agreement includes a damage waiver or if state law precludes the rental company from recovering from the insured for the loss. 13. Personal vehicle sharing program

List three reasons for deductibles in APD coverage.

1. Reduction of small claims 2. Holding down premiums 3. Encouraging insureds to be careful in protecting their car against damage or theft.

Identify 4 changes an insured can make during the policy period that can result in a premium increase or decrease.

1. The number, type or use of insured vehicles 2. The operators using insured vehicles 3. The place of principal garaging of insured vehicles 4. The coverage provided, deductibles, or limits of liability

Describe the three additional duties required if the insured is seeking payment under part D of the PAP.

1. The person seeking coverage must take reasonable steps after a loss to protect a covered auto or nonowned auto and its equipment from further loss. 2. If a covered auto or nonowned auto is stolen, the person seeking coverage must promptly notify the police of the theft. 3. The person seeking coverage must permit the insurer to inspect and appraise the damaged property before its repair or disposal.

Transportation network company (TNC)

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.

Explain why an insured may want to include an optional passenger exclusion to a miscellaneous type vehicle endorsement?

A motorcycle owner who never carries passengers can elect this exclusion in exchange for a lower premium.

Towing and labor costs endorsement

Personal auto policy endorsement that covers towing and the costs of labor performed at the site the car was disabled.

Describe the two categories of direct and accidental losses to an auto.

Collision losses and other than collision (OTC) losses.

If the driver is responsible for an accident that damages his/her car, will the collision coverage apply?

Collision losses are paid regardless of fault.

What is important about contact with a bird or animal and breakage of glass?

Collision with a bird or animal is an OTC loss! Therefore the OTC deductible applies to such losses. If glass breakage is caused by collision, the insured can elect to have the glass breakage covered as part of the collision loss (and collision deductible would apply). If the insured elects to cover it under OTC, both deductibles could apply.

ACV (Actual Cash Value)

Cost to replace property with new property of like kind and quality less depreciation.

Describe briefly the nonrenewal provision.

If the insurer decides not to renew the named insured must be given at least 20 days notice before the end of the policy period. The conditions under which the insurer can nonrenew vary according to the length of the policy period.

Briefly describe the insurer's right to recover payment provision (subrogation clause).

If the insurer makes a loss payment to a person who has the right to recover damages from a third-party that either caused or is legally liable for the loss, the insurer has a legal right of subrogation against that third party. The subrogation provision does not apply to physical damage coverages in regard to any person who is using a covered auto with a reasonable believe that he or she is entitled to do so.

Describe briefly the automatic termination provision.

If the insurer offers to renew the policy period but the named insured does not accept the offer, the policy automatically terminates at the end of the policy period. Failure to pay the renewal premium means that the named insured has not accepted the insurer's offer to renew the policy.

Describe the two or more auto policies provision.

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.

What does the insuring agreement of coverage part D say?

Insurer promises to pay for any direct and accidental loss to "your covered auto" or a "non-owned auto" as defined in the PAP, minus the deductible.

Describe the coverage for damage to you auto endorsement.

It allows owners of high-value cars or restored show cars to establish the car's insurance value upfront by inserting a stated amount of insurance. Note that the insurer's maximum limit of liability for a covered loss is limited to the lowest of these values: stated amount, ACV, amount necessary to repair or replace the property with other property of like kind and quality.

Describe the limited Mexico coverage endorsement.

It extends the PAP coverage to an insured who is involved in an accident or loss in Mexico within 25 miles of the US border on a trip of ten days or less. The endorsement is effective only if primary liability coverage is also purchased from a licensed Mexican insurer. The major advantage of the endorsement is that it provides additional liability insurance excess over the Mexican policy, as well as providing other standard PAP coverages (APD).

Explain why it is important for insureds to perform the duties after a loss as outlined in part E of the PAP.

It is important because if the insured does not perform them and this failure is prejudicial to the insurer, the insurer has no obligation to provide coverage and to pay for the loss.

What covers the miscellaneous type vehicle endorsement? (5+1)

It provides coverage for a motor home, a motorcycle, or similar type of vehicle, an all-terrain vehicle, a dune buggy, or a golf cart.

Explain the ISO public or livery conveyance exclusion endorsement.

It reinforces the public or livery conveyance exclusion in the PAP, which excludes coverage when a personal auto is used to transport people for a fee. It adds a "transportation network platform" definition. Exclusion applies to any period of time the insured has logged in to such a platform as a driver.

Optional limits transportation expenses coverage endorsement

PAP endorsement that allows the insured to select the daily and maximum limits of coverage provided for transportation and loss of use expenses.

Describe the obligations that an insured must fulfill before he or she can sue the insurer. Especially in respect of part A.

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.

What does Other Than Collision (OTC ) coverage cover?

OTC coverage insures auto physical damage losses that are not caused by collision and are not specifically excluded.

What is important to know about the premium and deductible of OTC vs collision coverage?

OTC coverage is less expensive than collision coverage and the deductible of OTC is often lower.

If a person A ( with APD deductible of 100) borrows a car from person B (with deductible of 200) explain how a loss of 1000 would be covered by which policy. What of person A acted negligent?

Policy of B will pay 800. Policy of A will be excess. So pay 100. The remaining 100 would have to be paid by A or B. If A acted negligent insurer of B can choose to subrogate against A for the 800. Insurer of A will not pay the 800 under part A because of the exclusion for property damage to property used by or in the care of the insured.

Briefly describe the policy period and territory provision in Part F.

The PAP applies only to accidents and losses that occurred during the policy period shown on the declarations page and within the policy territory. The policy territory includes the United States US territories and possessions, Puerto Rico, and Canada. Mexico is NOT included!

Describe the deductibles which apply to transportation expenses.

The deductible is not a dollar amount. Transportation expenses are subject to a waiting period, which is essentially a deductible stated in time rather than in dollars. For total theft losses a 48 hour waiting period applies under OTC coverage. For losses by other perils a 24 hour waiting period applies under both collision and OTC.

What options has an insured for collecting damages if the covered vehicle has collision coverage and another driver causes an accident damaging his/her car?

The insured can collect either from the other driver (or the driver's insurer) or from his/her own insurer. In this case the insurer has the right to recover payment from the driver at fault (or the driver's insurer).

What does the payment of loss provision state?

The insurer has the option of paying for the loss in money or repairing or replacing the damaged or stolen property. Payment for the loss includes the applicable sales tax for the damaged or stolen property.

Briefly describe the bankruptcy of insured provision in part F.

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

What does the limit of liability provision state?

The insurer's limit of liability for a physical damage loss to a covered auto is the lower of either the actual cash value (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.

What does the no benefit to Bailee provision state?

The policy will not benefit, either directly or indirectly, any bailee (a person who assumes custody of the property of others for business purposes). Insurer will pay damages to insured but has the right to recover from negligent party.

Explain the similarities and differences between the "Transportation Network Driver Coverage (no passenger)" endorsement and the "Limited Transportation Network Driver Coverage (no passenger)" endorsement.

The limited version is similar to the regular endorsement; both provide coverage when the insured is locked into a transportation network platform but has not yet picked up a passenger. The limited version's coverage ends once the driver accepts a passenger. The regular version ends when a passenger enters the vehicle. Both version exclude coverage when a passenger is occupying the vehicle.

Describe the cancellation right of the insured.

The named insured can normally 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.

Describe the transfer of insured's interest in the policy provision.

The named insured's rights and duties under the policy cannot be assigned to another party without the insurer's written consent.

Describe the details a person seeking coverage under the PAP should include when notifying the insurer that an accident or loss has occurred.

The notification should include details such as how, when, and where the accident happened, as well as the names and addresses of any injured persons and witnesses.

Briefly describe the fraud provision of part F.

The provision says that no coverage exist 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.

Explain why an insured would purchase an "extended non-owned coverage-vehicles furnished or available for regular use" endorsement?

The unendorsed PAP excludes liability and medical payments coverage in those cases. This exclusion can be eliminated by adding this endorsement. The liability coverage provided by the endorsement is excess over any other applicable insurance on the nonowned vehicle (like furnished by a company car).

What covers the "named non-owner coverage" endorsement?

This endorsement is used in conjunction with the PAP to provide liability coverage, medical payments coverage, uninsured motorist coverage, and underinsured motorists coverage for a driver who does not own an auto.

Describe the auto loan/lease coverage endorsement.

This endorsement provides coverage for the difference between the outstanding loan amount and the amount that would have been paid based on the limit of liability as stated in the unendorsed policy (ACV or amount necessary to repair or replace property with like kind and quality).

Describe how ISO has clarified when coverage under a driver's PAP ends in regards to TNC drivers. How do TNC companies provide insurance?

To clarify when coverage under a driver's PAP ends and to address potential coverage gaps, ISO has developed endorsements to the PAP. Many TNCs provide coverage through a commercial auto policy to drivers when they are transporting passengers for that TNC; however, depending on TNC business policies and state regulations, this coverage may begin at different points in the TNC transaction (e.g. when a driver has logged on to the network versus when a passenger has accepted a ride), and coverage may be limited before a passenger enters the auto.