Chapter 20- practice problems

Explain the duties imposed on the insured after an accident or loss occurs.

Certain duties are imposed on the insured after an accident occurs. The insurer must be notified promptly. The insured must cooperate with the insurer in the investigation and settlement of a claim and send to the insurer copies of any legal paper or notices received in connection with the accident. Certain other duties are also required.

What is a collision loss? Explain your answer.

Collision is defined as the upset of your covered auto or nonowned auto or its impact with another vehicle or object.

Which of the following is considered to be a collision loss under Part D (coverage for damage to your auto) of the PAP?

The covered auto is damaged when it slid off an icy road and hit a fence.

Which of the following situations would be covered under the liability section of the PAP?

The daughter of the named insured is sued after she has an accident when a new friend she just met at a campus hangout lets her drive his car.

Joyce was injured by an uninsured drunk driver while she was riding in a friend's car. Joyce and her friend each have a PAP with an uninsured motorists limit of $50,000. How much will be paid by each policy if it is determined that Joyce has $70,000 of bodily injuries?

The friend's policy will pay $50,000, and Joyce's policy will pay $20,000.

Which of the following situations would be covered by the liability section of an unendorsed PAP if the insured is legally liable?

The insured backs into and damages the garage door of his rented house.

All of the following statements about the termination provisions of the PAP are true

The insured can cancel the policy for any reason. - The insurer can cancel a newly-written policy if it has been in force for fewer than 60 days. -The insurer can refuse to renew the policy at its annual anniversary date as long as proper notice is given prior to the end of the policy period.

Which of the following statements is true about uninsured motorists coverage under the Personal Auto Policy?

The insured collects from his or her own insurer, and the insurer can recoup the loss payment from the other driver.

Which of the following statements concerning coverage for a newly-acquired auto under the Personal Auto Policy?

The insured must notify the insurer within 14 days after becoming the owner for the collision coverage to continue to be in force.

Tanya is driving under the influence of alcohol and is involved in an accident where another motorist is seriously injured.

The loss is covered. Because driving under the influence of alcohol is a serious offense, Tanya's insurer will probably refuse to renew her policy or will substantially increase the premium.

Kelly was hit by a car while she was walking to the park. She incurred $750 in medical costs at a hospital emergency room. Kelly has coverage for this charge under which of her Personal Auto Policy (PAP) coverages?

medical payments

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred.—The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages.—Ken incurred $5,000 in medical expenses.—The car that Ken hit was a total loss.Which of Ken's Personal Auto Policy (PAP) coverages will cover Ken's medical expenses?

medical payments coverage

Owen's car is insured under a Personal Auto Policy (PAP). A hail storm occurred one evening, and his car was severely damaged. Which PAP coverage, if Owen purchased it, would cover this damage to his auto?

other-than-collision

The purpose of gap insurance is to

pay the difference between the amount the insurer pays if a car is a total loss and the remaining amount owed on a lease or car loan.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred.—The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages.—Ken incurred $5,000 in medical expenses.—The car that Ken hit was a total loss.Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to the car that Ken hit?

property damage liability

Which of the following is a covered person under the medical payments coverage of the PAP?

a family member of the named insured if struck by an auto while crossing the street

Which of the following persons is (are) insured under the uninsured motorists coverage of the PAP?

-The spouse of a named insured who is killed by an uninsured motorist

Angie was injured when her car was struck by a driver who ran a red light. The other driver carried the minimum liability coverage necessary to be considered financially responsible. Angie's injuries were $15,000 above the minimum bodily injury limit. There is a coverage that can be added to the PAP that applies when a negligent driver carries the minimum liability insurance required by the state, but is less than the insured's actual damages for bodily injury. This coverage is called

underinsured motorists coverage.

Patricia purchased a Personal Auto Policy (PAP). Her car was rear-ended by a driver who fled the scene. Patricia suffered whiplash, migraine headaches, and she was unable to work. Which of the following coverages will cover her lost work earnings?

uninsured motorists

Part D of the Personal Auto Policy pays for temporary transportation expenses incurred by the insured because of loss to a covered auto. The coverage provided is

up to $30 per day to a maximum of $900.

Which of the following statements about the uninsured motorists coverage of the PAP is true?

The coverage applies only if the uninsured motorist is legally liable.

Tony has an unendorsed Personal Auto Policy which provides medical payments coverage. Under which of the following circumstances would the injured person be eligible for benefits under Tony's policy?

A friend in the car is injured while Tony is driving a covered auto.

Coverage for Damage to Your Auto (Part D) in the PAP provides for two optional coverages:

(1) collision coverage, and (2) other-than-collision coverage.

All of the following are covered autos under the liability section of the PAP

- a trailer owned by the named insured. - a borrowed auto used by the insured as a substitute for a stolen covered auto. - a newly acquired auto which replaces a vehicle previously described in the policy.

Which of the following statements about the liability limits of the PAP is (are) true?

-The policy can be written with split limits of liability. -Prejudgment interest is considered part of the damage award and is subject to the policy limit

All of the following are insured persons under the liability coverage of the PAP

-a friend to whom the named insured loans a covered auto. - the employer of the named insured for actions resulting from the named insured's use of a covered auto. -a relative of the named insured if a member of the same household.

All of the following are considered to be uninsured vehicles for purposes of the uninsured motorists coverage of the PAP

-a vehicle owned by an individual who is insured, but for less than the amount required by the state's financial responsibility law. -a hit-and-run vehicle, the ownership of which cannot be determined. -a vehicle insured by a company which becomes insolvent before a claim can be paid.

All of the following are covered as supplementary payments under the liability section of the PAP

-the cost of an appeal bond in a lawsuit stemming from an auto accident. -interest which accrues on a liability judgment covered by the policy - reasonable expenses incurred by the insured to testify at a trial involving a lawsuit covered by the policy.

What is the purpose of the extended nonowned liability coverage endorsement to the PAP?

-to provide liability coverage for an insured who operates a nonowned auto on a regular basis

All of the following losses are excluded under Part D (coverage for damage to your auto) of an unendorsed PAP

-vandals damaged a portable cell phone kept in the car. -damage caused to a car's engine because the named insured never changed the oil. -destruction of a radar detector which overheated and caught on fire.

The PAP provides coverage for your covered auto. Identify the four classes of vehicles that are considered to be covered autos.

A covered auto is any auto shown in the declarations, a newly acquired auto, a trailer owned by the named insured, and a temporary substitute vehicle.

Rob purchased a Personal Auto Policy (PAP) with collision and other-than-collision coverage. Which of the following losses would be covered under his policy?

A flash flood washed Rob's car off the road and damaged it.

Coverage for Damage to Your Auto (Part D) in the PAP also covers the insured while driving a nonowned auto. Define the meaning of a nonowned auto.

A nonowned auto is a private passenger auto, pickup, van, or trailer not owned by or furnished or made available for the regular use of the named insured or family member while such vehicle is in the custody of, or is being operated by, the named insured or family member.

All of the following statements about Part D (coverage for damage to your auto) of the PAP are true

A) Coverage may be purchased with or without collision insurance. B) Losses are paid regardless of fault. C) Coverage applies to a nonowned auto occasionally driven by an insured.

All of the following are considered to be a covered auto under the Personal Auto Policy

A) a trailer owned by the insured. B) a temporary substitute auto loaned to the insured while her care is being repaired. -a newly acquired auto.

After the Personal Auto Policy has been in force for 60 days (or is a renewal policy), all of the following are grounds for the insurer to cancel the policy

A) nonpayment of premiums B) the insured's license to drive is suspended C) the insurer discovers material misrepresentation by the insured in the application process

Alan's daughter, Heather, attends college in another state and drives a family auto. Heather lets her boyfriend drive the car, and he negligently injures another motorist. The boyfriend is sued for $50,000.

As the daughter's boyfriend had permission to use the vehicle, he would have coverage under Alan's policy, and $50,000 would be paid if he were legally liable.

Part D: Coverage for Damage to Your Auto

Coverage for damage to your auto pays for any direct or accidental physical damage loss to a covered auto less any deductible. A collision loss or other-than-collision loss is covered only if the declarations page indicates that such coverages are in effect. For example, if you lose control of your car on an icy highway and it overturns, the physical damage to the car is covered under collision insurance.

Which of the following statements about the medical payments coverage of the PAP is true?

Covered expenses include the cost of funeral services.

Alan's son, age 16, is driving a family car, runs a red light, and kills a pedestrian. The family of the deceased pedestrian sues and damages are awarded in the amount of $500,000.

Covered. Alan's son is covered as a member of the family. The maximum amount paid would be $100,000, which is the per-person limit.

Alan's son drives a family car on a date. He gets drunk, so his girlfriend drives him home. The girlfriend negligently injures another motorist, who has bodily injuries in the amount of $200,000.

Covered. From the facts, it appears that the girlfriend can establish a reasonable belief that permission to drive the automobile would have been given. However, the amount paid would be only $100,000.

Alan's wife is driving a family car in a snowstorm. She loses control of the car on an icy street and smashes into the foundation of a house. The property damage to the house is $30,000. The damage to the family car is $8,000. Alan's wife has medical expenses of $5,000.

Covered. Property damage to the house in the amount of $30,000 would be paid. The amount paid for damage to the family car is $7,500. The wife's medical expenses in the amount of $5,000 are also paid.

While driving a rented golf cart, Alan accidentally injures another golfer with the cart.

Covered. The PAP covers liability arising out of non-owned golf carts. Thus, the loss is covered.

Alan borrows a friend's car to go to the supermarket. He fails to stop at a red light and negligently smashes into another motorist. The other driver's car, valued at $15,000, is totally destroyed. In addition, repairs to the friend's car are $5,000.

Covered. The liability insurance on the borrowed car is primary, Alan's insurance is excess. Damage to the other car is covered under property damage liability for $15,000. Collision coverage, if any, on the friend's car would be primary, and Alan's policy would be excess. If there is no collision coverage on the friend's car, Alan's policy would be primary and would pay $4,500.

Alan's wife goes shopping at a supermarket. When she returns, she finds that the left rear fender has been damaged by another driver who did not leave a note or his/her name. The cost of repairing the car is $2,000.

Covered. This loss is considered to be a collision loss. The amount paid is $1,500.

Alan's car hits a cow crossing a highway. The cost of repairing the car is $2,500.

Covered. This loss is covered under Part D (coverage for damage to your auto). Loss caused by contact with a bird or animal is considered to be other-than-a-collision loss. The amount paid would be $2,000.

Alan is walking across a street and is struck by a motorist who fails to stop. He has bodily injuries in the amount of $15,000.

Covered. Under the uninsured motorists coverage, Alan would recover $15,000.

Jenny purchased a Personal Auto Policy (PAP) that included property damage liability, collision coverage, medical payments coverage, and other-than-collision coverage. Jenny had too much alcohol to drink at a graduation party. While driving home from the party, Jenny ran off the road and hit a tree. Police responded to the accident, and Jenny was arrested for driving under the influence of alcohol. Which of the following statements is true regarding the damage to Jenny's car?

Damage to the car is covered under Jenny's collision coverage.

Dan picked up his friend Rodney to drive to their softball game. Both Dan and Rodney have a Personal Auto Policy (PAP) with $5,000 of medical payments coverage. Dan hit a parked car, and Rodney was injured, incurring $9,000 of medical expenses. How will this claim be settled under the other insurance provision of the PAP?

Dan's insurer will pay $5,000 and Rodney's insurer will pay $4,000.

Dani, Tanya's roommate, borrows Tanya's car with her permission and injures another motorist. Dani is at fault.

Dani is covered under Tanya's policy. Tanya's PAP will pay the liability claim up to the policy limits.

List the major exclusions that apply to Coverage for Damage to Your Auto (Part D).

Exclusions under Part D include using the vehicle as a public or livery conveyance including when logged into a transportation network platform; damage from wear and tear, freezing, and mechanical or electrical breakdown; radioactive contamination or war; certain electronic equipment unless permanently installed in a covered auto or nonowned auto; tapes, records, and disks; government destruction or confiscation; loss to a trailer, camper body, or motor home not shown in the declarations; using a nonowned auto without a reasonable belief of permission; radar detection equipment; custom furnishings or equipment; nonowned auto used in the automobile business; using the vehicle in a racing facility; and loss to a rental car if a state law or rental agreement precludes the rental company from collecting from the insured.

Under the Personal Auto Policy, which of the following statements is true concerning transportation network platforms through which drivers are connected with passengers for pre- arranged transportation for a fee?

I. Liability arising out of operating a vehicle while using the vehicle for such pre-arranged travel for a fee is excluded. II. Medical payments coverage does not apply if the injuries occur while using the vehicle for pre-arranged travel for a fee through a transportation network platform.

The insurance company's options for settling a collision loss to a covered auto under the PAP include which of the following?

I. Pay the loss in money .II. Repair or replace the damaged auto.

Which of the following persons is (are) covered for liability insurance under the PAP?

I. a family member who drives a covered auto II. a family member who occasionally drives a friend's auto

The PAP provides liability coverage to four groups. Identify the four groups of persons or parties who can be insured under the PAP.

Insured persons include the named insured and spouse, resident family members, other persons using a covered auto if there is a reasonable belief that permission to use the auto exists, and any person or organization legally responsible for the acts of an insured person.

Which of the following statements about the Miscellaneous-Type Vehicle Endorsement to the PAP is (are) true?

It can be added to PAP to insurance motorcycles and motor scooters.

Which of the following statements concerning the collision damage waiver when renting an auto is true?

It relieves the renter from legal liability for the vehicle if it is damaged or stolen.

John has an auto which is covered for collision losses subject to a $250 deductible. Kate's auto also has collision coverage but her deductible is $500. Which of the following statements describes how a $2,000 collision loss will be paid if it occurs when John borrows Kate's car because his car is in the shop for repairs?

Kate's policy will pay $1,500, and John's policy will pay $250.

Larry has $25,000 of bodily injury liability coverage under his PAP. This limit is the minimum amount required by his state to be considered financially responsible. While on a vacation, Larry visited a neighboring state which has a minimum financial responsibility limit of $50,000 for bodily injury. Which of the following statements describes the situation for Larry while he was in the neighboring state?

Larry's policy automatically provided $50,000 of liability coverage.

Tanya, age 21, is a college student who recently purchased her first car from a friend who had financial problems. The vehicle is a high-mileage, 2006 Toyota Corolla with a current market value of $3,000. Assume you are a financial planner and Tanya asks your advice concerning the various coverages in the PAP. Which of the available coverages in (a) should Tanya purchase? which should she not purchase?

Liability coverage (Part A) is the most important coverage that Tanya should buy since it would cover her for legal liability arising out of the negligent operation of an automobile. Since many motorists drive without liability insurance, the uninsured motorists coverage should also be purchased. Medical payments coverage could be purchased if she consistently drives with other passengers in her car or if she has no individual or group health insurance that would cover her in an accident. Coverage for damage to your auto (Part D) should not be purchased. Tanya is driving an older automobile with a limited market value, which should not be insured for physical damage losses.

List the major exclusions that apply to liability coverage (Part A) in the PAP.

Liability coverage excludes liability arising out of intentional injury or damage, property owned or transported by an insured, property rented to or in the insured's care, workers compensation claims, using the vehicle as a public or livery conveyance including when travel is arranged through a transportation network platform, vehicles used in the automobile business, other business vehicles, using a vehicle without a reasonable belief of permission, nuclear energy exclusion, vehicles with fewer than four wheels, vehicles furnished or made available for the named insured's or family member's regular use, and using the vehicle as a racing vehicle inside a racing facility.

List the major exclusions that apply to medical payments coverage (Part B) in the PAP.

Medical payments coverage excludes injuries sustained while occupying a vehicle with fewer than four wheels, using the vehicle as a public or livery conveyance including travel arranged through a transportation network platform, using the vehicle as a residence, work injuries covered by workers compensation, vehicles furnished or made available for the named insured or family member's regular use, using a vehicle without a reasonable belief of permission, racing vehicles, and vehicles designed for flight.

Part B: Medical Payments Coverage

Medical payments coverage pays all reasonable medical and funeral expenses incurred by an insured for services rendered within three years from the date of the accident. For example, if you are involved in an auto accident and have a broken arm, your medical expenses will be paid under medical payments coverage up to the limit of the policy.

If the insured drives a nonowned auto on a regular basis, does the insured's PAP provide coverage? Explain your answer.

No. You can occasionally drive another person's car, and your PAP will cover you. However, if you drive the car on a regular basis, or it is made available for your regular use, your PAP coverage does not apply.

In a fit of anger, Karen deliberately ran over the wagon of a neighbor's child that had been left in Karen's driveway after repeated requests that the wagon be left elsewhere. The child's parents seek reimbursement.

Not covered. Intentional property damage or bodily injury is excluded under the PAP.

Alan works for a construction company. While driving a large cement truck, he negligently injures another motorist. The injured motorist sues Alan for $25,000.

Not covered. Liability coverage for commercial vehicles and large trucks used in a business, such as a large cement truck, is excluded under the liability section of the PAP.

Alan's car is being repaired for faulty brakes. While road testing the car, a mechanic injures another motorist and is sued for $50,000.

Not covered. The mechanic is not covered under Alan's policy. If a person is employed or engaged in the automobile business, liability arising out of operation of vehicles in the automobile business is excluded. However, the exclusion does not apply to the operation of any covered auto by the named insured, family member, or partner.

Karen was involved in an accident while she was transporting a passenger for a fee. The ride was arranged through a transportation network platform. The passenger's medical expenses were $3,000.

Not covered. When the covered auto is used to transport passengers for a fee with travel arranged through a transportation network platform, the loss is excluded under the PAP.

What is an other-than-collision loss? Explain your answer.

Other-than-a-collision loss refers to a physical damage loss to a covered vehicle other than by a collision. To distinguish between collision and other-than-collision losses, certain losses are considered to be other-than-collision losses. Some examples of such losses include: These losses include damage to the car from missiles or falling objects; fire; theft or larceny; explosion or earthquake; windstorm, hail, water, or flood; malicious mischief or vandalism; riot or civil commotion; contact with a bird or animal; glass breakage; and other non-excluded losses.

Karen allowed Scott to use her car. While operating Karen's car, Scott damaged Gray's car in an accident caused by Scott's negligence. Karen is sued by Gray for damages

Scott is covered for the property damage to Gray's car. Any person using a covered auto is covered under the named insured's policy if there is a reasonable belief that permission to use the automobile exists. Karen is also covered under her PAP for the suit.

Karen is the named insured under a PAP that provides coverage for bodily injury and property damage liability, medical payments, and uninsured motorists coverage. For each of the following situations, briefly explain whether the claim is covered by Karen's PAP. -Karen ran into a telephone pole and submitted a medical expense claim for Jason, a passenger in Karen's car at the time of the accident.

Since Jason is a passenger in a covered auto, his medical expenses would be covered under Karen's PAP

John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of 100/300/50. John also has a PAP, and his liability limits 250/500/50. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy?

Sophie's policy will pay $100,000, John's policy will pay $200,000.

Duties of an insured after a collision loss covered under the PAP include which of the following?

Take reasonable steps to protect the vehicle from further damage.

Tanya also owns a motorcycle. To what extent, if any, does Tanya's PAP cover the motorcycle?

The PAP does not cover motorcycles. However, coverage can be obtained by adding the miscellaneous-type vehicle endorsement to the policy.

Does the PAP cover you if you are driving a vehicle in a foreign country? Explain your answer.

The PAP will not provide coverage in all foreign countries. The PAP provides coverage only in the United States, its territories or possessions, Puerto Rico, and Canada.

A thief breaks a car window and steals a camera and golf clubs locked in the car. It will cost $400 to replace the damaged window. The stolen property is valued at $500.

The broken window is covered as an other-than-a-collision loss; however, as the loss is less than the deductible, nothing would be paid. The theft of the camera and golf clubs is not covered under the PAP.

Jana borrows her friend's car with permission and is in an accident with another motorist in which Jana is at fault. The cost of repairing the friend's car is $5,000. The friend's auto policy has a $500 deductible for collision losses and $250 for other-than-collision losses.

The collision insurance applies to a borrowed vehicle on an excess basis. However, the insurance on the friend's car is primary. The friend's collision insurance, therefore, pays $4,500 for the physical damage loss to the car. The remaining $500 is submitted to Jana's insurer. However, since she has a $500 deductible, nothing would be paid.

Jana has a PAP with the following coverages: Liability coverages: $100,000/$300,000/$50,000 Medical payments coverage: $5,000 each person Uninsured motorists coverage: $25,000 each person Collision loss: $500 deductible Other-than-collision loss: $500 deductible Towing and labor cost coverage: $75 each disablement To what extent, if any, is each of the following losses covered under Jana's PAP? Treat each event separately. a. Jana rents a car while on vacation. She is involved in an accident with another motorist when she fails to yield the right of way. The injured motorist is awarded a judgment of $100,000. The rental agency carries only liability limits of $30,000 on the rental car. The rental agency carries no collision insurance on its cars and is seeking $15,000 from Jana for repairs to the rental car.

The loss is covered. However, the liability insurance on the rental car is primary, and Jana's insurance is excess. The insurance on the rental car pays $30,000 and Jana's insurance pays the remaining $70,000. The rental agency does not carry collision insurance on the rental car. Thus, Jana's collision insurance is primary and will pay $14,500.

Tanya drives her boyfriend's car on a regular basis. While driving the boyfriend's car, she is involved in an accident in which another motorist is injured. Tanya is at fault.

The loss is not covered under Tanya's policy. The PAP does not cover non-owned vehicles driven on a regular basis or made regularly available for use.

Tanya rents a car in England where she is participating in a summer study abroad program. The car is stolen from a dormitory parking lot

The loss is not covered. The PAP provides coverage only in the United States, its territories and possessions, Puerto Rico, and Canada.

Jana is employed as a salesperson and is furnished a company car. She is involved in an accident with another motorist while driving the company car during business hours. The injured motorist claims Jana is at fault and sues her for $100,000. Damage to the company car amounts to $5,000.

The loss is not covered. The loss is excluded since a company car is furnished and made available for Jana's use on a regular basis. Adding the extended nonowned coverage endorsement to her policy can cover the company car.

During the football season, Tanya charges a fee to transport fans from a local bar to the football stadium. Several passengers are injured when Tanya suddenly changes lanes without signaling and hits another car.

The loss is not covered. Using a vehicle as a taxi or public livery conveyance is specifically excluded.

Karen's husband ran over a bicycle while driving a friend's car. The owner of the bicycle demands that Karen's husband pay for the damage.

The spouse of the named insured is covered under the PAP. Thus, the husband is insured under Karen's policy. The liability coverage also extends to the occasional use of a non-owned automobile. However, the liability insurance on the friend's car would apply first, and Karen's insurance is excess. Thus, if the husband is legally liable for damage to the bicycle, the friend's policy would pay the claim. If the friend has no liability insurance, then Karen's policy is primary and would pay the claim.

Part C: Uninsured Motorists Coverage

The uninsured motorists coverage pays for the bodily injury of a covered person (and property damage in some states) caused by an uninsured motorist, by a hit-and-run driver, or by a driver whose insurer is insolvent. For example, if you are injured by a negligent driver with no liability insurance, you can collect for your injury under the uninsured motorists coverage.

Which of the following statements about the payment of defense costs by the PAP is (are) true?

They are paid in addition to the policy limits.

Part A: Liability Coverage

Under liability coverage, the insurer agrees to pay damages for which an insured is legally liable arising out of an auto accident. The insurer also agrees to defend the insured and pay the legal defense costs. For example, if you carelessly run a red light and injure someone, you are covered for any suit or claim arising out of the incident.

Describe the major features of uninsured motorists coverage (Part C) in the PAP.

Uninsured motorists coverage pays for the bodily injury of a covered person (and property damage in some states) caused by an uninsured motorist, by a hit-and-run driver, or by a driver whose insurer is insolvent. The major features of the uninsured motorists coverage are as follows: (a) Coverage applies only if the uninsured motorist is legally liable. (b) Some states include coverage for property damage from an uninsured motorist in their uninsured motorists law. (c) The maximum amount paid for any single accident is the amount shown in the declarations. (d) The claim is subject to arbitration if the covered person and insurer disagree over the amount of damages.

The purpose of the Miscellaneous-Type Vehicle Endorsement to the PAP is to

insure motorcycles, mopeds, motor scooters, and similar vehicles.

The appraisal provision in the Personal Auto Policy is used to determine the

amount paid for a physical damage loss to the insured's auto if the insured and insurer disagree.

Dennis was involved in an accident. He believes the damage to his auto is $7,000. His insurer believes the damage is only $3,500. Which PAP provision is designed to handle disputes between the insurer and the insured over the amount of the loss?

appraisal provision

If the value of a vehicle is increased after repairs, such as repainting an entire auto when only one fender or door is damaged, the insurer will not pay for the increase in value. Another name for the increase in value is

betterment.

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred:—The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages.—Ken incurred $5,000 in medical expenses.—The car that Ken hit was a total loss.Which of Ken's Personal Auto Policy (PAP) coverages will cover the other driver's medical expenses?

bodily injury liability

Ken purchased a PAP with liability limits of 100/300/50, medical payments coverage, and collision coverage. Ken fell asleep while driving late at night. He crossed the center line and hit a car approaching from the other direction. The following losses occurred.—The driver of the other car suffered $30,000 in bodily injuries. —Ken's car sustained $5,000 in damages.—Ken incurred $5,000 in medical expenses.—The car that Ken hit was a total loss.Which of Ken's Personal Auto Policy (PAP) coverages will cover the damage to Ken's car?

collision coverage

A car damaged in an auto accident may have reduced market or resale value after it is repaired. Some insureds have sought to recover this reduction in market or resale value. This loss in value is called

diminution.

The Personal Auto Policy states that the insurer has no duty to provide coverage if the insured fails to comply with certain listed duties. In practice, however, the insurer is only relieved of its duty to provide coverage if

failure to comply with the duties is prejudicial to the insurer.

In addition to providing coverage in the United States, its territories and possessions, and Puerto Rico, where else does the PAP provide coverage?

in Canada

In which of the following situations would medical payments be paid under an unendorsed PAP?

injuries incurred in an auto while it is used in a share-the-expense car pool

Gary purchased a Personal Auto Policy (PAP) that included collision coverage. Gary lost control of his vehicle on an icy road. He slid off the road and hit a tree. Ignoring any deductible, what is the insurer's liability for damage to Gary's car?

the lesser of the actual cash value or the amount necessary to repair or replace the vehicle

A vehicle is considered a constructive total loss when

the repair cost exceeds the actual cash value.