Personal Auto Policy Basics-Credit and Risk Managment-Lecture Notes, Study notes of Credit and Risk Management

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LECTURE – 37 PERSONAL AUTO POLICY BASICS • The 2005 Personal Auto Policy (PAP) is widely used throughout the USA & European Countries – Drafted by the ISO, it replaces the 1998 form • Eligible vehicles include: – A four-wheeled motor vehicle owned or leased by the insured for at least six consecutive months – A pick-up or van with a gross vehicle weight rating of 10,000 pounds or less • Cannot be used for deliveries, with some exceptions • Autos covered by the policy include: – Any auto shown in the declarations – A newly acquired auto • Coverage depends on whether it is an additional vehicle or a replacement vehicle and whether the declarations indicates at least one auto for collision coverage – A trailer owned by the named insured – A temporary substitute vehicle, which is a non-owned auto or trailer used temporarily because of mechanical breakdown, repair, servicing, loss, or destruction of a covered vehicle Liability Coverage • Liability coverage is the most important part of the PAP – It protects a covered person against a suit or claim arising out of the ownership or operation of a covered vehicle – The coverage is usually written in split limits, where the amounts of insurance for bodily injury liability and property damage liability are stated separately – The insurer also agrees to provide defense and pay all legal defense costs for claims covered by the policy • Defense costs are covered in addition to the policy limits • Liability coverage applies to: – The named insured and any resident family member – Any person using the named insured’s covered auto – Any person or organization legally responsible for any insured’s use of a covered auto on behalf of that person or organization – Any person or organization legally responsible for the named insured’s or family members’ use of any auto or trailer (other than a covered auto or one owned by the person or organization). • In addition to the policy limits and legal defense, certain supplementary payments can be paid, including: – The cost of a bail bond – Premiums on appeals bonds – Interest accruing after a judgment – Loss of earnings – Other reasonable expenses • Exclusions to the coverage include: – Intentional injury or damage – Property owned or transported – Property rented, used, or in the insured’s care – Bodily injury to an employee – Use as a public livery or conveyance docsity.com – Vehicles used in the auto business – Vehicles with fewer than four wheels – Vehicle furnished for the insured’s regular use • If an accident occurs in another state, and the financial responsibility law in that state has higher liability limits than shown in the declarations, the PAP automatically provides the higher limits • If more than one liability policy covers a loss: – The insurer pays its pro rata share of the loss for an owned vehicle – The insurance coverage is excess over any other insurance for a non-owned vehicle Medical Payments • Medical payments coverage covers all reasonable medical and funeral expenses incurred by an insured in an accident – Two groups are eligible for coverage: • The named insured and family members are covered: – While occupying any motor vehicle, or – As pedestrians when struck by a motor vehicle • Other persons occupying a covered auto are covered – But not covered in a non-owned vehicle – Covers medical services rendered within three years from the date of the accident – Coverage is not based on fault • Exclusions to the coverage include injuries sustained: – While occupying a vehicle with fewer than four wheels – While operating the vehicle as a public livery or conveyance – When the vehicle is used as a residence – When the vehicle is used without a reasonable belief of permission – When the vehicle is competing in a race • If more than one auto policy covers a loss: – The insurer pays its pro rata share of the loss for an owned vehicle – The insurance coverage is excess over any other insurance for a non-owned vehicle Uninsured Motorists Coverage • The uninsured motorists coverage pays for the bodily injury caused by an uninsured motorist, by a hit-and-run driver, or by a negligent driver whose insurance company is insolvent – In some states, property damage is also covered – The uninsured motorist must be legally liable • The coverage applies to: – The named insured and family members – Any other person while occupying a covered auto – Any person legally entitled to recover damages (e.g., a surviving spouse) • Coverage does not apply when: – An insured is injured in, or by, a vehicle owned by the named insured, but not insured under the policy – There is primary coverage under another policy – The vehicle is used as a public livery or conveyance • Does not apply to a carpool – When workers compensation benefits are applicable • There are several limitations when more than one uninsured motorist coverage provision applies to a loss – For example, if an insurer provides coverage on a vehicle not owned by the named insured, the insurance provided is excess over any collectible insurance provided on a primary basis docsity.com