CAIA Policy Coverage and Exclusions 2 — Questions and Answers
Question 1: A claimant drives a borrowed vehicle and causes an accident. Under most personal auto policies, which coverage applies FIRST?
- The borrower's own policy as primary
- The vehicle owner's policy as primary (Correct answer)
- Both policies share equally as co-primary
- Neither policy applies to borrowed vehicles
Correct answer: The vehicle owner's policy as primary
The vehicle owner's policy is primary coverage; the borrower's policy acts as excess if the owner's limits are exhausted.
Question 2: Which of the following losses is typically EXCLUDED under a standard comprehensive auto coverage?
- Hail damage to the vehicle roof
- Theft of the entire vehicle
- Mechanical breakdown of the engine (Correct answer)
- Flood damage to the interior
Correct answer: Mechanical breakdown of the engine
Mechanical or electrical breakdown is a maintenance issue excluded from comprehensive coverage, which covers sudden external perils.
Question 3: An insured intentionally rams another car during a road rage incident. How does the policy respond to the damage claim?
- Liability coverage pays because the other driver is a third party
- Collision coverage pays the insured's vehicle damage
- The intentional act exclusion bars all coverage (Correct answer)
- Comprehensive covers intentional acts against others
Correct answer: The intentional act exclusion bars all coverage
Intentional acts exclusions in auto policies bar coverage when the insured deliberately causes damage.
Question 4: Under a Personal Auto Policy (PAP), which statement about the 'named insured' is correct?
- Only the person listed first on the declarations page
- The named insured and spouse residing in the household (Correct answer)
- All licensed drivers in the household automatically
- Any family member who drives the insured vehicle
Correct answer: The named insured and spouse residing in the household
The PAP defines 'named insured' as the person shown in declarations and, if a resident, their spouse.
Question 5: A delivery driver uses a personal auto policy vehicle for commercial pizza delivery. The insurer denies a collision claim. What is the most likely basis?
- The driver did not have a commercial license
- The vehicle was used for business purposes excluded under the PAP (Correct answer)
- Collision coverage does not apply while moving
- The deductible was not met
Correct answer: The vehicle was used for business purposes excluded under the PAP
PAPs typically exclude coverage when the vehicle is used to carry persons or property for a fee, including regular delivery work.
Question 6: What does the 'other than collision' coverage in an auto policy cover?
- Accidents involving another vehicle only
- Losses from fire, theft, vandalism, and weather events (Correct answer)
- Medical payments to occupants after any accident
- Property damage liability for third parties
Correct answer: Losses from fire, theft, vandalism, and weather events
'Other than collision' (comprehensive) covers perils like fire, theft, weather, falling objects, and vandalism.
Question 7: An insured's vehicle is damaged when an uninsured driver runs a red light. Which PAP coverage provides direct payment to the insured for their vehicle damage?
- Uninsured Motorist Property Damage (UMPD) (Correct answer)
- Medical Payments coverage
- Comprehensive coverage
- Bodily Injury Liability
Correct answer: Uninsured Motorist Property Damage (UMPD)
UMPD reimburses the insured for vehicle damage caused by an at-fault uninsured driver where available by state.
CAIA Policy Coverage and Exclusions 2
A claimant drives a borrowed vehicle and causes an accident.
Under most personal auto policies, which coverage applies FIRST?