P&C Personal Automobile Policies 2 — Questions and Answers
Question 1: Under Part A (Liability) of a personal auto policy, the insurer agrees to pay damages the insured is legally liable for involving:
- Only damage to the insured's own vehicle
- Bodily injury and property damage to others arising out of the ownership, maintenance, or use of a covered auto (Correct answer)
- Only injuries sustained by passengers in the insured's vehicle
- Mechanical damage to the insured's vehicle
Correct answer: Bodily injury and property damage to others arising out of the ownership, maintenance, or use of a covered auto
Part A covers the insured's legal liability for bodily injury and property damage caused to third parties arising from the covered auto's ownership, maintenance, or use.
Part A of the PAP is the primary liability coverage that protects the insured against third-party claims. It includes a duty to defend covered suits and pays both bodily injury (medical bills, lost wages, pain and suffering) and property damage (repair or replacement of the other party's vehicle and property). Coverage applies to the named insured, household residents, and permissive users of covered autos.
Question 2: Under the personal auto policy, which of the following is typically considered a 'covered auto'?
- A vehicle the insured borrowed from a neighbor without permission
- A vehicle newly acquired by the insured during the policy period, if reported within the required timeframe (Correct answer)
- A vehicle owned by an employer provided to the insured
- A vehicle rented for a commercial delivery purpose
Correct answer: A vehicle newly acquired by the insured during the policy period, if reported within the required timeframe
A newly acquired vehicle is automatically covered under the PAP for a specified period (typically 14–30 days), and full coverage continues if reported to the insurer within that window.
The PAP's definition of covered auto includes vehicles listed on the declarations page, trailers owned by the insured, temporary substitute vehicles (while a covered auto is being repaired), and newly acquired vehicles. For newly acquired autos, the policy automatically provides coverage similar to the broadest coverage on any existing vehicle for up to 14 days; the insured must notify the insurer within that period to continue full coverage.
Question 3: What does 'split limits' mean in the context of auto liability coverage?
- A policy that pays half of each claim
- Separate maximum amounts per person injured, per accident for bodily injury, and per accident for property damage (e.g., 100/300/100) (Correct answer)
- A coverage that is split between collision and comprehensive
- Coverage that alternates between primary and excess on a claim-by-claim basis
Correct answer: Separate maximum amounts per person injured, per accident for bodily injury, and per accident for property damage (e.g., 100/300/100)
Split limits express liability coverage as three separate amounts: maximum per person for bodily injury, maximum per accident for bodily injury (all persons), and maximum per accident for property damage (e.g., 100/300/100 means $100K per person, $300K per accident BI, $100K per accident PD).
Split limits are the most common way to express personal auto liability coverage. For example, 25/50/25 means the insurer will pay up to $25,000 for any one person's bodily injury, up to $50,000 total for all bodily injuries in one accident, and up to $25,000 for all property damage in one accident. State minimum limits vary; most states specify split limits or a single combined single limit (CSL) as the minimum.
Question 4: Under a personal auto policy, 'medical payments' coverage (Part B) pays for:
- Liability to third parties for injuries the insured causes
- Reasonable medical and funeral expenses for the insured and passengers, regardless of fault (Correct answer)
- Lost wages of the insured after an accident
- Damage to the insured's vehicle
Correct answer: Reasonable medical and funeral expenses for the insured and passengers, regardless of fault
Part B (Medical Payments) covers reasonable medical and funeral expenses for the named insured, household residents, and any occupant of a covered auto, regardless of who caused the accident.
Medical payments coverage is a no-fault benefit that pays for necessary medical treatment (up to the limit, typically $1,000–$10,000) for covered persons injured while in or entering/exiting a covered auto. It also covers the named insured and family members injured as pedestrians hit by a vehicle. In no-fault states, Personal Injury Protection (PIP) typically replaces or supplements medical payments.
Question 5: The 'permissive use' doctrine in auto insurance means that:
- Only the named insured is covered while driving
- A person who has the insured's permission to drive a covered auto is generally covered under the insured's liability policy (Correct answer)
- Permission is not required as long as the driver has a valid license
- The insurer must give permission before the insured can lend their vehicle
Correct answer: A person who has the insured's permission to drive a covered auto is generally covered under the insured's liability policy
Under permissive use, someone who has express or implied permission from the named insured to drive a covered auto is typically covered under the insured's PAP for liability purposes.
Most PAPs extend Part A liability coverage to any person using a covered auto with the named insured's reasonable belief of permission. Express permission is a direct statement; implied permission arises from a pattern of conduct (e.g., regularly allowing a family member to borrow the car). Coverage may be excluded if the user takes the car without permission or uses it outside the scope of the permission granted.
Question 6: Under Part D (Physical Damage) of a personal auto policy, 'other-than-collision' (comprehensive) coverage includes loss caused by:
- Rolling over the vehicle in a one-car accident
- Rear-ending another vehicle
- A tree limb falling on the parked vehicle (Correct answer)
- Swerving to avoid a deer and hitting a guardrail
Correct answer: A tree limb falling on the parked vehicle
A tree limb falling on a parked vehicle is an 'other-than-collision' peril (comprehensive), not a collision. Striking a guardrail and rolling over are both collision losses.
Other-than-collision (comprehensive) coverage under the PAP covers losses from fire, theft, explosion, earthquake, windstorm, hail, water, flood, malicious mischief, vandalism, riot, contact with a bird or animal, and falling objects — but not collision. A collision includes the vehicle overturning or colliding with another object. Swerving to avoid a deer and striking a guardrail is a collision (contact with the guardrail), even though a deer was involved; simply hitting the deer would be comprehensive.
P&C Personal Automobile Policies 2
Under Part A (Liability) of a personal auto policy, the insurer agrees to pay damages the insured is legally liable for involving: