Ch. 5 - Auto Insurance Note Cards Flashcards
A professional assessment to determine extent of damage.
Appraisal
Proof that one can pay for damages caused, often fulfilling by purchasing insurance.
Financial Responsibility
A person granting a lease of a motor vehicle.
Lessor
The transporting of people or things for hire (ex. Taxi service).
Livery
When something cannot occur simultaneously with something else.
Mutually Exclusive
An automobile used for private needs rather than for business uses.
Private Passenger Vehicle
An insurance policy for the owners of private passenger vehicles that combines physical damage insurance on the automobile, with liability insurance for claims from use of the auto.
Personal Auto Policy (PAP)
6 parts of PAP:
- Part A - Liability Coverage
- Part B - Medical Payments Coverage
- Part C - Uninsured Motorist Coverage
- Part D - Coverage for Damage To Your Auto
- Part E - Duties After An Accident or Loss
- Part F - General Provisions
What does PAP protect you for in terms of losses?
- Legal liability (for injuries and/or property damage to others)
- Injury to the insured or members of the insured’s family
- Damage to or loss of the auto itself
Located on the first page of the policy; defines terms used in policy
Definitions
Bodily harm, sickness or disease, including death that results from the injury.
Bodily Injury
Physical injury, destruction or loss of use of tangible property.
Property Damage
Terms in PAP that refer to:
- The named insured shown in the Declarations
- The spouse of the named insured, if a resident of the same household
You and Your
If spouse ceases to be resident, they are only covered on policy until:
- The end of the 90 days following the spouse’s change of residency.
- The effective date of another policy listing the spouse as a named insured.
- The end of the policy period.
A person related by blood, marriage, or adoption who is a resident of the household (including ward or foster children).
Family Member
What is included under Your Covered Auto?
- Any vehicle shown in the declarations
- A newly acquired auto
- Any trailer owned
- Any auto or trailer not owned by the insured but used as a temporary substitute for a vehicle described above which is out of normal use because of its breakdown, repair, serving, loss, or destruction.
A vehicle designed to be pulled by a private passenger auto, pickup, or van, or farm wagons and implements while towed by any of the above vehicle types.
Trailer
Any of the following vehicles that are acquired by the insured during the policy period:
- A private passenger auto
- A pickup or van, for which no other insurance provides coverage that: Has a gross vehicle weight less than 10,000lbs, is not used for the delivery or transportation of goods and materials unless such is incidental to a business of installing, maintaining, or repairing furnishings/equiptment, and/or is not used for farming/ranching.
Newly Acquired Auto
GVW
Gross Vehicle Weight
The maximum recommended weight including the vehicle, fuel and fluids, passengers, and all cargo.
Gross Vehicle Weight (GVW)
- Coverage will be the broadest offered on any existing vehicle on the declarations (notice not needed by insurer)
- If the vehicle is in addition to the listed vehicles, policy grants coverage if the insurer is notified within 14 days prior to ownership.
Liability, Medical Payments, and Uninsured Motorist Coverage For Newly Acquired Auto For Replacement Vehicles
The upset or impact of a covered vehicle or nonowned auto with another vehicle or object.
Collision
What losses are included in Other-Than-Collision?
- Missiles or falling objects
- Fire
- Theft/larceny
- Explosion
- Earthquake
- Windstorm
- Hail
- Water
- Flood
- VMM
- Riot/civil commotion
- Contract with birds or animals
- Breakage of glass
What Other-Than-Collision was previously known as.
Comprehensive
Collision Coverage and/or Other Than Collision Coverage For A Newly Acquired Auto:
- Begins on the date the insured becomes the owner.
- Insured must ask the company to insure the vehicle within 14 days of becoming the owner
- Will have the broadest coverage provided
- If not notice is given, and a loss occurs within the first 4 days of ownership, coverage can still be requested. ($500 deductible will apply.)
In, upon, getting in, on, out of, or off a vehicle.
Occupying
Liability coverage that protects the insured against loss arising from legal liability when an automobile that the insured owns, operates, or maintains is involved in an accident.
Insuring Agreement Liability Coverage
What is covered/paid under the Insuring Agreement?
- Bodily injury and property damage due to an accident caused by the insured.
- Defense costs as long as the policy covers a particular loss.
- Costs for settling/defending the insured as deemed appropriate.
The person named in an insurance policy that is protected under the contract and to whom the insurer pays benefits/provides services.
Insured
Who is included under Part A - Liability Insured:
- The insured or any family member for the ownership, maintenance, or use of any auto/trailer.
- Any person using an insured’s covered auto with permission.
- The insured’s covered auto
- Any auto or trailer other than the insured’s covered auto that is being rented.
Provision that promises to pay certain costs on behalf of the insured such as:
- Bail bonds (up to $250)
- Premiums on appeal bonds/bonds to release attachments in suits covered (covered in full)
- Interest on a judgment upon the judgment being entered
- Other reasonable expenses incurred at the request of the insurer (such as up to $200 per day for loss earning for assisting in legal proceedings).
- Amounts payable in addition to the liability limit.
Supplementary Payments Provision
- Intentional injury or damage.
- Damage to property owned/being transported by a covered person.
- Damage to property rented, used, or in the care of a covered person, except a home/private garage.
- BI to an employee during the course employment, except domestic employees not required to be covered by workers compensation.
- Use of a vehicle as a public or livery conveyance, except carpools.
- Damage caused by any person while engaged in the business of selling, repairing, servicing, storing, or parking vehicles designed for use mainly on public highways.
- Use of commercial-type vehicles in any business.
- Persons using a covered auto without permission.
- Persons insured under a nuclear energy policy.
- The ownership, maintenance, or use of:
Any vehicle with fewer than 4 wheels.
Off road vehicles.
Any uncovered autos owned by the insured.
Vehicles owned by a family member, unless the named insured is using the vehicle.
Racing vehicles.
PAP Exclusions
2 types of Limits of Liability for PAP
- split limit
2. combined single
Coverage uses 3 dollar amounts that, in the event of an accident, these numbers specify the max amount the policy will pay for:
- BI for each person involved
- BI for the entire accident (regardless of number of people involved)
- Property damage
Split Limit
Coverage uses one dollar amount, indicating the max coverage for all losses, regardless of the number of people involved or the amount of property damage.
Combined Single
- When a covered auto is involved in an auto accident that occurs in any state or Canadian province outside of the principal garage location, out of state coverage applies to the accident.
- If the state/province has a financial responsibility law specifying limits of liability higher than what is shown in the Declarations, the insured’s policy will provide the higher specified limits.
- If state/province has compulsory insurance requiring nonresident to maintain insurance whenever the vehicle is used in the state, the insured’s policy will provide the least required minimum amounts/coverage.
Out of State Coverage
The liability section that states that if there is other insurance available to pay for covered loss, the insurer will only pay its share of the loss.
Other Insurance Clause
Medical payments coverage pays reasonable expenses associated with necessary medical and funeral expenses caused by an accident; must be rendered within 3 years of the accident.
Part B: Medical Payments Coverage -Insuring Agreement
In Part B - Medical Payments Coverage, who is defined as an insured?
- The named insured (“you”) or any family member occupying vehicle
- The named insured or family member as a pedestrian if struck by a vehicle.
- Any person while occupying a covered auto.
What is not covered under Part B - Medical Payments Coverage?
- While occupying vehicles that:
- Have less than 4 wheels
- Used as a public livery
- Used as residence
- Used without permission
- Commercial type vehicle for business
- Racing vehicle - While occupying/when struck by any vehicle that’s:
- Owned/used by the insured
- Owned/used by insured’s family member, other than a covered vehicle. - In course of employment if workers comp benefits are required.
- While occupying a vehicle in a racing facility.
- Nuclear weapon, war, insurrection, rebellion/revolution, or nuclear reaction.
Limits of Liability and Other Insurance under Part B - Medical Payment Coverage
- Regardless of fault, coverage depends on a per-person basis for BI.
- Other insurance clause matches Liability Coverage Section.
Provides the insured with money for bodily injuries that the insured would be legally entitled to recover from the owner/operator of the vehicle that does not carry the required liability insurance coverage.
Uninsured Motorist (UM) Coverage
UM
Uninsured Motorist
PAP
Personal Auto Policy
A vehicle that does not carry the required insurance.
Uninsured Vehicle
4 Categories of Uninsured Motor Vehicles:
- No liability bond/insurance for vehicle.
- Bond/insurance is less than required by the financial responsibility laws of the state in which the accident occurred.
- The accident was a hit-and-run accident, and the driver cannot be identified.
- The bonding company/insurance company denies coverage/is insolvent.
UM Vehicle doesn’t include any vehicle that’s:
- Owned/used by the insured or a family member.
- Owned by a self-insurer unless self-insurer becomes insolvent.
- Owned by a government agency.
- Operated on rails/crawler treads.
- Designed for off public road usage.
- While used as a residence
Part C: Uninsured/Underinsured Motorist Insured:
- The named insured and family members.
- Any person while occupying a covered vehicle.
- Any person entitled to recover damages because of injuries to one of the above.
Another name for Coverage for Damage to Your Auto.
Physical Damage Coverage
Coverage For Damage To Your Auto
Includes both collision and other than collision coverage when a premium is shown on the Declarations.
Agreement that states that the insurer will pay for direct and accidental loss to a covered/nonowned auto, minus any applicable deductible on the Declarations.
Insuring Agreement for Part D: Coverage For Damage To Your Auto
Any private passenger auto, pickup, van, or trailer which is operated by or in the custody of, but is not owned or furnished for the regular use of the named insured/family member.
Nonowned Autos
Paid if the loss is caused by collision or other-than-collision, as long as the corresponding coverage is indicated in the Declarations. Applies to both covered auto and a nonowned auto.
Transportation Expenses
Transportation Expenses daily coverage and max coverage for Part D: Coverage For Damage To Your Auto
$20 per day; $600 max
When do Part D: Coverage For Damage To Your Auto begin?
After 24 hours, unless theft. Theft coverage begins after 48 hours.
Is there a deductible for Part D: Coverage For Damage To Your Auto transportation expenses?
Not subject to deductible and limited to the period of time required to repair or replace vehicle.
Exclusions for Part D: Coverage For Damage To Your Auto
Includes the following exclusions for Part D: Coverage For Damage To Your Auto for losses/damages to/caused by any of the following:
- If vehicle is being used a public livery.
- Wear and tear, freezing, mechanical/electrical breakdown, and road damage to tires.
- Radioactive contamination, nuclear weapons, war, insurrection, rebellion, or revolution.
- Electronic equipment designed for reproduction of sound such as radios, tape decks, CD players not permanent in vehicle..
- Any TV/computer things not permanent in vehicle.
- Total loss due to confiscation/destruction by governmental or civil authorities.
- Camper, trailer, or motor home not shown in declarations.
- Awnings, cabanas, or additional living spaces equipment.
- Nonowned vehicles used without a belief that any insured is entitled to do so.
- Radar detection equipment
- Customer furnishings/equiptment in pickup/van.
- Any nonowned auto being used by any business of selling, repairing, storing, servicing, or parking vehicles.
- Any covered auto located in a racing facility.
- Any nonowned auto rented by any insured due to rental agreement or state law.
Limit of Liability for Part D: Coverage For Damage To Your Auto
- The lesser of:
The ACV of the vehicle at the time of loss (includes adjustment for depreciation and physical condition).
The amount necessary to repair/replace the vehicle. - Losses to nonowned autos are covered at the broadest coverage available. Trailers are limited to $1500.
- Electronic equipment permanently installed is covered up to $1000.
4 Additional PAP Provisions for Part D: Coverage For The Loss of Auto
- Payment of Loss
- No Benefit To Bailee
- Other Sources of Recovery
- Appraisal
Payment of Loss For Part D
The insurer has the option of paying money, repairing/replacing damaged or stolen property. If stolen property is received, the insurer may return the property to the insured, paying for any damage or they may keep all/part of the property at an agreed/appraised amount.
No Benefit To Bailee for Part D
The insurance will not directly/indirecly benefit any carrier or bailee.
Other Sources of Recovery for Part D
If other insurance is available, the insurer will pay on a proportional basis.
Appraisal for Part D
If the insured/insurer cannot agree on a settlement, either party can demand appraisal. Parties then select and pay for own appraiser. The appraised selects an umpire. Decision must be reached y 2 of the appraisers to be binding.
A third selected appraiser.
Umpire
Outlines the duties required of any person seeking damages under the policy following a loss or accident.
Part E - Duties After An Accident or Loss
Part E - Duties After An Accident or Loss - Included Duties
- Prompt notification of loss.
- Cooperating with the insurer.
- Forwarding any legal papers received.
- Submitting to a physical exam when requested.
- Allowing the insurer access to medical records.
- Submitting a proof of loss.
- Notifying the police of a hit and run accident/stolen vehicle.
- Protecting the property from further loss.
- Allowing the insurer to inspect and appraise the damaged property.
When is the insurer relieves of its duty to provide coverage according to Part E - Duties After An Accident or Loss?
If the insured fails to comply, resulting in harm to the insurer, the insurer is relieved of its duty to provide coverage.
Part F: General Provisions:
Describes conditions that apply to all coverage parts in addition to the previously applied conditions as follows: Bankruptcy Policy Changes Fraud Legal Action Against The Insurer Subrogation Policy period and territory Termination Transfer of Insured's Interest In The Policy (assignment) Two or More Auto Policies
Termination Provision:
Right and duty of the insured/insurer to cancel or nonrenew coverage. 10 days notice for nonpayment of premium/cancelled within the first 60 days of initial coverage. 20 days notice for all other reasons. If policy has been in force for more than 60 days, insurer can only cancel because of nonpyament, if a driver’s license has been suspended/revoked, or policy was obtained through material misrepresentation. For nonrenewal, insurer most provide 20 days notice.
Transfer of Insured’s Interest In The Policy (assignment) Provision:
Insured cannot transfer their rights/interests in the policy without written consent of the insurer. If they die, coverage will be provided for the surviving spouse/legal rep until end of the policy period.
Two or More Auto Polices Provision:
If the insurer has issued 2 or more policies that will respond to the same loss, the insurer’s liability will be the highest applicable limit of insurance under one policy.
Optional endorsements can be used to modify the PAP to fit the needs of individuals
Selected Endorsements
Common Endorsements in PAP:
- Amendment of Policy Provisions - Ohio
- Towing and Labor Costs
- Extended Nonowned Coverage For Named Individual
- Miscellaneous Type Vehicle
- Joint Ownership Coverage
Endorsement modifies the policy to conform with state law.
Amendment of Policy Provisions - Ohio Endorsement
Endorsement provides basic limit of $25 for towing and labor costs incurred at the place a vehicle is disabled. Higher limits are available for additional premium.
Towing and Labor Costs Endorsement
Endorsement can broaden the liability only, or liability and medical payments coverage provided in the policy for individuals specifically named on the endorsement. Coverage includes autos used by the insure, used of covered vehicles to carry people/property for a fee, and use of covered vehicles in business.
Extended Nonowned Coverage For Named Individual Endorsement
Endorsement used to expand the definition of a covered auto to include motorized vehicles such as motorcycles, motor homes, golf carts, dune buggies, and other recreational vehicles. The liability and medical payments exclusions regarding vehicles with less than 4 wheels doesn’t apply when this endorsement is attached to the policy.
Miscellaneous Type Vehicle Endorsement
Endorsement used when individuals own a vehicle together (insurable interest), but do not meet the traditional definition of an insured in the personal auto policy. Coverage applies to individuals who reside in the same household who are not husband or wife.
Joint Ownership Coverage Endorsement
General Form Structure for Business Auto Coverage Form:
SectionI - Covered Auto Section II - Liability Coverage Section III - Physical Damage Coverage Section IV - Business Auto Conditions Section V - Definitions
Section in CA form that explains the designation symbols used in that coverage form and states whether things such as newly acquired vehicles/temp vehicles are covered.
Covered Auto (Section I)
Section in CA form that covers the insured’s legal responsibilities in an accident or negligent act. Pays for BI or PD to others, as well as legal fees incurred by defending the insured in a suit.
Liability Coverage (Section II)
Section in CA form that covers damage done to the insured’s property, including any covered autos; personalized to each commercial auto form.
Physical Damage Coverage (Section III)
Section in CA form that defines coverage in more detail by determining things such as policy period, coverage territory, and how coverage applies in certain situations.
Conditions (Section IV)
Section in CA form that defines terms and phrases that appear throughout the policy; located at the end of the policy.
Definitions (Section V)
CA
Commercial Auto
A land motor vehicle, trailer, or semitrailer designed for use on public roads/any other land vehicle that is subjected to compulsory financial responsibility laws where it’s licensed/principally garaged (doesn’t include mobile equipment).
Auto
