Chapter 18: Personal Auto and Umbrella Liability Insurance Flashcards
No pay, no play
No pay, no play statutes limit the rights of uninsured drivers to collect damages from insured drivers. A few states have recently enacted such laws.
Financial Responsibility Laws
These laws require proof of future financial responsibility, generally proof that liability insurance is in force after:
- an auto accident
- conviction of serious offense i.e drunk driving
- loss of drivers license
- failure to pay legal judgement
A few states (all of which also have compulsory insurance requirements) have unsatisfied judgment funds?
Established to compensate persons who are unable to
collect legal judgments that result from auto accidents.
Uninsured Motorists Coverage
Under uninsured motorists coverage, the injured insured is able to collect the amount he or she would have collected from the insurer of an insured driver if that driver had been carrying insurance. In effect, the insured’s own company acts as the insurer of the uninsured driver.
No-Fault Auto Insurance
Your insurance company pays all or some of the bills for an accident regardless of who’s fault the crash was.
pure no-fault
each owner of an auto would be required to carry first-party insurance that compensated all persons injured in auto accidents involving that vehicle. The right to sue a negligent party, even for pain and suffering, would not exist. No state has adopted a pure no-fault law. The types of laws that do exist fall into three broad categories—modified no-fault laws, add-on plans, and choice no-fault laws.
Modified No-Fault Laws
The most common form of no-fault legislation limits the right of an injured party to recover damages from a negligent party but does not eliminate it.
Add-On Plans
An add-on plan has no restriction on the right to sue a negligent party, but first-party no-fault type benefits are available. The insurer that pays these benefits has subrogation rights against the negligent party. Some argue that add-on plans should not be referred to
as a type of no-fault because the traditional tort system has not been altered.
Choice No-Fault Laws
A choice no-fault law, used in only a few states, gives the insurance buyer two choices: coverage under the traditional tort liability system or coverage under a modified no-fault law at a reduced premium.
Types of No-Fault Laws
- Pure no-fault: right to sue negligent party would be eliminated.
- Modified no-fault: right to sue negligent party only if injuries exceed a dollar or verbal threshold.
- Add-on no-fault: right to sue negligent party in addition to right to collect first-party no-fault benefits.
- Choice no-fault: right to sue neglige.
P.I.P
Personal Injury Protection
P.A.P
Personal Auto Policy
PAP provides four types of insurance
coverage:
- Part A—Liability Coverage
- Part B—Medical Payments Coverage
- Part C—Uninsured Motorists Coverage
- Part D—Coverage for Damage to Your Auto
A PAP can be written on?
A PAP can be written on eligible vehicles owned or leased by an individual or by a husband or wife residing in the same household. Vehicles with other forms of ownership (such as a father and a son) can also be insured with an endorsement. A vehicle rented to others or used as a public or livery conveyance is not eligible and must be insured under a commercial policy.
PAP
Policy territory
The PAP applies only to accidents and losses that occur in the United States, its territories or possessions, Puerto Rico, or Canada.
PAP Part A
Part A of the PAP provides bodily injury and property damage liability protection to any insured who is legally responsible for an auto accident.
Uninsured Motor Vehicle
- One with no insurance
- One with liability limits lower than the applicable state law requires
- One driven by a hit-and-run driver
- One whose insurer denies coverage or becomes insolvent
Part C ( provides uninsured motorists coverage) specifically excludes certain vehicles from the definition of an uninsured vehicle. These are vehicles that are:
• owned by or furnished for the regular use of any family member
• owned or operated by a self-insurer under an applicable motor vehicle law unless
the self-insurer is or becomes insolvent
• owned by any government agency unit
• operated on rails or crawler treads
• designed mainly for use off public roads
• located for use as a residence or premises
Collision
Collision is defined as the upset of the covered auto or any nonowned auto or its impact with another vehicle or object.
Do most no fault laws eliminate the right to sue negligent parties?
Under most no-fault laws, the right to sue the negligent party exists once a dollar or verbal threshold has been met. No state has adopted a pure no-fault law.
If Jim has an accident while driving his friend’s car and is sued for $250,000 for bodily injury and property damage, the friend’s liability insurance would pay first and Jim’s liability coverage would be excess and thus pay only if needed.
TRUE
Other than collision coverage
The PAP never specifically defines the term other than collision. Technically, if a loss is
not caused by a collision, it must be a result of other than collision.
Specific sources of loss covered under other than collision policies are:
• missiles and 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
• breakage of glass. However, the policyowner may choose to consider this part of the collision loss if it is caused by collision.
A client driving to Mexico should be advised to purchase liability coverage from a Mexican insurer.
TRUE
Despite the highly competitive market, the cost of auto insurance differs significantly from company to company in most states.
TRUE
Two common package policies for boats are:
Boat owners policy for smaller boats and the yacht policy for larger boats.
Umbrella Policy
A personal umbrella policy is designed primarily to provide liability coverage for catastrophic legal claims or judgments. The smallest limit of coverage available from most insurers is $1 million, and limits up to $5 or $10 million are often available. The policy covers not only bodily injury and property damage liability but also personal injury liability.
