Personal Auto Insurance

Question 1

What are the 2 major automobile exposures individuals seek protection from?

Answer 1

1. Liability - in case they injure someone or damage someone else’s property through the use of their auto
2. Physical Damage - damage to their own auto from an accident or from other types of damage, such as fire or theft

Question 2

What does PAP stand for?

Answer 2

Personal Auto Policy

Question 3

PAP is a _____ Policy?

Answer 3

Package

Question 4

Why is PAP considered package policy?

Answer 4

Because it contains property and liability coverage

Question 5

Name the documents included for PAP?

Answer 5

1. Declaration Page

2. Policy Form

Question 6

The policy form for PAP contains? (explain the documents)

Answer 6

4 separate coverages, each with its own insuring agmt, exclusions, and conditions

Question 7

What are the 4 coverages contained in the policy form?

Answer 7

Part A - liability
Part B - medical payments
Part C - uninsured motorists
Part D - physical damage

Question 8

Does the insured have to purchase all coverages contained in the policy form?

Answer 8

No

Question 9

Explain coverage selection options for each coverage under policy form?

Answer 9

Part A - liability, may be written alone or with any of the other coverages

Part B - medical payments, is optional, but may only be written if the liability is included

Part C - uninsured motorists, may only be written in conjunction with liability and is also subject to other laws that vary from state to state

Part D - may be written alone or with liability

Question 10

The PAP can be issued to an (1) _____ or a (2) _____ residing in the (3) _____.

Answer 10

1. an individual
2. married couple
3. same household

Question 11

The definitions section of the PAP defines:

Answer 11

certain key terms used in the policy

Question 12

The policy uses the words ‘you’ and ‘your’ to refer to?

Answer 12

the named insured - shown in declarations and the insured’s spouse

Question 13

Can the spouse reside in a different household then the insured?

Answer 13

No

Question 14

If a separation occurs between insured and the spouse during the policy period, the spouse is still considered an insured for the least of:

Answer 14

• 90 days;
• the effective date of a new policy listing the spouse as a named insured; or
• the end of the policy period.

Question 15

A ‘family member’ is?

Answer 15

any person related to the named insured who is a resident of the insured’s household. This includes those related by blood, marriage, or adoption and includes a ward or foster child.

Question 16

‘Bodily Injury’ (BI) means?

Answer 16

bodily harm, sickness, or disease, including death, that results from any of these

Question 17

‘Occupying’ means?

Answer 17

• in a vehicle;
• upon a vehicle; or
• getting into, onto, out of, or off of a vehicle.

Question 18

‘Property Damage’ (PD) means?

Answer 18

physical injury to, destruction of, or loss of use of tangible property

Question 19

What does the named insured’s ‘covered auto’ include?

Answer 19

• any vehicle listed in the declarations
• any private passenger auto, pickup, or van the named insured acquires during the policy period
• any trailer owned by the named insured - includes farm wagons or implements while towed by a vehicle listed in the declarations
• any auto or trailer not owned by the named insured that is being used as a temporary substitute for a vehicle shown in the declarations that is out of use due to breakdown, repair, servicing, loss, or destruction

Question 20

What are the vehicles eligible to be listed as ‘covered auto’ in PAP?

Answer 20

• private passenger autos, which are 4-wheel motor vehicles and pickup trucks and vans that are under a certain weight and are not used for business purposes (farming and ranching are not considered businesses)
• vehicles must be owned or leased under a long-term contract of 6 months or more

Question 21

For (types of coverage) (1) _____, (2) _____, and (3) _____ coverage, if the ‘newly acquired auto’ replaces one listed in the declarations, the new auto (4) _____ has the (5) _____ coverage provided for any vehicle already listed in the declarations. If the new auto does not replace one that is already insured, the insured must request coverage within (6) _____ days after acquiring the auto.

For (type of coverage) (7) _____ coverage, it doesn’t matter if the new auto is a replacement or additional auto. If the insured already has at least one vehicle insured for (7) _____ under the policy, coverage begins on the date the auto is acquired as long as the insured requests coverage within (8) _____ days after acquiring the auto. If the insured does not already have (7) _____ coverage on an auto, coverage must be requested within (9) _____ days after acquiring the auto. If a loss occurs in the time before the insured requests coverage, a (10) _____ deductible applies.

If an insured requests coverage after any of the reporting periods specified in the policy have elapsed, coverage begins (11) _____.

Answer 21

1. liability
2. medical payments
3. uninsured motorists
4. automatically
5. broadest
6. 14
7. physical damage
8. 14
9. 4
10. $500
11. at the time coverage is requested

Question 22

Part A - liability coverage covers?

Answer 22

damages for bodily injury or property damage that an insured becomes legally responsible for because of an auto accident

Question 23

Part A - liability coverage only protects those who are considered (1) _____, and coverage applies only to damages for which the insured is (2) _____, and the damages must involve (3) _____ or (4) _____ and result from (5) _____.

Answer 23

1. insured
2. legally responsible
3. bodily injury
4. property damage
5. an auto accident

Question 24

What are the 3 conditions that must be met for a loss to be covered under Part A - liability coverage?

Answer 24

1. The person involved must be an insured
2. The insured is legally responsible for the damages
3. Damage must involve BI or PD and result from an auto accident

Question 25

Who is considered an insured under Part A of the PAP

Answer 25

• named insured & members of the insured’s family while using any auto
• anyone using the insured’s car with the insured’s permission or the reasonable belief that he is entitled to do so
• other people or organizations to the extent that they share liability with an insured
• other persons or organizations for their liability arising out of an accident involving any auto or trailer used by the insured or a family member (does not apply if the auto or trailer is owned by the person or organization in question)

Question 26

True or False

Suppose the named insured’s 16-year-old son borrows a neighbor’s car and causes an accident. The son is not considered an insured for liability coverage under the named insured’s personal auto policy.

Answer 26

False. The son is considered an insured for liability coverage under the named insured’s PAP

Question 27

True or False

A neighbor would be insured under the policy if he had an accident while driving the named insured’s car but would not be covered under the named insured’s policy while driving his own vehicle.

Answer 27

True

Question 28

The policy also insures any person or organization who is legally responsible for the (1) _____ of anyone insured under Part A of the policy that result in an auto accident involving a covered auto. This is an example of (2) _____.

Answer 28

1. acts or omissions - failure to perform an act agreed to, where there is a duty to an individual or the public to act (including omitting to take care) or is required by law. Such an omission may give rise to a lawsuit in the same way as a negligent or improper act.
2. vicarious liability - ex., an employer can be held liable for the unlawful actions of an employee, such as harassment or discrimination in the workplace. Even though the employer is not the one who committed the unlawful act, the employer is held liable because it is considered responsible for its employees’ actions while they are on the job and it is considered to be able to prevent and/or limit any harmful acts performed by its employees. The employer may be able to avoid vicarious liability by exercising reasonable care to prevent the unlawful behavior.

Question 29

True or False

The policy does not insure any person or organization who is legally responsible for the acts or omissions of a named insured or family member that result in an accident involving any auto or trailer.

Answer 29

False. The policy does insure.

Question 30

True or False

The policy does not insure any person or organization who is legally responsible for the acts or omissions of a named insured or family member that result in an accident involving any auto or trailer owned or hired by the person or organization.

Answer 30

True. The person or organization is not covered if it owns or hires the auto or trailer involved in the accident.

Question 31

True or False

Dave is on his way to a business luncheon in his own car when he hits Randall’s car. Because Dave was on company business when the accident occurred, Randall sues Dave and his employer, Solomon Agency, for damages. Under these circumstances, Dave’s PAP also covers Solomon Agency’s liability.

Answer 31

True

Question 32

True or False

Dave is on his way to a business luncheon in company-owned car when he hits Randall’s car. Because Dave was on company business when the accident occurred, Randall sues Dave and his employer, Solomon Agency, for damages. Under these circumstances, Dave’s PAP also covers Solomon Agency’s liability.

Answer 32

False. No coverage applies when the organization owns or rents the vehicle involved in the accident.

Question 33

Supplementary Payments section are contained in the _____ portion of the PAP.

Answer 33

liability

Question 34

True or False

Amounts paid under Supplementary Payments section reduces the policy limit.

Answer 34

False. Amounts paid under Supplementary Payments section do not reduce the policy limit

Question 35

Supplementary payments under liability portion of the PAP include:

Answer 35

• up to $250 for the cost of bail bonds;
• premiums on appeal bonds or bonds to release attachments;
• postjudgement interest (prejudgement interest is included as part of the liability limit)
• up to $200/day for loss of earnings because of attendance at hearings or tirals at the company’s request; and
• other reasonable expenses incurred by the insured at the company’s request

Question 36

What are some of important ‘exclusions’ that help define coverage under the liability section of the PAP?

Answer 36

• BI or PD caused intentionally by the insured;
• damage to property owned or being transported by the insured;
• damage to property rented to, used by, or in the care of the insured;
• BI to an insured’s employees (these losses are covered under workers’ compensation);
• liability arising out of an insured’s ownership or operation of a vehicle used as public or livery conveyance, such as a taxi (this exclusion does not apply to a share-the-expense carpool);
• liability arising while the insured auto is being used in an auto business;
• use of a vehicle without permission (does not apply to family members using covered autos owned by the insured);
• BI or PD for which an insured is covered under a nuclear energy liability policy;
• motorized vehicles with fewer than 4 wheels or designed for use off public roads (does not apply to nonowned golf carts);
• vehicles other than covered autos owned by the named insured or furnished for the named insured’s regular use;
• vehicles other than covered autos that are owned by family members or furnished for their regular use (does not apply to the named insured); and
• vehicles used in prearranged racing or speed contests

Question 37

Which of the following losses would be excluded under Part A of the PAP?

A. Theresa uses her car as a taxicab. One evening, she hits a parked car while pulling into a parking place to pick up a passenger.
B. Because the newspaper carrier never delivers the morning paper on time, Bryce deliberately runs over the boy’s bicycle while it is parked at the edge of Bryce’s driveway.
C. Jerry’s teenage son backs into his car with one of the other family autos, damaging both autos.
D. While riding his motorcycle through the neighborhood, Herman hits a parked car, damaging the car’s bumper and grille.
E. Bill is the named insured. His 18-year-old son Jeff, who lives at home, has been furnished a van by the pizza restaurant that employs him. One day, while driving the van off duty, Jeff strikes and injures a pedestrian

Answer 37

All choices A, B, C, D, and E

Question 38

The Part A (1) _____ is the most the company will pay for all damages resulting from any one auto accident, regardless of the number of insureds, claims filed, vehicles or premiums listed in the declarations, or vehicles involved in the accident.

Answer 38

1. limit of liability

Question 39

Liability coverage is provided on a _____.

Answer 39

split limits basis

Question 40

What does split limit 25/50/25 mean?

Answer 40

• $25K per person for BI
• $50K per accident for BI; and
• $25K per accident for PD

Question 41

True or False

A person can collect duplicate payments for a loss that is covered under Part A and another coverage in the PAP or under any underinsured motorists coverage provided by the policy.

Answer 41

False

Question 42

Assume the named insured’s personal auto policy has limits of 100/300/100 for Part A. After an accident, there is a $250K judgement against him for injuries to one person. In this case, the policy will pay _____.

Answer 42

$100K (the policy limit for BI to one person

Question 43

What is ‘Financial Responsibility’ law?

Answer 43

State law taht require each driver to prove that he can pay for bodily injury or property damage liability losses arising out of auto accidents

Question 44

How does a driver meet the requirements of the financial responsibility law?

Answer 44

by purchasing an auto insurance policy with limits of liability that meet the limits required by the state law

Question 45

What is ‘Financial Responsibility’ provision

Answer 45

an important provision under Part A of the PAP that deals with financial responsibility laws. It states that the insurance company can certify the policy as proof of future financial responsibility. The policy will automatically reflect any changes in the state’s financial responsiblity laws

Question 46

What is ‘out-of-state coverage’ provision?

Answer 46

provision modifies the PAP to meet other states’ financial responsibility requirements and other state laws concerning out-of-state drivers when the covered auto is being driven in that state

Question 47

What is ‘other insurance clause’ for liability coverage?

Answer 47

it states that the company will pay only its share of a loss that is also covered by other insurance. The company’s share is the proportion that its policy limit bears to the total of all applicable limits. However, any insurance the company provides for a vehicle that is not owned by the insured, including vehicles used as temporary substitute autos, will be considered excess to other insurance.

Question 48

Suppose the named insured has an accident in her car and is liable for damages of $60K. She has a PAP with a $50K single liability limit and other applicable liability insurace of $25K. How much would her PAP pay?

Answer 48

$40K ($50K/$75K x $60K = $40K)