Table of Contents
Page
I. Overview of Personal Auto Insurance 1
II. Declarations and Definitions 6
III. Liability Coverage 12
IV. Medical Payments Coverage 26
V. Uninsured Motorist Coverage 33
VI. Coverage for Damage to Your Auto 39
VII. General Policy Provisions 48
VIII. Review of Personal Auto Claims 53
Course Objectives
It is said that the Travelers Insurance Company is credited with creating the first personal auto policy in the very early 1900's. The personal auto policy has been constantly revised as our society has evolved. Even today, nearly 100 years since its creation, the coverage parts of this policy are continually being revised based on new court decisions and coverage interpretations. The objective of this course is to take the student through the personal auto insurance form, line by line, with an explanation of the intent of the various clauses as well as actual loss examples. By discussing each insuring agreement relating to the various coverage parts, the student should gain valuable knowledge of this most popular and necessary coverage. In addition, gray areas of coverage are duly noted to alert the agent or adjuster to seek coverage interpretations from his or her respective insurance companies. This course will also act as a quick coverage interpretation guide for future use in the day-to-day activities of an agent, customer service representative (CSR) or claims adjuster.
This CE course on personal auto will review most of the coverage parts, actual claim examples, and several controversial claims questions.
I. Overview of Personal Auto Insurance
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The Application
Every agent knows that the coverage is set up by first completing the application with the insured. Statements made in the application for coverage are usually considered
"representations". These statements are supposedly truthful answers to the best of the
insured's knowledge. An error will usually not void coverage. Concealment of important facts, or material representations can, and often do, create coverage problems and will void coverage in many states. Insureds should be given choices of coverages and those options carefully explained to the insured to avoid possible Errors and Omission (E&O) claims in the future. One very common problem is setting up the coverage based on the ownership and insurable interest of the vehicle. Often times a teenager will purchase a vehicle in his name and attempt to add it to the parent's policy without disclosing all the facts to the agent or insuring company. Sometimes the parents transfer title to the teenager or other family member and attempt to put all the vehicles under one policy without addressing the problem of "insurable interest". Usually the parent is the only named insured leaving no coverage for the true owner of the vehicle, namely the teenager or other family member. Many couples today are living together, and even though not married, will purchase a vehicle in both names. Again, this can cause a coverage problem if not properly addressed.
Companies approach these situations in various ways. Some insist that a separate policy be issued per owner of the vehicle. ISO uses a "Joint Ownership Endorsement" for the purpose of covering insureds in the same household under these circumstances. Many claims have been denied because the coverages were not set up properly for the correct owner of the vehicle. Several insureds have blamed the agent or CSR for not asking the right questions at the time of the application or and in particular, when the insured calls to add a vehicle. Some agents end up paying an uninsured claim themselves or end up in an Errors and Omissions situation.
Eligibility, Use and Basic Rating Factors
The Personal Auto Policy (PAP) is not designed to cover commercial type vehicles used primarily in business. However, farming and ranching are exceptions for business use. The purpose of the Business Auto Policy is to cover commercial type vehicles such as the heavier trucks or vehicles that are used routinely in a business such as cars, pickup trucks, vans etc., rather than the PAP.
Four wheeled motor vehicles (not motorcycles, mopeds snowmobiles etc.) are eligible. Pickup trucks (10,000 GVW or less) are also eligible. A leased vehicle (assuming the type of vehicle is acceptable to the company) for at least six months is also eligible. Age, marital status, sex, driving record, use, type of vehicle, and where the vehicle is garaged, all have a bearing on the premium. Companies have various rating programs with some giving extra credit for good
students, senior citizens, and length of time insured by the carrier. A few companies give extra credit if they write both the auto and homeowners coverages.
Case In Point: Some companies refuse to provide coverage for certain types of occupations.
For example, a pool hall owner or a bartender may have problems getting standard rates because of the odd hours they have to work and the potential problems with alcohol.
Employment history is also part of the underwriting process. There was a situation where the credit and personal history report was obtained on a minister with the same name as a bartender. The minister (based on this report) was considered an undesirable risk. The company declined the coverage on the grounds of a poor and unacceptable moral risk. The minister was livid and pressed the reporting company for a complete retraction and correction of his file with a threat to sue for defamation of character. The matter was finally resolved, but he went to another company for coverage.
Non-Owned Auto Coverage
Often overlooked is the need to sell Non-Owned Auto coverage. Some people do not own a car but are furnished a company car. They are obviously covered while driving this auto under their company's policy. However for rental car liability coverage, physical damage etc., they would not be covered by their company's insurance policy. They would need Non-Owned Auto Coverage. Also if they were driving a friend's vehicle, they would only have the same limits of liability coverage as their friend. Non-Owned Coverage would cover the insured for "excess liability" should the friend's limits be too low and also provide physical damage coverage, if needed, and purchased.
Section I - Review
Review of Actual Claim: The insured has his personal autos covered under the 1977
version of the PAP. He has decided he would like to rent a motor home for his vacation and contacts his agent to find out if he will be covered under his current plan. Although the policy states that the insured is covered for liability arising out of the use of any auto, the insurer says that the motor home does not qualify as an automobile because it has six wheels.
1. Does the insured have liability coverage while driving the motor home?
2. Does the insured have physical damage coverage while driving the motor home? 3. Does the insured have a need for any further coverage while he is driving the rented
motor home?
Review Questions
1. Concealment of important facts by the insured or the agent during the application process:
A. Are considered to be representations and won't void coverage unless they are material to a loss.
B. Have no affect on the coverage since the insured has paid the premium and has a policy.
C. Will usually void coverage. D. None of the above
2. The Personal Auto Policy (PAP) is used to cover: A. Trucks used commercially.
B. Vans used to deliver products to customers. C. Bulldozers and other heavy equipment.
D. Vehicles that are used primarily for personal transportation.
3. For a leased vehicle to be eligible for coverage under a Personal Auto Policy, the vehicle must be leased for how long?
A. At least six months. B. At least a year.
C. At least three months. D. None of the above
4. Which of the following have a bearing on the amount of premium that will be charged in a Personal Auto Policy?
A. Age B. Weight
C. Color of vehicle D. All of the above
5. A person would need to purchase Non-Owned Auto coverage to insure them under which of these conditions?
A. Driving their own automobile
B. Driving their company car while doing business C. Rental car liability
Answers to Claim Review
1. Yes. The 1977 edition of the PAP covers the insured's liability for the use of ANY auto. 2. No. Damage to non-owned autos is provided via an exception to the care, custody, or
control exclusion. But, that only includes coverage for private passenger autos, trailers, and pickup, sedan delivery, or panel trucks. The motor home does not fit any of those categories.
3. Yes, he will still need physical damage coverage. This type of coverage can usually be picked up via the rental agency.
Answers to Review Questions
1. C 2. D 3. A 4. A 5. C
II. Declarations and Definitions
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The Declarations Page
Every property and casualty policy has a declarations page that states the name of the insurance company; the name or names of the insureds; coverages; effective date; etc. This is probably the only page of the policy the insured reads. Agents should keep this in mind as most insureds really don't fully understand insurance coverage's and rely heavily on the agent or CSR to ask the right questions and properly set up the coverages. Certain options and gaps in coverage should be fully explained to the insured.
Definitions
Definitions are in most personal auto policies and in homeowner policies. They are there to lend clarification to the terms used in the policy. In reading through the policy the defined words are put in "quotations" so one can go back and refer to the policy definitions for clarification.
Personal Auto Form - Definitions Part A
A. Throughout this policy, "you" and "your" refer to: 1. The named insured shown in the Declarations; and 2. The spouse if a resident of the same household.
If the spouse ceases to be a resident of the same household during the policy period or prior to the inception of the policy, the spouse will be considered "you" and "your" under this policy but only until the earlier of:
1. The end of 90 days following the spouse's change of residency.
2. The effective date of another policy listing the spouse as a named insured; or 3. The end of the policy period.
Probably the most important definition to fully understand is the definition of the named insured. Since we have included the forms in this course, you may want to review them
carefully. (The complete form is located in the Appendix of this.) In most policies (we are using the ISO form) the definition reads as follows: The "named insured" shown in the policy
declarations; and the spouse if a resident of the same household.
What coverage would an estranged spouse lose if they moved out of the household? They could lose coverage for driving a non-owned auto. They could still be covered (for the
coverages purchased) while driving one of the insured vehicles but not covered while driving a non-owned vehicle such as a rental or a friend's car. The estranged spouse could also lose uninsured motorist (UM) coverage if they were injured in another vehicle.
Under the insuring agreement A of the policy, the definition of the insured is broadened to include any person using the "covered auto". It is presumed that they have the insured's
permission. Thus a five year old would be covered as there isn't an age restriction in the policy. Organizations are covered for their legal responsibility for acts or omissions of the insured. An example would be an insured driving the vehicle during a church activity and having an accident. The church could be covered under the insured's policy.
Other definitions that an agent should review are those dealing with the type of vehicle, its use and coverage for a newly acquired vehicle. Some insureds may have changed the use of a vehicle to delivery of food, mail or using the vehicle as a livery and found that they had great coverage problems when they had an accident because they failed to advise their agent of this change of use.
Under newly acquired vehicles the policy provides coverage for a private passenger auto or a pickup or van that has a gross vehicle weight of 10,000 lbs. or less and is not used for the delivery or transportation of goods and materials unless such use is incidental to your "business" of installing, maintaining or repairing furnishings or equipment or for farming or ranching.
In addition to the above, the following should also be noted. If the newly acquired auto replaces a covered vehicle the insured will be covered for liability and has to do nothing. The
replacement vehicle is covered for the same liability coverages as the vehicle it replaced. Should the insured carry physical damage coverages on the vehicle being replaced, the replacement vehicle will only have physical damage for 14 days (some states have 30 days). Beyond this 14-day (or 30) period the insured must report the replacement vehicle to his agent or insuring company, or there would not be physical damage coverage on this vehicle.
If it is an additional vehicle (a second or third vehicle), it will be covered for 14 days for liability coverage. Physical damage coverage would apply for 14 days if physical damage coverage were carried on another vehicle that is insured by the insurance company.
Let's assume that an additional vehicle has been acquired and no physical damage coverage exists for the other vehicle or vehicles. The insured has only four days to report the vehicle to the company to have physical damage coverage. Beyond the four-day period, the insured would be without physical damage coverage. Should he have a loss, before it's reported to the insuring company to add physical damage coverage, a $500 collision deductible would apply. The same applies to comprehensive losses such as fire, theft, glass breakage etc. Again please refer to your own company's forms for coverage and clarification of newly acquired autos as many states and companies may differ. Some forms do not include this extension of four days in their policies.
Coverage Parts and Endorsements
Most agents realize that each coverage part in the policy is similar to a separate and distinct policy, each part having its own insuring agreement and exclusions. Each state also has certain modifying endorsements that change the meaning or application of some of the coverages. These endorsements usually modify the cancellation provisions as well as the non-renewal provisions. These are based on the insurance laws of the different states.
Sometimes the endorsement changes a coverage part to comply with the law. For example, under the uninsured motorist coverage, which we will discuss in more detail later, there is a provision that requires that there be contact between the insured's vehicle and the uninsured vehicle. In some states this requirement is waived. If someone is run off the road, hits a tree and is injured, the insured could still collect for his injuries under uninsured motorist coverage. The insured would have to prove that the actions of the insured to avoid an accident were caused by a "phantom" driver.
Section II - Review
Review of Actual Claim: The insured owns two vehicles, both covered under the same
personal auto policy. The named insured allows his daughter exclusive use of one of the vehicles, although she does not reside in the named insured's household. The daughter has no ownership of the car.
1. Does the daughter need her own PAP in order to have coverage? 2. Is the daughter covered under her father's PAP? If so, is it full coverage?
Review Questions
1. What coverage would an estranged spouse lose if they moved out of the household? A. Coverage for driving a rental car
B. Coverage for driving a friend's vehicle
C. Uninsured motorist coverage if they were injured in another vehicle D. All of the above
2. If a person purchases a new vehicle to replace one that is covered under a Personal Auto Policy, the insured will be covered for:
A. Liability, but must call his/her insurance agent to request the coverage
B. Liability for the same amount of coverage that was on the vehicle being replaced and physical damage for 14 or 30 days, depending on state law, if the insured carried physical damage coverage on the vehicle being replaced.
C. Neither liability nor physical damage, even if he/she had these coverages on the vehicle being replaced.
D. Any coverage he/she may have had on the vehicle being replaced for an indefinite period of time.
3. Each coverage part in the Personal Auto Policy is similar to a separate and distinct policy. Each part has its own:
A. Declarations page B. Premium
C. Insuring agreement and exclusions D. All of the above
4. Each state has certain modifying endorsements that change or modify: A. The meaning of some of the coverage
B. The application of some of the coverage C. The cancellation provisions
D. All of the above
5. The "named insured" shown in the policy declarations include:
A. The insured and their spouse, if they are residents of the same household. B. The insured and their spouse, even if they reside separately.
C. The insured, their spouse, and any dependant children if they hold a driver's license.
Answers to Claim Review
1. No.
2. Under the father's auto policy, the definition of "insured" is: any person using the
insured's covered auto. The auto is furnished for the regular use of a family member but that exclusion does not apply to covered autos.
Answers to Review Questions
1. D 2. B 3. C 4. D 5. A
III. Liability Coverage
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The Liability Insuring Agreement
This agreement has been constantly modified over the years, primarily due to court decisions. It should be remembered that any ambiguity in the policy is usually ruled against the insurance company in court. This is due to the fact that the insurance company is the one who writes the contract. Sometimes what the company had intended to cover is different than the court's interpretation.
Case in Point: For example, we discussed the problem of coverage when a spouse moves
out of the house and loses certain coverages. In one case, the wife moved out and at that time there was only one vehicle insured. She purchased another vehicle and added it to the policy and failed to tell the agent that she was separated from her husband. She was injured in
another vehicle and the company denied UM coverage because she was no longer a resident of the household. The court ruled that a separate premium had been paid for the second vehicle and that it was reasonable to assume that coverage existed.
The liability insuring agreement actually has two parts. The first stipulates the following: "We will pay damages for "bodily injury and "property damage" for which any "insured" becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the "insured". We will settle or defend, as we consider appropriate, any claim or suit asking for these damages.
The second part of the insuring agreement states the following: In addition to our limit of liability, we will pay all defense costs we incur. Therefore, if an insured has a limit of $100,000 for bodily injury coverage, the company is obligated for that amount plus all costs to defend. If the company chooses to spend another $100,000 for defense costs, then these would also be covered at the company's expense.
An exception, as respects defense costs being entirely borne by the company, can occur when the insured is being sued for more than his limits of liability coverages. In this case the insuring company must inform the insured of this fact and invite the insured to obtain legal counsel at his expense to assist in the defense of the suit.
When Does Coverage Cease?
The insuring agreement states: "Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted by payment of judgments or settlements.”
Part A - Liability Coverage INSURING AGREEMENT
We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the "insured". We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted by payment of judgments or settlements. We have no duty to defend any suit or settle any claim for "bodily injury" or "property damage" not covered under this policy.
B. "Insured" as used in this Part means:
1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer". 2. Any person using "your covered auto".
3. For "your covered auto", any person or organization but only with respect to legal responsibility for acts or omissions of you or any "family member" for whom coverage is afforded under this Part. This Provision (B.4.) applies only if the person or organization does not own or hire the auto or "trailer.
This one clause has caused a great deal of controversy. The insurance company simply cannot pay its limit and walk away. They still have to defend and pay all costs until a judgment or settlement has been reached - for all claims! (Continental Insurance Company v. Burr, 706 A.2d499 - Delaware 1988) This is not true with other casualty policies such as the CGL. This policy ties the ending of the company's obligation to the payment of the policy limits.
Therefore, under CGL coverage, the company can simply pay its limit and walk away leaving the insured to defend himself. Controversy still surrounds the question, under the personal auto policy, concerning defending other claims as a result of the same accident when the company has already exhausted its limits by means of a settlement or judgment. Many agree that they must defend all claims, resulting from the same accident, until a settlement has been reached, even though the company can't pay the claim because of exhausted limits.
The last portion of the insuring agreement states: “We have no duty to defend any suit or settle any claim for "bodily injury" or "property damage" not covered by this policy.” If a claim is made against the insured that is groundless or false, it is the duty of the company to defend only if the type of claim is covered by the policy.
Supplementary Payments
In addition to the policy limits, the insurance company is also obligated to pay other expenses on behalf of the insured. These are as follows:
1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic violations. The accident must result in "bodily injury" or "property damage" covered under this policy. Note: A bail bond required because of a speeding violation is not covered. An accident must have occurred.
2. Premiums on appeal bonds and bonds to release attachments in any suit the company defends.
3. Interest accruing after a judgment has been entered in any suit the company defends. 4. Up to $200 a day for loss of earnings, but not other income, because of attendance at
hearings or trials at the company's request.
5. Other reasonable expenses incurred at the company's request. SUMMPLMENTARY PAYMENTS
In addition to our limit of liability, we will pay on behalf of an “insured””
1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic law violations. The accident must result in "bodily injury' or "property damage" covered under this policy.
2. Premiums on appeal bonds and bonds to release attachments in any suit we defend.
3. Interest accruing after a judgment is entered in any suit we defend. Our duty to pay interest ends when we offer to pay that part of the judgment which does not exceed our limit of liability for this coverage.
4. Up to $200 a day for loss of earnings, but not other income, because of attendance at hearings or trials at our request.
5. Other reasonable expenses incurred at our request.
Punitive Damages
These are additional amounts that the insured must pay as determined by the court. They are usually an additional penalty added by the court for gross misconduct on the part of the insured. Some states are allowing these to be covered by insurance as part of the overall judgment. Some are allowing them to be paid as a separate amount from the damage judgment. This will vary by state. Opponents to having punitive damages paid by the insurance company claim that this eliminates the penalty that the court wants to impose on the insured. Some companies may try to avoid paying punitive damages unless included in the overall judgment. The PAP does not contain an exclusion for punitive damages in Part A, the liability part of the policy. However, punitive damages are excluded under the "uninsured motorist" coverage to be discussed later.
Liability Exclusions
Liability Exclusions
A. We do not provide liability coverage for any “insured”:
1. Who intentionally causes “bodily injury” or “property damage”.
2. For “property damage” to property owned or being transported by that “insured”. 3. For “property damage” to property:
a. Rented to; b. Used by; or
c. In the care of that insured.
This exclusion (A.3.) does not apply to “property damage” to a residence or private garage. 4. For "bodily injury' to an employee of that "insured" during the course of employment.
This exclusion (A.4.) does not apply to "bodily injury" to a domestic employee unless workers' compensation benefits are required or available for that domestic employee.
5. For that "insured's" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This exclusion (A.5) does not apply to share-the expense car pool.
6. While employed or otherwise engaged in the "business" of: a. Selling;
b. Repairing c. Servicing; d. Storing; or
e. Parking;
Vehicles designed for use mainly on public highways. This includes road testing and delivery. This Exclusion (A.6.) does not apply to the ownership, maintenance or use of "your covered auto" by: a. You;
b. Any "family member"; or
c. Any partner, agent or employee of you or any "family member".
7. Maintaining or using any vehicle while that "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in Exclusion A.6. This exclusion (A.7.) does not apply to the maintenance or use of a:
a. Private passenger auto; b. Pickup or van; or
c. "Trailer" used with a vehicle described in a. or b. above.
8. Using a vehicle without a reasonable belief that the “insured” is entitled to do so. This Exclusion (A.8) does not apply to a “family member” using “your covered auto” which is owned by you.
9. For "bodily injury" or "property damage" for which that "insured": a. Is an insured under a nuclear energy policy; or
b. Would be an insured under a nuclear energy liability policy but for its termination upon exhaustion of its limit of liability
A nuclear energy liability policy is a policy Issued by any of the following or their successors: a. Nuclear Energy Liability Insurance Association;
b. Mutual Atomic Energy Liability Underwriters; or c. Nuclear Insurance Assoc anon of Canada Analysis of Liability Exclusions:
Exclusion A.1 - As you can see, the policy states that the insurer does not provide liability coverage for an insured who intentionally causes "bodily injury” or "property damage".
Case in Point: Intentionally causing "bodily injury" or "property damage" is self explanatory
and quite clear most of the time. There was an actual claim involving an insured that had a box made with a spring lid and attached a foxtail to the lid. He had the box in the trunk of his car and would invite his friends to take a look at his "mongoose". He would then spring the lid and scare his friends. One victim crashed his ankle on retreat and caused permanent damage to the extent that he could no longer perform his job. He was a house painter and could no longer climb ladders, etc. It was determined that the insured only meant to scare his friend and did not intend to injure him. The claim was paid.
There are other court cases such as the "Case in Point" above, that have ruled that the vehicle has to contribute to the accident. If we go back to the liability insuring agreement we see that coverage is provided for an auto accident. Accident is not defined in the policy. The assumption is that the auto is the instrument that contributed to the accident. Therefore an animal left in a vehicle that causes bodily injury could be excluded because the vehicle was merely the place where it happened and had nothing to do with the actual injury.
Exclusion A. 2 - The policy states that the insurer does not provide liability coverage for "property damage" to property owned by or being transported by the insured.
The clause is broad enough to not only exclude damage to the property being transported, but coverage is also excluded for property being transported for others. Thus if you transport a large TV for a friend in a pickup truck and the TV is damaged due to an accident, there would
be no coverage. The insured would need short-term cargo coverage. However, if the TV rolled out of the truck and struck another vehicle causing injuries or damage to a third party, then the resulting claim would be covered.
Exclusion A.3 - There is no coverage for “property damage" to property rented to, used by, or in the care of that "insured". This exclusion (A.3) does not apply to "property damage" to a residence or private garage.
This is called the "care, custody and control" clause in the personal auto policy. At times it may seem an unfair exclusion. Let's assume you borrow a friend's boat. It is parked in your driveway you hit it with your car. There would be no coverage. The policy does make an exception for a residence or garage the insured rents. They are covered if damaged by the insured's vehicle. There was a claim that occurred when a minor child opened the door of a car as the mother was pulling out of the garage. The door caught the side of the garage and caused partial collapse of the structure. Since this was a rented premise, the claim was covered because of the
exception in the exclusion.
There are a few other situations where coverage could apply. Earlier we mentioned that more than one insured and their autos could be covered by the same PAP policy. Assume that a mother backs into her daughter's car that is also insured by the same PAP as the mother. The daughter can make claim against the mother and coverage would apply. The same is true if the daughter backs into a company owned vehicle furnished to the father. The company owning the car can make a claim against the daughter. The daughter is not an insured under the father's company policy nor is she an insured under the PAP for the father's furnished vehicle so coverage would apply.
Exclusion A.4 - There is no coverage for “bodily injury" to an employee of an "insured" during the course of employment. This exclusion (A.4) does not apply to resident type employees such as a housekeeper, gardener etc., unless workers compensation coverage applies. Most states provide a means of covering such employees. But where workers compensation does not apply, a resident employee can pursue a claim for bodily injury under their employer's PAP policy. The intent is to cover such employees under workers compensation if coverage is applicable.
Remember that the only exception is for a domestic-type employee and the exception does not apply to another type of employee working for an insured such as in the insured's business. Injury to the employee would not be covered if injured in the insured's vehicle going to work or making a business call with the insured.
Exclusion A.5 - There is no liability coverage for an "insured's" liability arising out of the
ownership or operation of a vehicle while it is being used as a public or livery conveyance. This exclusion (A.5) does not apply to share-the-expense car pool.
Clearly the purpose is to exclude coverage when the insured's vehicle is "for hire" to the public. An example would be using a car or van as a taxi service or a food delivery vehicle or newspapers. Some companies make exceptions when the exposure is not that great. Perhaps a senior citizen charges a small amount to take other seniors to the doctor or to a store.
Perhaps the delivery of food is only incidental (part time) to the operation of the vehicle. These are sometimes very gray area exceptions and should be cleared in writing with the company underwriter to avoid serious coverage problems.
Exclusion A. 6 - There is no liability coverage for any “insured” while employed or engaged in the “business” of selling, repairing, servicing, storing or parking vehicles designed for use mainly on public highways.
The intent is not to cover employees or owners of garages, repair shops for liability they incur as a result of their negligence while repairing, test-driving, parking, and storing etc. the
customer's vehicle. The purpose is to have the garage's insurance carrier pay the claim. Should an insured, covered under a PAP, be brought into the claim when a garage employee has involved the vehicle in an accident as a result of the operation of it, then coverage would apply only to the insured. However, this exclusion (A.6) does not apply to owners of such businesses for covered autos under the PAP for their autos driven by the insured, family member, any partner, agent or employee. An example would be if the owner of a Ford dealership owns an auto and drives a customer home and has an accident that injures the customer, the customer's injuries would be covered by the owner’s PAP.
Exclusion A.7 - There is no liability coverage for maintaining or using any vehicle while the "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in Exclusion A.6. This exclusion (A.7.) does not apply to the maintenance or use of a:
Private passenger auto; Pickup or van; or
"Trailer" used with a vehicle described in a. or b. above.
The purpose is to exclude for business use vehicles other than items mentioned in a, b and c, above. If the insured owns an appliance store and uses a large truck to make deliveries this would be excluded. However, if he uses a private passenger auto to deliver a proposal or takes the pick-up truck and delivers tools to a job site then coverage would apply.
Exclusion A.8 - There is no liability coverage for any “insured” using a vehicle without a
reasonable belief that the "insured" is entitled to do so. This exclusion (A.8) does not apply to a "family member" using "your covered auto" which is owned by you.
Sometimes this exclusion can be confusing and controversial. The exception to "reasonable belief" is with family members. If the son sneaks off with the family car at 2:00 am and has an accident he is covered. However, what if the family member gives permission to someone else to drive the car? Perhaps the son has had too much to drink at a party and asks someone else to drive. Does that person have a "reasonable belief" that they are covered. Some courts have held that if the son or daughter were told never to let someone else drive the car, then the "reasonable belief" doctrine would not allow coverage to apply. One court in California held that the family member who let an underage, unlicensed person drive the car would not be a permitted driver because they were legally underage and this would be in violation of the law. Let's assume an insured leaves the keys in the car and someone steals it and has an accident.
Obviously, coverage for the thief would not be covered. However, if the insured were sued there would be coverage.
Exclusion A.9 - There is no liability coverage for "bodily injury” or "property damage" for which the “insured” is an insured under a nuclear energy policy or would be an insured under a nuclear energy liability policy but for its termination upon exhaustion of its limit of liability. It goes on to mention the names of three carriers providing such coverage.
The purpose is to exclude catastrophe risks that are beyond the scope of the Personal Auto Policy. Let's assume that an atomic energy engineer is transporting radioactive material in his personal car and has an accident and he is liable for the accident. His policy would not respond to the claim. However, one has to wonder why coverage would not apply if there was never any coverage issued by any of the three nuclear energy insurance carriers mentioned in the policy.
Paragraph B of the Liability Exclusions is designed to clarify when certain vehicles or
types of vehicles are and are not covered by the policy.
B. We do not provide Liability Coverage for the ownership, maintenance or use of: 1. Any vehicle which:
a. Has fewer than tour wheels; or
b. Is designed mainly for use off public roads. This Exclusion (B.I.) does not apply:
a. While such vehicle is being used by an "insured" in a medical emergency; b. To any "trailer"; or
c. To any non-owned golf cart
2. Any vehicle, other than "your covered auto", which is: a. Owned by you, or
b. Furnished or available for your regular use. 3. Any vehicle, other than "your covered auto", which is:
a. Owned by any "family member"; or
b. Furnished or available for the regular use of any "family member".
However, this Exclusion (B.3.) does not apply to you while you are maintaining or "occupying" any vehicle which is:
a. Owned by a "family member" or
b. Furnished or available for the regular use of a "family member" 4. Any vehicle, located inside a facility designed for racing, for the purpose of:
a. Competing in. or
b. Practicing or preparing for;
any prearranged or organized racing or speed contest.
Exclusion B.1 enforces the fact that the Personal Auto Policy is designed for automobiles and not recreational type vehicles. However it is interesting to note that some coverage is given to recreational vehicles in cases of an emergency. Also, when a golfer uses a rented or non-owned golf cart, liability coverage is also provided. The policy also states that "any” trailer is covered for liability. So if you own, borrow or lease a trailer, liability coverage is provided at no extra cost.
Exclusion B.2 deals with vehicles that are furnished or available for regular use. A company vehicle that is at the disposal of the insured, wherein permission does not have to be granted each time it is used would not be covered under the Person Auto Policy Conversely, if each time the vehicle is used and specific permission must be granted, then this should not be considered as being furnished or available for regular use. This was determined in a Colorado court case (Waggoner v. Wilson). Also, in Tennessee the same conclusion was reached in the case of Hughes v. State Farm. A short-term rental car could at times create a coverage problem as the policy does not, in the opinion of many, properly address this issue or the status of coverage for a borrowed vehicle. The length of time, according to some courts, is the determining factor. Thus, if you rent a vehicle for more than three weeks, or borrow a friend's vehicle for an extended period of time, a coverage problem could exist. This interpretation may vary by company and by the various courts. An agent should be well advised before advice is given to an insured regarding this issue.
Exclusion B.3 is similar to Exclusion B.2 except it applies to "family members". It removes coverage for family members for furnished or available for regular use by family members. However, this exclusion does not apply to the "named insured". Therefore, should the named insured drive an uninsured vehicle, owned, furnished or available by a" family member" and have an accident, coverage would still apply for the "named insured" but not to the "family member".
Exclusion B.4 applies to any vehicle, located in a facility designed for racing, for the purpose of competing in or practicing or preparing for, any prearranged or organized racing or speed contest. This part of the exclusion has been modified from earlier versions of the policy. Previously, "located in a facility designed for racing" was not in the exclusion. So if two
teenagers stopped at a light, started drag racing contest, it could cause coverage problems if it was prearranged. The clause now clarifies the situation where racing is excluded.
Limit of Liability
LIMIT OF LIABILITY
A. The limit of liability shown in the Declarations for each person for Bodily Injury Liability is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by anyone person in anyone auto accident. Subject to this limit for each person, the limit of liability shown in the Declarations for each accident for Bodily Injury Liability is our maximum limit of liability for all damages for "bodily injury'' resulting from any one auto accident.
The limit of liability shown in the Declarations for each accident for Property Damage liability is our maximum limit of liability for all "property damage" resulting from any one auto accident.
This is the most we will pay regardless of the number of: 1. "Insureds' ;
2. Claims made;
3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved in the auto accident.
B. No one will be entitled to receive duplicate payments for the same elements of loss under this coverage and: 1. Part B or Part C of this policy or
This part of the liability section of the policy deals with how the limits of liability shown in the declarations page will be paid. The policy we are reviewing assumes we have selected a "split limit" approach rather than the "single limit" method of setting up the limits applying to bodily injury and property damage claims. We will discuss both in this review. First the split limit approach.
Split Limits - With split limits the maximum limit that will apply "per person" is established
for all damages, including death, arising out of "bodily injury" sustained by any one person in any one accident. This would be the per person limit shown in the declarations page. So if we had a limit of $100,000 per person limit, each person injured in the same accident would be covered up to $100,000 including the cost of defense. However, the split limit policy also has a
maximum limit for all bodily injury claims from the same accident. Let's assume that limit is $300,000. If we had four people injured to the extent of $100,000 each, the policy could only pay $300,000. Assume we have two people seriously injured and they claimed $125,000 each. Even though the maximum limit for all persons injured is $300,000, the policy would only pay $200,000 because of the person limit of $100,000.
Property damage has a separate limit per accident. Let's assume we have a limit of $100,000. If the insured was involved in an accident, and damaged a large Greyhound bus and two tractor-trailers, the most the policy would pay is $100,000 even though each vehicle was damaged to the extent of $100,000. The limit applies per accident and not per vehicle damaged.
Single Limit – Some insurers offer the "single limit" approach and many agents prefer this
method because it eliminates being underinsured in certain cases. The "single limit" method of coverage establishes one limit that applies for all bodily injury claims as well as property damage claims. Assume we have a single limit of $500,000. If we had two people injured to the extent of $125,000 each, one at $200,000 and property damage of $50,000, the entire claim would be paid plus the defense costs involved. Also, there is very little premium difference in the single limit versus the split limit approach.
The policy also states that this is the most we will pay regardless of the number of: 1. "Insureds"
2. Claims made
3. Vehicles or premiums shown in the declarations; or 4. Vehicles involved in the auto accident
The policy also states that "no one will be entitled to receive duplicate payments for the same elements of loss under this coverage and:
1. Part B or Part C of this policy, (referring to medical payments coverage and uninsured motorist coverage - yet to be discussed) or
2. Any Underinsured Motorists Coverage (yet to be discussed) provided by this policy.” The purpose is to allow the company to only pay under one coverage part and avoid over indemnification or overpayment of a claim, plus "stacking" of coverage.
Out of State Coverage
We all travel across state lines from time to time and we also realize that the statutory limits of auto coverage will vary by state. Some states also have compulsory insurance laws and no-fault laws. Should an insured be driving in another state or province (such as in Canada) with different laws or requirements of coverage than those provided by the insured's policy, the policy will comply with at least the minimum limits or requirement of coverage as mandated in those states or provinces.
Financial Responsibility
When the policy is certified as future proof of financial responsibility, the policy will comply with the law to the extent required. Therefore, the insurance company is guaranteeing that the insured's policy will comply with the law in the insured's state.
Other Insurance
This clause states that if there is other insurance the company will only pay its share of the loss. That share is the company's limit as it bears to the total of other insurance limits. If company A has $100,000 and Company B has $100,000 then each company would pay 50% of the loss. The coverage is only excess when the insured is driving a non-owned vehicle such as a friend's auto. For example, John borrows a car from Jim and has an accident. Since Jim has coverage, John would be covered up to the limits carried by Jim and under Jim's policy. Should the claim exceed the limits under Jim's policy then John's policy would provide the excess coverage to protect him.
Conclusion
This concludes our discussion of the liability section of the policy and its exclusions. Please keep in mind that there are various policy forms used by agents in all of the states. Some of the states may not have adopted the newer versions of the Personal Auto Policy and therefore, coverage interpretations may differ from this text. In addition, where gray areas of coverage exist, the agent or CSR should contact their respective companies for guidelines.
Section III - Review
Review of Actual Claim: An insured has agreed to help a neighbor pick up a new wide
screen television and deliver it to his neighbor's home. On the way, the insured's pickup truck hits a bump in the road and the television falls out of the truck. The TV rolls out of the pickup and strikes a pedestrian causing bodily injury.
1. Is the TV covered under the insured's PAP? 2. Are the pedestrian's bodily injuries covered?
Review Questions
1. The liability insuring agreement:
A. Has been constantly modified over the years, primarily due to court decisions B. Is located in the policy (Part A)
C. Has two parts D. All of the above
2. The purpose of the liability insuring agreement is to: A. Define the terms in the policy
B. Impose restrictions
C. Define the obligations of the insurance company in case of a claim D. None of the above
3. Which of the following is covered under the supplementary payments part of the liability coverage section of the PAP?
A. Premiums of appeal bonds and bonds to release attachments in any suit the company defends.
B. Interest accruing after a judgment has been entered in any suit the company defends.
C. Up to $200.00 a day for loss of earnings, but not other income, because of attendance at hearings or trials at the company's request.
D. All of the above
4. An additional penalty added by the court for gross misconduct on the part of the insured is:
A. The damage judgment B. A penalty premium C. Punitive damages D. Additional damages
5. The liability exclusion for "property damage" to property rented to, used by, or in the care of that "insured" is called:
A. The "care, custody and control" clause B. The "property damage exclusion" clause C. The "rental property exclusion" clause D. The "insured use" clause
True/False:
1. When the company has paid its limit, their obligation to defend other claims from the same accident ceases.
A. True B. False
2. Defense costs are in addition to the limits of liability. A. True
B. False
3. Any trailer owned by the insured must be listed on the policy to be covered for liability. A. True
B. False
4. Jerry rents a U-Haul trailer to move some furniture. Jerry must add the trailer to his policy for liability coverage.
A. True B. False
5. Assume in the circumstances in question 4, Jerry fails to attach the trailer on the hitch properly. The trailer comes loose and overturns. The furniture in the trailer destroyed. The furniture is covered because it belonged to the insured.
A. True B. False
6. Anyone who does not hold a driver's license is excluded from coverage under the PAP. A. True
7. Supplementary costs are in addition to the limits of liability. A. True
B. False
8. Punitive damages are excluded under the liability section of the policy. A. True
Answers to Claim Review
1. The damage to the TV is not covered because of Exclusion A.2 in the liability section of the policy. This basically excludes damage to the insured's property or property of others being transported by the insured. This is a property damage exclusion.
2. The policy does not contain an exclusion to exclude bodily injury to a pedestrian. The liability section, in respect to bodily injury, covers injury for which the insured can be held legally liable as a result of an auto accident. The TV striking a person would be considered an accident since it occurred as a result of operating a covered vehicle.
Answers to Review Questions
1. D 2. C 3. D 4. C 5. A True/False Answers 1. B 2. A 3. B 4. B 5. B 6. B 7. A 8. B
IV. Medical Payments Coverage
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Part B - Medical Payments Coverage
As previously mentioned, each coverage part in the Personal Auto Policy has its own insuring agreement with exclusions. Medical Payments coverage is no exception. This coverage is usually optional in most policies. Some agents suggest that it maybe more prudent to carry higher liability limits than to carry Medical Payments Coverage since most people are covered under some form of health insurance plan. In today's world of litigation, taking the premium that would usually be spent on Medical Payments Coverage and purchasing higher liability limits maybe the thing to do. We will begin our discussion of this coverage with the insuring agreement.
Insuring Agreement
Insuring Agreement
A. We will pay reasonable expenses incurred for necessary medical and funeral services because of "bodily injury": 1. Caused by an accident; and
2. Sustained by an "insured"
We will pay only those expenses incurred for services rendered within 3 years from the date of the accident. B. "Insured" as used in this Part means:
1. You or any "family” member a. While "occupying"; or
b. As a pedestrian when struck by a motor vehicle designed for use mainly on public roads or a trailer of any type.
2. Any other person while "occupying" "your covered auto".
Part A - Note that the insuring agreement does not include coverage for pain and suffering, disfigurement, loss of income, disability etc. It only applies to medical and funeral expenses. Defense costs are not mentioned because there does not have to exist legal liability for an "insured" or other passenger to be paid for their injuries. Therefore, lawsuits and legal fees are not a factor in this coverage.
Part B.1, obviously covers the insured and any "family" member while occupying a vehicle or being struck as a pedestrian. Note that the insured does not necessarily have to be in his vehicle. The insured and family members are covered in any vehicle except those that are not designed primarily for use on public roads such as an all terrain type vehicle designed for off road use as well as those with fewer than four wheels thus excluding injury on a motorcycle. This is the first exclusion.
Part B.2, provides coverage for any other person while occupying the vehicle such as a friend or other relative. Most adjusters like medical pay coverage because they consider it a "good will" type coverage since fault does not have to be established and they can immediately pay the medical expenses that could help avoid a lawsuit in the future.
Exclusions
EXCLUSIONS
We do not provide Medical Payments Coverage for any “insured” for “bodily injury”: 1. Sustained while "occupying" any motorized vehicle with fewer than four wheels.
2. Sustained while “occupying” “your covered auto” when it is being used as a public or livery conveyance. This Exclusion (2) does not apply to a share-the-expense car pool.
3. Sustained while "occupying" any vehicle located for use as a residence or premises.
4. Occurring during the course of employment if workers' compensation benefits are required or available for the "bodily injury".
5. Sustained while "occupying", or when struck by, any vehicle (other than your "covered auto") which is: a. Owned by you; or
b. Furnished or available for your regular use.
6. Sustained while "occupying", or when struck by, any vehicle (other than "your covered auto") which is: a. Owned by any "family member"; or
b. Furnished or available for the regular use of any "family member". However, this exclusion (6) does not apply to you.
7. Sustained while "occupying" a vehicle without the reasonable belief that the "insured" is entitled to do so. This exclusion (7) does not apply to a "family member" using "your covered auto" which is owned by you.
8. Sustained while "occupying" a vehicle when it is being used in the "business" of an "insured". This exclusion (8) does not apply-to "bodily injury" sustained while "occupying" a:
a. Private passenger auto; b. Pickup or van that you own; or
c. "Trailer" used with a vehicle described in a. or b. above. Analysis of Exclusions:
1. Sustained while "occupying" any motorized vehicle with fewer than four wheels. Therefore, injury on a motorcycle is not covered.
2. Sustained while “occupying” “your covered auto” when it is being used as a public or livery conveyance. This Exclusion (2) does not apply to a share-the-expense car pool. This tracks with the previously discussed liability exclusion dealing with using the vehicle as a public or livery conveyance. The Personal Auto Policy is not designed to cover this type of exposure. Using the vehicle as a livery indicates no coverage if the vehicle is for hire by the public. If the insured were occasionally using the vehicle to deliver goods for his employer then this exclusion would not apply except where workers compensation coverage would pay. 3. Sustained while "occupying" any vehicle located for use as a residence or premises.
The intent is to exclude using a vehicle as a premises for an extended period of time. A camper used for a two-week vacation would not be excluded. The policy, however, does leave some gray area as to the length of time a camper type vehicle could be used as a residence. Some people have a permanent residence but may travel as much as nine months during the year with their camper or motor home. Clarification of coverage from the company should be obtained in writing before advising the insured as to their coverage.
4. Occurring during the course of employment if workers' compensation benefits are required or available for the "bodily injury". This completely excludes work related injuries whether the employer carries workers compensation or not. The policy is not designed to cover these types of claims.
5. Sustained while "occupying", or when struck by, any vehicle (other than your "covered auto") which is owned by you or furnished or available for your regular use. This is similar to the liability exclusion in that vehicles owned by the named insured are to be listed on the policy and coverage purchased for coverage to apply. If the vehicle is furnished or available for regular use then coverage does not apply.
6. Sustained while "occupying", or when struck by, any vehicle (other than "your covered auto") which is owned by any "family member" or furnished or available for the regular use of any "family member". However, this exclusion does not apply to you (meaning the named insured).
First, the policy excludes coverage if the insured owns other vehicles and does not provide medical payments on those vehicles and is injured in one of those vehicles. Part B excludes coverage if the family member is injured in a furnished vehicle (such as a company car) but the exclusion does not apply to the "named insured". The same discussion stated in the liability section regarding "furnished or made available" also applies to medical payments. If permission must be granted each time the vehicle is being used then this exclusion would probably not apply.
7. Sustained while "occupying" a vehicle without the reasonable belief that the "insured" is entitled to do so. This exclusion (7) does not apply to a "family member" using "your covered auto" which is owned by you.
Should the insured drive or otherwise occupy a vehicle without obvious permission and is injured in an accident, coverage would not apply. However, is a "family member" drives an insured vehicle owned by the "named insured" without permission and is injured in an accident, then coverage would apply.
8. Sustained while "occupying" a vehicle when it is being used in the "business" of an "insured". This exclusion (8) does not apply-to "bodily injury" sustained while "occupying" a:
a. Private passenger auto;
b. Pickup or van that you own; or
c. "Trailer" used with a vehicle described in a. or b. above.
The purpose of this exclusion is to eliminate coverage where the insured is operating a non-owned vehicle for business use. Should the insured be injured in a large truck, then coverage would not apply. The exclusion makes an exception for private passenger autos (whether owned or not), a pickup or van owned by the named insured and trailers being used being used either a private passenger auto or pickup truck or van.
The remaining exclusions, (9, 10, and 11), deal with excluding coverage for nuclear weapons, war, nuclear reaction, radiation, and while competing in racing inside a facility designed for racing.
Limit of Liability
LIMIT OF LIABILITY
A. The limit of liability shown in the Declarations for this coverage is our maximum limit of liability for each person injured in any one accident. This is the most we will pay regardless of the number of:
1. "Insureds"; 2. Claims made;
3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved in the accident.
The limits of liability for medical payments apply "per person" no matter how many people are injured in the same accident. Nor is there a limit for the number of accidents during the policy period. There is a clause in the policy regarding duplicate payments received under any other coverage parts of the policy such as liability, uninsured motorists and underinsured motorists coverage. So the insured can only collect once under the policy.
Other Insurance
If there is other applicable auto medical payments coverage (note that personal health policies are not mentioned) then the company will pay only its share of the loss. However, if the insured is injured in a non-owned vehicle then the medical payments coverage is "excess" over other collectible auto insurance.
Personal Injury Protection
Some states have enacted some form of "no fault" liability laws. New York and Florida are examples. The purpose is to reduce the number of lawsuits and pay the insureds for their loss in a timely fashion. Personal injury protection covers losses due to bodily injury. It pays for medical and funeral expenses as well as loss of income. The insureds collect from their own insurance company Legal liability does not have to be established.
Most no-fault laws have a threshold when once exceeded, the insured can sue the negligent party. Serious injury such as disability, loss of a limb, etc. can also allow the injured party to sue the negligent driver.
Loss of income has its limits that vary by state with some allowing the insured to purchase additional coverage. Most pay 80% but subject to a maximum limit per month.
Section IV Review
Review of Actual Claim: The insureds furnish an auto for the regular use of their son. One
evening, their son used the auto to go cruising with some friends and allowed a friend to drive the vehicle. The friend, an unlicensed 15-year-old girl, wrecked the automobile and
subsequently injured the insured's son.
1. Does the liability policy of the girl's parents come in as excess over the medical payments policy of the insureds?
2. Does the policy of the girl's parents cover any expenses since the girl was an under aged, unlicensed driver?
Review Questions
1. The insuring agreement under the Policy Part B -Medical Payments Coverage, does not include coverage for:
A. Pain and suffering B. Medical expenses C. Funeral expenses D. All of the above
2. Under the Policy Part B - Medical Payments Coverage, the "insured" means: A. You or any family member while occupying a vehicle
B. You or any family member, while walking as a pedestrian, struck by a motor vehicle designed for use mainly on public roads or a trailer of any type.
C. Any other person while "occupying" your covered auto. D. All of the above
3. The limits of liability for medical payments:
A. Apply "per person" no matter how many people are injured in the same accident B. Apply to a limited number of accidents during the policy period
C. Include a clause in the policy allowing duplicate payments under other coverage parts.
4. Some states have enacted some form of "no fault" liability laws. The purpose of these laws is:
A. To allow the injured party to be awarded a larger settlement
B. To reduce the number of lawsuits and pay the insureds for their loss in a timely fashion.
C. To stop the injured party from suing the negligent party, regardless of the seriousness of the injury.
D. All of the above 5. Loss of income coverage:
A. Has no limit B. Has a limit of 50%
C. Has a limit fixed by federal law D. Has limits that vary by state
Answers to Claim Review
1. The liability coverage under the friend's parent's policy is not excess over the insured's medical payments coverage. Both the medical payments and liability coverages are primary coverages for the insureds that the policy covers. The medical payments insurer is entitled to recover its payment to its insured from the liability proceeds that are recovered from the other insurer.
2. Because the insuring agreement of the personal auto policy pledges to pay damages arising from bodily injury or property damage for which any insured becomes liable because of an auto accident, there is coverage under the friend's parent's PAP.
Answers to Review Questions
1. A 2. D 3. A 4. B 5. D
V. Uninsured Motorist Coverage
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Part C - Uninsured Motorists Coverage
This coverage has existed since the 1960s and was designed primarily to cover injuries to the insured and family members when struck by a driver that did not have insurance. Many states estimated that as many as 30% or higher of its drivers were without auto insurance and this caused a substantial unfair financial burden on its citizens when injured in an auto accident with an uninsured driver. Many states have now made this coverage mandatory with stated statutory limits of coverage. Some states still allow the insured to reject this coverage in writing, but, it must be a least offered to the insured. Due to claim activity, because the problem of uninsured drivers still exists, premiums have been constantly increased.
When an insured or family member is injured in an accident caused by an at fault uninsured driver, the insured must collect from his own insurance carrier as if it were a liability claim. Sometimes the insured ends up in arbitration or a lawsuit against his insurance company.
Insuring Agreement
The insuring agreement states that the company will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" involved in an accident and causing "bodily injury". Any judgment for damages will not be binding on the insurance company without their consent. So if an insured settles with the uninsured motorist, without the consent of the company, then coverage is voided. It is not clear as to the purpose of this provision since it is often the court and not the company that determines the award the insured, family members or other persons occupying the insured's vehicle at the time of the accident will receive. The coverage applies to the insured, family members and any other person occupying the covered auto.
Part C of the form also describes what is considered to be an "uninsured motor vehicle" as follows:
C. "Uninsured motor vehicle means a land motor vehicle or trailer of any type: 1. To which no bodily injury liability bond or policy applies at the time of the accident.
2. To which a bodily injury bond or policy applies at the time of the accident. In this case its limit for bodily injury must be less than the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which "your covered auto" is principally garaged.
3. Which is a hit-and-run vehicle whose operator or owner not be identified and which hits: a. You or any "family member";
b. A vehicle which you or any "family member" are "occupying"; or c. "Your covered auto"
4. To which a bodily injury liability bond or policy applies at the time of the accident but the bonding or insurance company:
a. Denies coverage; or b. Is or becomes insolvent.
First, we observe that the first clause indicates that all land motor vehicles and trailers are covered. It does not have to be just another private passenger type vehicle. Secondly the coverage will apply should the at-fault operator carry less than the state required limit of coverage according to their financial responsibility law. The one that causes the most problems is where there is a hit-and-run operator who can't be identified. Some states have modified this to include a provision where a "hit" does not have to occur. In this situation the insured must prove that he was run off the road or forced into a line of traffic, for example, by a "phantom" driver and that no contact was made with the insured's vehicle and as a result the insured was injured. Coverage also applies to the insured and family members even if they are pedestrians. Part C also describes six vehicles that are excluded from coverage:
1. Vehicles owned by or furnished to the named insured or family members. Vehicles owned by the insured and not insured are not covered. We have already discussed the furnished or made available for regular use provision as not applying to medical
payments and the same is true of uninsured motorists coverage. Nor can the named insured collect if injured in an uninsured vehicle owned by a family member.
2. Owned or operated by a self-insurer, except for an insolvent self-insurer as defined by the state. If a self-insurer becomes insolvent and has no assets to honor a claim, the insured's policy would provide uninsured motorists coverage.
3. Owned by a government unit or agency. (This is self-explanatory)
4. Operated on rails or crawler treads. (Railroads and heavy earth movement type equipment would not be covered)
5. Designed mainly for use off public roads. Therefore, all terrain type recreational vehicles are not covered. All terrain vehicles does not mean SUVs such as Jeeps, Ford Broncos, etc.
6. Located for use as a residence or premises. This type of vehicle does not meet the definition of uninsured vehicle. Thus if the insured is camping and is injured in another camper's trailer, coverage would not apply because the vehicle is being used as a residence.
Exclusions Under Uninsured Motorist Coverage
Part C describes the following exclusions under the uninsured motorist coverage.
No coverage for an insured that is struck by his own vehicle that is not insured even though he may have coverage on another vehicle.
If a family member has primary coverage on their own vehicle, they cannot collect under the insured's policy if injured in the vehicle the insured owns.
The insured cannot settle with an uninsured at-fault driver without the consent of the insured's insurance caner. They would void their UM coverage.
