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chapter20autoinsurancei.ppt

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Chapter 20

Auto Insurance

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Agenda

Overview of Personal Auto Policy
Part A: Liability Coverage
Part B: Medical Payments Coverage
Part C: Uninsured Motorists Coverage
Part D: Coverage for Damage to Your Auto
Part E: Duties after an Accident or Loss
Part F: General Provisions
Insuring Motorcycles and Other Vehicles

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Personal Auto Policy Basics

The 2005 Personal Auto Policy (PAP) is widely used throughout the United States
Eligible vehicles include:
A four-wheeled motor vehicle owned or leased by the insured for at least 6 consecutive months
A pickup or van with a gross vehicle weight rating of 10,000 pounds or less

Transparency Master 1.2

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Personal Auto Policy Basics (Continued)

Autos covered by the policy include:
Any auto shown in the declarations
A newly acquired auto
A trailer owned by the named insured
A temporary substitute vehicle, which is a nonowned auto or trailer used temporarily because of mechanical breakdown, repair, servicing, loss, or destruction of a covered vehicle

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Part A: Liability Coverage

Liability coverage (Part A) is the most important part of the PAP
It protects a covered person against a suit or claim arising out of the ownership or operation of a covered vehicle
The coverage is usually written in split limits, where the amounts of insurance for bodily injury liability and property damage liability are stated separately

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Part A: Liability Coverage (Continued)

Liability coverage applies to:
The named insured and any resident family member
Any person using the named insured’s covered auto
Any person or organization legally responsible for any insured’s use of a covered auto on behalf of that person or organization
Any person or organization legally responsible for the named insured’s or family members’ use of any auto or trailer (other than a covered auto or one owned by the person or organization)

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Part A: Liability Coverage (Continued)

The insurer agrees to provide defense and pay all legal defense costs for claims covered by the policy
The policy also allows for certain supplementary payments including:
The cost of a bail bond, up to $250
Premiums on appeal bonds
Interest accruing after a judgment
Loss of earnings, up to $200/day
Other reasonable expenses

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Part A: Liability Coverage (Continued)

Exclusions to the coverage include:
Intentional injury or damage
Property owned or transported
Property rented, used, or in the insured’s care
Bodily injury to an employee
Use as a public or livery conveyance
Vehicles used in the auto business
Vehicles used in any other business

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Part A: Liability Coverage (Continued)

Using a vehicle without reasonable belief the person is entitled to do so
Vehicle covered under special nuclear energy contracts
Vehicle with fewer than four wheels
Vehicle furnished for the insured’s regular use
Vehicle owned by, furnished, or made available for the regular use of any family member
Racing vehicle

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Part A: Liability Coverage (Continued)

The PAP policy is typically written with split limits
Split limits of 250/500/100 means that you have:
A maximum amount of $250,000 for bodily injury to each person for any one accident
A maximum amount of $500,000 for the bodily injury to all persons resulting from any one accident
A maximum amount of $100,000 paid for property damage resulting from any one accident

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Part A: Liability Coverage (Continued)

If an accident occurs in another state, and the financial responsibility law in that state has higher liability limits than shown in the declarations, the PAP automatically provides the higher limits
If more than one liability policy covers a loss:
The insurer pays its pro rata share of the loss for an owned vehicle
The insurance coverage is excess over any other insurance for a nonowned vehicle

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Exhibit 20.1 Primary and Excess Insurance

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Part B: Medical Payments

Medical payments coverage covers all reasonable medical and funeral expenses incurred by an insured in an accident
Coverage is not based on fault
Covers medical services rendered within 3 years from the date of the accident
The named insured and family members are covered:
While occupying any motor vehicle, or
As pedestrians when struck by a motor vehicle
Other persons occupying a covered auto are covered, but only in an owned vehicle

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Part B: Medical Payments (Continued)

Exclusions to the coverage include injuries sustained:
While occupying a vehicle with fewer than four wheels
While operating the vehicle as a public or livery conveyance
When the vehicle is used as a residence
When using the vehicle during the course of employment, or for business
When the vehicle is used without a reasonable belief of permission
When injuries are from a nuclear weapon or war
When the vehicle is competing in a race

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Part B: Medical Payments (Continued)

If more than one auto policy covers a loss:
The insurer pays its pro rata share of the loss for an owned vehicle
The insurance coverage is excess over any other insurance for a nonowned vehicle

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Part C: Uninsured Motorists Coverage

Uninsured motorists coverage pays for the bodily injury caused by an uninsured motorist, by a hit-and-run driver, or by a negligent driver whose insurance company is insolvent
In some states, property damage is also covered
The uninsured motorist must be legally liable
The insurer’s maximum limit of liability for any single accident is the amount shown in the declarations

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Part C: Uninsured Motorists Coverage (Continued)

The claim is subject to arbitration if the insured and insurer disagree over the amount of damages
The coverage applies to:
The named insured and family members
Another person while occupying a covered auto
Any person legally entitled to recover damages

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Exhibit 20.2 Estimated Percentage of Uninsured Motorists in the United States in 2012

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Part C: Uninsured Motorists Coverage (Continued)

Four groups of vehicles are considered to be uninsured vehicles:
A motor vehicle or trailer for which no bodily injury liability insurance policy applies at the time of the accident
An insured vehicle with less coverage than the amount required by the state’s financial responsibility law
A hit-and-run vehicle
A vehicle covered by an insurer that denies coverage or becomes insolvent

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Part C: Uninsured Motorists Coverage (Continued)

Coverage is excluded for many reasons, including:
There is no uninsured motorists coverage on the vehicle
There is primary coverage under another policy
The insured settles a claim without the insurer’s consent
The vehicle is used as a public or livery conveyance
When workers compensation benefits are applicable
There is no reasonable belief the person is entitled to use the vehicle

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Part C: Uninsured Motorists Coverage (Continued)

The PAP excludes payment for punitive or exemplary damages
There are several limitations when more than one uninsured motorist coverage provision applies to a loss
For example, if an insurer provides coverage on a vehicle not owned by the named insured, the insurance provided is excess over any collectible insurance provided on a primary basis

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Part C: Uninsured Motorists Coverage (Continued)

Underinsured motorists coverage can be added to the PAP to provide more complete protection
In general, the maximum amount paid is the underinsured motorist’s coverage limit stated in the policy less the amount paid by the negligent driver’s insurer
Coverage is typically added as an endorsement
Some states make coverage mandatory, while others make it optional

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Part D: Coverage for Damage to Your Auto

Under the coverage for damage to your auto, the insurer agrees to pay for any direct and accidental loss to a covered auto or any nonowned auto
A collision is defined as the upset of your covered auto or nonowned auto or its impact with another vehicle or object
Collision losses are paid regardless of fault

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