Chapter 5 The Personal Auto Policy (PAP) This set of overheads provide an overview of the automobile insurance contract. No set of overheads can totally and accurately describe the auto contract. Overheads cannot substitute for the lengthy and complicated nature of the actual contract. This is why I actually go through the contract and explain and interpret it to my class.

CONTENTS POLICY LAYOUT LIABILTY EXCLUSIONS MEDICAL PAYMENTS UNINSURED MOTORIST PHYSICAL DAMAGE AND LOST SETTLEMENT

Policy Layout Part A: Liability Pays if you are sued Part B: Medical Payments Pays you if injured Pays if you are hit by negligent driver Part C: Uninsured Motorists Part D: Physical Damage Pays for damage to your car Collision Other Than Collision

PAP Is Different From HO Contract A policy owner may generally pick and choose the coverage wanted Coverage applies only if declaration page indicates the coverage has been purchased Each insuring agreement can generally stand by itself Some definitions change depending on the insuring agreement The automobile policy is set up differently than the homeowners contract. The homeowner’s contract is set up so the entire contract is integrated and all parts must be purchased. The automobile contract is set up so that each section is self-contained. Each section can legally stand by itself. The declarations page indicates whether the insured has the coverage or not. Because of the “free standing” nature of each section of the contract, some definitions change depending on the section. For example, who is “insured” changes.

Definitions “You” = named insured & spouse if resident Family member must be a resident “Your Covered Auto” Shown in declarations Private passenger auto, small pickup, or van Newly acquired autos Trailer Just like in the homeowners contract, definitions in the auto contract are important. Since each section of the contract can stand by itself, the reader needs to pay attention to changes in definitions from section to section. For example: “You” is defined as the named insured and spouse if a resident. Family members in order to be covered must be a resident “Your Covered Auto” shown in declarations private passenger auto, small pickup or van newly acquired autos trailer The definition of “your covered auto” addresses the issues of: Replacement vehicles Additional vehicles Vehicles rented while your car is being services or repaired. Also pay careful attention to the definition of “non-owned vehicle.”

Part A -- Liability Pays legal judgments on your behalf resulting from an auto accident Includes owned and non-owned vehicles Coverage on the car is primary Single versus split-limits Any person using your covered auto Any organization whose liability arises from your negligence while using auto The liability section of the PAP is on an “open-peril” basis and therefore, all losses are covered unless excluded. Coverage follows the car and is primary. So if someone borrows your car and also has liability insurance, your coverage pays first and when limits are exhausted, the other insurance pays after (excess). Coverage can be purchased on a single limit basis or split limit basis. Single limits: For example: $100,000 single limit means that the $100,000 can apply toward bodily injury or property damage or a combination. But once a total of $100,000 is paid (defense costs not included) coverage exhausts for the incident. Split limits: For example: 100/300/50 (000s) means that the insurer will pay up to 100,000 per person bodily injury, $300,000 per occurrence bodily injury, and $50,000 property damage per occurrence. Definition of insured includes the named insured, any person using your covered automobile, and others when their liability arises out of the driver’s acts or omissions.

Part A -- Exclusions Intentional injury Damage to own property Damage caused while using your car as a taxi or delivery vehicle Using vehicles without belief you had permission Damage caused if driver is using the care while in the automobile business These are the major exclusions of the PAP. Intentional injury – intentional injury by an insured is never covered in insurance contracts. Damage to your own personal property is covered under other property contracts and the car is covered under section C Damage caused while using your car as a taxi – this is a business use that is not permitted. Using vehicles without permission – the intent is to not give coverage to people who steal your car. Damage caused if driver is in the automobile business (see description).

Part A -- Exclusions Damage caused while using a motorcycle (less than 4 wheels) Other owned vehicles not listed in Declarations Additional exclusions found in Part A – the liability sections include: Damage caused while using a motorcycle – the intent is that there is no coverage for use of vehicles having less than 4 wheels. Other owned vehicles not listed in Declarations – vehicles owned and undeclared at inception are not covered. The contract does address vehicles that are replacements, additional ones as well as ones used while your car is being serviced. – see the definition of your “covered auto.”

Part B -- Medical Payments Caused by an accident & sustained by an insured Additionally you are covered if struck as a “pedestrian” Includes occupants of car, but not people you hit Exclusions are similar to Part A Medical payments in the PAP is different than the Medical Payments to Others in the homeowners contract. The PAP pays to anyone “occupying” the vehicle including the insureds. Additionally you are covered if struck as a “pedestrian.” Does not cover people you hit, they will have to sue you to collect under the liability section. The exclusions are similar to Part A.

Part C -- Uninsured Motorists Pays damages insured is legally entitled to recover from a negligent driver Uninsured motor vehicle means No policy applies at the time of the accident Hit-and-Run vehicle Tort-feasor insured by insolvent insurer Exclusions similar to Part A Arbitration clause applies The uninsured motorist provision allows injured parties to collect from the owner or operator of an uninsured vehicle that is operated negligently. In other words, you are legally entitled to collect from them but you cannot because they are “uninsured.” Uninsured motor vehicle means No policy applies at the time of the accident Hit-and-Run vehicle Tort-feasor insured by insolvent insurer Tort-feasor who violates conditions of their contract (for example: uses the car as a taxi) Uninsured motorist coverage provides a solution to the uncompensated victim problem. A person injured by a negligent driver but cannot recover anything because the negligent party has no insurance. Estimates vary as to how many drivers on the road do not have insurance. In Ohio, one estimate is from 12 to 20 percent. Arbitration answers two questions. Is the insured legally entitled to collect? And how much, if legally entitled. Under–insured motorist coverage is also available. Your insurer pays additional amounts because the tort-feasor does not have enough coverage.

Part D -- Physical Damage Pays for direct and accidental loss to covered auto if premium shown on the declaration page showing coverage for: Collision Other than collision Specified losses NOT collision Some indirect loss coverage The physical damage section covers direct loss to the cars specified in the contract. In addition it covers non-owned cars in certain circumstances. Coverage is split into collision and other than collision loss. A person can buy none, either or both coverages. Collision is the hitting of an object or upset of the vehicle. Other than collision is just that. Anything but collision or upset. In addition, certain events are defined as other than collision for clarity purposes. Breakage of glass can be paid under collision if collision was the cause of the loss. The policy pays for some indirect loss coverage generally when there is damage to “your covered vehicle.” If the loss is from theft, there is a waiting period of 48 hours for coverage.

Part D -- Physical Damage Exclusions similar to Part A, plus Wear and tear Electronic equipment Recovery is based on actual cash value The exclusions to the physical damage section are fairly similar to Section A. Two additional exclusions are worth noting. There is no coverage for wear and tear. Electronic equipment that is not permanently installed is not generally covered.

Loss Settlement When cost of repair generally exceeds the market value of the auto before the loss, the vehicle is “totaled” and the insurer pays the ACV of the loss. The limit of the amount payable is the amount not to exceed what it would repair or replace with “like kind and quality” allowing the repair facility to use after-market parts that meet or exceed OEM standards.