(November, 2017)
DEFINITIONS
K. “Newly
acquired auto”
1. Any private
passenger auto, pickup, or van that any insured obtains possession of during
the policy period (but after the policy period's inception date) qualifies as a
newly acquired auto. However, van and pickup eligibility is subject to a weight
and a use restriction. Pickups and vans are ineligible as covered autos if they
are used for business activities.
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Example: Hannah had her sedan
insured under a new SPAP. Two weeks after she received the policy, she bought
a used van. It was in a collision less than a week later.
Scenario 1: Hannah bought
the van to better handle her personal chores and transporting kids. This vehicle
is covered.
Scenario 2: The van was
purchased and used in her
start-up leasing company. The van is not eligible for coverage.
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The policy makes an exception for incidental
business use (as part of a repair or maintenance business). It also allows
covered auto status for such vehicles that are used on a farm or ranch
business. Though not specifically referenced, SUVs are treated as private
passenger autos and therefore are not subject to the following weight
restriction.
In order to be eligible, a pickup or van has
to have a Gross Vehicle Weight of no more than 10,000 lbs. The use of the term
GVW Rating conforms to what is used in the U.S. Government's vehicle
classification manual.
However, even if an additional car, pickup
or van clears the vehicle type, vehicle use and date of acquisition hurdles,
there are other requirements. Item K.2. coversthe issue of when to report an additional
vehicle to the insurance company. The timing of reporting the vehicle has a
direct impact upon coverage.
Note: The reporting
requirements depend upon the type of coverage involved and whether the vehicle
is a replacement.
2. Coverage for a
“newly acquired auto” (but only when it is a replacement) is provided along the
basis discussed below. The policy states that, if the insured fails to report a
newly acquired auto within the applicable time period requested by the policy,
coverage will not begin until the date the late request is made.
a. The
replacement does not have to be reported for liability coverage. The liability
coverage that applies to the vehicle being replaced also applies to the
replacement vehicle. Reporting is not required.
b. If the
replaced vehicle had Coverage for Damage to Your Auto, the replacement vehicle
has the same coverage but only for 14 days. If a report is not provided to the
insurance company within 14 days of its acquisition the physical damage
coverage ends on the replacement vehicle. If the replaced vehicle did not have
Coverage for Damage to Your Auto, the replacement vehicle does not have such
coverage either.
Now this is an
area that should be clarified by the policy wording. The implication is that a
vehicle would have to be reported by the renewing term because, once the policy
renews, the replacing vehicle loses its status as a newly acquired auto.
However, since the policy states “If a ’newly acquired auto’ replaces a
vehicle shown in the Declarations, coverage is provided for this vehicle
without your having to ask us to insure it,” a case may be made
that the insured has no obligation to EVER report the vehicle. While there are
other portions of the policy which would support an implicit requirement that a
vehicle should be reported, it would help matters if the policy specifically
stated that such a vehicle would have to be reported at the policy’s renewal.
A newly
acquired ADDITIONAL car qualifies for coverage ONLY when it is
reported to the insurer and that coverage begins upon the date the vehicle is
reported. THERE IS NO automatic coverage provided for newly acquired autos that
are in addition to the insured autos appearing on the policy.
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Example: Dill E. Dally’s
SPAP covers a ’13 Mercury and has a policy
period of April 15, 2017 to October 15, 2017. It has the following coverage
limits
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Bodily Injury
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$100,000/$300,000
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Property Damage
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$100,000
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Medical Payments
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$10,000
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Collision
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n/a
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Other Than Collision
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n/a
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Uninsured Motorist
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$25,000/$50,000
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On September 3, 2017, Dill
buys a second vehicle, a ‘13 Ford Ranger. On September 16, Dill collides with
another car when he ignores a stop sign. He causes $22,000 in injuries to the
other driver, $4,500 in damages to the other driver’s car and $6,700 in
damages to his Ranger. Dill reports the accident to his insurance company on
September 18 and that is the same day that the insurance company learns of
the new car. Under these circumstances, there is no coverage for either the
vehicle or the damage or injuries caused by its use. It is an additional
vehicle.
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Like the PAP, the
SPAP considers pickups and vans eligible vehicles as long as their gross
vehicle weight does not exceed 10,000 pounds and they aren't used commercially.
This auto policy is intended to provide coverage for personal exposures. Where
the language regarding pickups and vans excludes business use of such vehicles
(since commercial policies are available), its approach is reasonable, since it
makes exceptions for incidental business use and for farming or ranching. The
exceptions recognize the fact that such use is still consistent with what an
insurer would consider a personal loss exposure. Another qualifier for
providing coverage to pickups or vans is that no other coverage applies. Both
owned and non-owned "trailers" are defined as covered autos. Finally,
if they're pulled by an eligible vehicle, farm wagons and implements are also
defined as "trailers," which are eligible for coverage.
