(September, 2018)

PART D - COVERAGE FOR DAMAGE TO YOUR AUTO

This section is a serious departure from the earlier sections, since instead of liability to other injured parties, it deals with actual damage to the insured’s covered vehicle (including expenses because of loss of use of the same).

Insuring Agreement

A. Under paragraph A of the insuring agreement, the Personal Auto Policy agrees to protect “your covered auto” or a “non-owned auto” against accidental loss. Any payment includes compensation for loss to auto equipment but does not include the applicable deductible. If you’re unlucky enough to have more than one covered vehicle involved in the same collision loss, only a single, highest deductible will count against any loss payment.

This section clearly applies only to collision and other than collision losses, but only if the policy’s declarations page shows a deductible choice to indicate that these coverages apply. Should a loss involve a non-owned auto, the broadest coverage written for “your covered auto” applies.

B. “Collision” refers to your covered auto or your non-owned auto which has either hit or been hit by another vehicle or some other item. It’s implied that the event has to result in damage to your car. It also covers the damage to the covered or non-owned auto when it flips or is otherwise upset.

410_C076 Insured Unable to Prove Her Injury Was Result of Rear-End Collision

“Other than collision” simply refers to those events that aren’t collision. The PAP lists 10 events that qualify as other than collision losses. If your covered car is damaged by items falling from the sky, fire, theft, explosion or earthquake, windstorm, hail or flood, vandalism, rioting, contact with birds and animals, or if glass has broken, you’ve experienced an other than collision loss. The PAP is flexible about losses involving glass. If any vehicle glass is broken during a collision, an insured may choose to have it covered under the collision portion of the policy.

C. Now let’s move on to “non-owned” autos. These are private-passenger vehicles (including trailers), vans and pickup trucks that, while being operated or used by an insured, aren’t owned by or regularly available to any insured (which includes any “family member”).

Related Article: Auto Dealer Customers Covered Under Their Personal Auto Policies

Note: This definition, while including pickups or vans, does not include a reference to their gross vehicle weight such as is made in the definition of “newly acquired auto.”

Another class of vehicle that’s considered a non-owned auto is a temporary substitute. This refers to an auto or trailer that takes the place of a covered auto (or trailer) because the covered vehicle is unavailable while being repaired, replaced or maintained. The rationale for covering non-owned autos is that these are temporary situations that don’t typically increase the exposure contemplated by your premium, so the PAP should be available to provide protection.

Related Court Cases:

Rental Car Fails to Qualify As A Temporary Substitute.

Temporary Borrowed Car Or Replacement For Inoperable Car?

D. Exclusion 10. that is found later in this policy excludes coverage for custom equipment. This part of the policy is all about explaining what custom equipment is. Under the latest edition of the PAP, custom furnishings and equipment include such items as carpeting, insulation, furniture or bars, ovens, beds/couches, roof extensions, murals, paintings, etc.

Custom equipment does not include  property in the vehicle that is original manufacturer equipment or parts and similar property that replaced original manufacturer equipment or parts. Further, electronic property that is designed to handle audio signals, video or data does is not custom equipment. (09 18 addition)

Related Article: Personal Auto Policy Endorsements

Transportation Expenses

A. An insured can accumulate significant expenses related to the loss of a covered vehicle. The PAP is sensitive to this likelihood, and it includes some additional coverages. It will pay up to a maximum of $900 to help cover the cost of getting replacement transportation. (09 18 change)

1. The PAP will pay up to $30 a day. This coverage is only provided if the covered car is unavailable due to a collision or other than collision loss. Of course, the declarations page must show that the applicable coverage has been selected.

In the midst of this section that provides physical damage coverage lies liability protection. The PAP also compensates an insured for legal liability for the loss-of-use expenses for damage to a non-owned car. This coverage is limited to $30 per day with no mention of a maximum. Of course, this is a small loss exposure, so no other limit may be necessary. (09 18 change)

B. The PAP also will cover additional transportation expenses if an owned or non-owned auto is stolen. However, coverage won’t begin until 48 hours after the theft. In all other cases, coverage begins after 24 hours (that a covered vehicle is unavailable for use). Coverage ends when the covered car is back for the insured’s use or a settlement has been made. All coverage is subject to any limits and provisions shown in paragraph A of the coverage. Further, all payments end when the auto is available for use or the loss has been settled. Payments under this provision are also subject to the time it should reasonably be expected to repair or replace the applicable auto.

Exclusions

Part D - Coverage for Damage to Your Auto will not pay for:

1. Loss to an owned or non-owned auto that occurs while it is used for hire to transport persons or goods. This exclusion has been revised to make coverage intent clearer. It now makes reference to the coverage ineligibility when any insured driver is actively using any vehicle in conjunction with a transportation network platform. Active use means providing such use as a driver. The exclusion applies both while seeking passenger contacts and during transporting passengers. (09 18 change)

Both the 01 05 and the 09 18 PAP editions maintain an important exception to this exclusion, with a difference.

a. Coverage is still permitted for vehicles used in traditional car pools (where the insured gets gas and maintenance money from car pool riders).

b. An additional exception is referenced, allowing coverage for a vehicle during its use in charity and volunteer situations. Protection extends to instances of both ownership and operation during such instances. (09 18 change)

2. Damage resulting from your car’s aging, extremely cold weather, mechanical or electrical breakdown, or road damage.

An exception is made for such damage that is related to the total theft of a covered auto (owned or non-owned).

3. There’s no coverage for any loss caused by radioactive contamination, nuclear weapons, war, insurrection, rebellion or revolution.

4. Part D of the PAP does not cover loss to electronic equipment designed for reproducing, receiving or transmitting signals (both audio and visual). For instance, the PAP begins by excluding coverage for equipment such as radios, tape decks, stereos or compact disc players. Other items that are becoming common auto components are also barred from coverage such as navigation devices, phones, computers, TVs, scanners and similar equipment. However, there are some exceptions. There IS coverage for equipment IF the equipment is permanently installed in your covered auto or any non-owned auto.

Note: Another issue that may need to be addressed, although the items that are listed in the PAP is just illustrative, the fact that it includes obsolete devices and fails to mention newer devices could still create claim disputes.

5. This exclusion is for any media that is used with such equipment as well as any accessories used with equipment that reproduces sound, receives or transmits (audio and/or visual) signals.

6. No coverage is available for vehicles listed on the policy or those that qualify as a non-owned auto when they are destroyed or taken by military or civil authorities.

Of course, an exception is made for the financial interests of loss payees. It isn’t in the public interest to deny protection to lenders because of the illegal acts of their borrowers.

7. There’s no coverage for a camper body, motor home or trailer owned by an insured, but not listed on the declarations page. Neither is there any coverage for awnings, cabanas (lightweight structures with living facilities) and equipment designed to create additional living facilities including cooking, refrigerating or plumbing equipment. Coverage for such property should be endorsed to the policy using PP 03 07–Trailer/Camper Body Coverage (Maximum Limit of Liability). Of course, in many instances it would make more sense to purchase a special motor home or RV policy to properly protect rolling homes.

Related Article: Personal Auto Policy Endorsements

Are there any exceptions? Yes. This exclusion doesn’t affect coverage for trailers (including their facilities or equipment) that are NOT owned by an insured.

The PAP also provides coverage for trailers (including their facilities or equipment) that are newly acquired by the insured and which are reported to the insurer within 14 days. The intent of the policy is to make sure that all exposures are reported and rated.

Of course, coverage would also apply to such equipment that the insured already owns on the date that the property is reported and coverage requested by the insured. However, most companies have their own additional restrictions in order to protect themselves against insureds who try to save money by requesting coverage while a trailer is being used (such as the summer) and then removing coverage while the property is in storage.

8. Any insured, including a family member, who has a loss involving a non-owned auto will find him without coverage if he doesn’t believe he has permission to use that auto.

Related Court Case: Insurer Must Cover Non-Owned Auto Loss

9. Any equipment used to detect or locate radar or lasers aren’t protected if it is lost or damaged.

10. All custom equipment (referenced in Part D in Coverage to Your Auto insuring agreement, Part D) is excluded from coverage. (09 18 addition).

Note: The change is that examples of custom equipment are removed from reference in the exclusion and now appears separately under this Coverage Part’s Insuring Agreement.

There has also been a change to the exception to this exclusion. In the previous edition, the exclusion did not extend to a covered pickup truck’s cap, cover or bed liner. The revised exception is more generic and pays for the first $1,500 of a custom equipment loss. The equipment is covered while in either  owned or non-owned autos. (09 18 Change).

11. This eliminates coverage for any non-owned auto that is being held or used by any insured while working at selling, repairing, servicing, storing or parking cars. The exclusion specifically mentions that it applies even during  road testing and delivery. HOWEVER, this exclusion just applies to vehicles that are made for use on public highways.

It looks like exclusion 11 bars coverage for any auto-related business.

12. There is no coverage for any loss to an auto that is related to organized vehicle competitions that take place   within a facility meant for racing. Traditionally this limitation applied to vehicles in such a facility while practicing, preparing or competing in races or speed contests. However, the latest edition of the PAP has been revised. Besides the activities just listed (racing and speed contests), this exclusion also applies to driver skill training and driver skill events. In addition, the exclusion applies to those participating in any of the above instead of being limited to only those competing. (09 18 change)

Of course, your car should be safe if it’s in the parking lot of a NASCAR track...at least we hope so. Actually, the change to the PAP is logical to fulfill the policy’s intent to avoid coverage for race-related exposures; including such times that a vehicle is at a location as a precursor to a participating in a race.

The PAP definitely  distances itself from covering cars that have anything to do with organized competition. Persons who have these exposures have to look for special coverage, since ISO does not fill the coverage gap with any endorsement. 

13. This item excludes any loss to a non-owned auto (including loss of use) rented by the named insured, resident spouse or family member when any applicable state law or rental agreement prohibits a rental car company from collecting for any loss or loss of use. In other words, the PAP won’t provide protection when either state law or a rental contract provides that coverage must be part of the rental transaction. Such a legal requirement makes coverage under a PAP unnecessary.

14. No loss to a covered vehicle applies during the period that both of the following apply to the vehicle:

a. There is a written contract under which the vehicle is part of a personal vehicle sharing program

b. That vehicle is being used by a person other than the named insured or a family member (as defined) of the named insured who is participating in a program referenced in 12.a above. (09 18 addition)

15. No coverage extends to claims involving a non-owned vehicle that involves damage, destruction, or loss of use of that vehicle when such claims are related to the use of the vehicle under a personal vehicle sharing program. This exclusion applies when both of the following apply:

·         A non-owned vehicle is used by the named insured or a family member (as defined) of the named insured

·         No recovery can be demanded from the named insured or family member due to the parameters of the sharing program’s written agreement or due to state law. (09 18 addition)

16. This exclusion is also new. It bars coverage for loss involving flying vehicles, whether flight is their sole capability or is among their features. (09 18 addition)

Limit of Liability

A. The PAP does have restrictions on the total amount of coverage available for a loss to a covered vehicle.

1. Paragraph A. of Part D - Coverage for Damage to Your Auto - states that the policy is obligated to pay the actual cash value of the lost (stolen or damaged [including total losses]) property, or

2. To pay what’s needed to repair or replace the property,

whichever is the LEAST EXPENSIVE option. This provision includes the option of settling a loss by using property of like kind and quality.

This section also explains that the maximum available for the loss of:

·         A non-owned trailer is $1,500;

·         Equipment that merely reproduces sound (such as a CD player) which is installed in a place other than where intended by the vehicle manufacturer  is $1,000. Loss to accessories of that equipment is subject to the same $1,000.

·         Property installed on either an owned auto (that qualifies as a covered auto) or a non-owned auto which meets the definition of  custom equipment is $1,500 (09 18 addition)

B. Any settlement includes an adjustment for a vehicle’s decreasing market value (depreciation) and physical condition when determining its actual cash value after a total loss. Finally, under paragraph C, if the repair or replacement of a covered vehicle results in an insured being better off than before the loss, the PAP won’t pay the value of the improvement.

C. While not defined, the words “of like kind and quality” can have a significant impact on settlements. As the cost of vehicles and vehicle parts continues to increase, insurers face more pressures to find options that indemnify their insureds while not “breaking the bank.” As it is with homeowners insurance, the need to repair damaged property often puts auto insurers in the position of having to actually improve an insured’s position after a loss. Use of the terms “like kind and quality,” allows carriers options other than the problematic use of new parts to make repairs and then attempt to adjust the value of the settlement.

Payment of Loss

This provision discusses a company’s options in making a settlement on a loss to a covered vehicle. The settlement may be in the form of a cash payment, a repaired vehicle or a replacement vehicle. The insurer has the option to return any stolen property to the named insured or to the latest address shown on the declarations page. If any property is returned, the insurer must pay for doing so, and only after any damages have been repaired. Further, should the company exercise the right to keep the property; it has to be at a price that’s acceptable to both parties. Finally, if the settlement is made in cash, the total has to include any sales tax.

No Benefit to Bailee

A carrier for hire or a bailee for hire is not permitted to benefit from the PAP.

The Personal Auto Policy has a tradition of trying to identify precisely the parties to the insurance contract. One of its intentions is to perform its contractual obligations to the named insured and other parties defined in the definitions, insuring agreements and other policy provisions. To do otherwise would be to open the policy up to parties who haven’t been rated or underwritten for coverage and for more exposures than contemplated. Other parties may benefit unintentionally from the policy without this provision. Such persons or organizations can’t piggyback their obligations to the PAP.

Related Court Case: "Car Wash Assumes Liability When Customer Relinquishes Vehicle For Service"

Other Sources of Recovery

This provision is to make sure that any payment under Part D of the Personal Auto Policy takes other sources of loss payment into account. If other insurance policies, provisions or sources of recovery apply to a physical damage loss, the policy will only pay its proportion of the total available coverage. But the proportional payment is only for owned autos. If other sources of payment exist for a loss involving a non-owned auto, Part D of the PAP responds on an excess basis. It is excess over everyother available source of payment, including the policy of the owner of the car.

The provision to pay its proportionate share on owned auto losses effectively assures that the policy won’t pay more than the limits of liability listed on the declarations page. Of course, it has no other way to control the amount paid by other sources.

Related Court Case: Parties Dispute Applying “Other Insurance”

Appraisal

This system works quite similarly to an arbitration clause, except that the only point of dispute is the amount of payment, rather than the amount of payment and/or whether payment is due. This provision may be invoked when the company and the insured don’t agree on the amount of the loss. Each party must select its own qualified (competent and impartial) appraiser. The two appraisers then select an umpire. The appraisers then submit their opinion of the actual cash value and the amount of the loss. If they don’t reach agreement, they submit this information to the umpire. An agreement by any two persons is binding on both parties.

The company and the insured have to pay for the expenses of their own appraiser, as well as equally share the expenses of the umpire.

Note: No other insurer rights are affected by their agreeing to an appraisal. For instance, if another party has some responsibility for the loss, the insurer, after paying the appraised amount of loss, may still subrogate the claim.