The PAP covers damages that the insured is legally obligated to pay to other (third) parties. In a certain states, an injured person is often entitled to policy benefits, regardless of whether or not the vehicle operator was at fault. This is mandated by statutes known as no-fault laws. These laws are discussed later in this topic.

Insurance coverage is for the ownership, maintenance, or use of the automobile designated in the policy. The basic policy also includes the following coverages:

OTHER DRIVERS AND INTERESTS

The policy covers accidents arising out of the operation of the automobile by the named insured, resident spouse and family members, or by any other person who reasonably believes that he or she is entitled to use the vehicle. The PAP protects any member of an insured household who uses a covered car, assuming that the driver has the named insured’s permission. The PAP also liberally covers an insured’s spouse. In the event that a named insured and his or her spouse become legally separated, the spouse who leaves the household remains covered for 90 days or until that person’s coverage is handled by another policy, whichever occurs first.

The policy also covers any person or organization legally responsible for the use of the described automobile. It is important to note that the coverage is not really for the employer, but rather coverage for the named insured’s legal liability that is related to the use of the vehicle. Depending upon the loss circumstances, after paying a claim, the insurer may be in a position to pursue an insured’s employer for reimbursement.

The personal automobile policy excludes a person or organization, including its agents or employees that operate an automobile repair shop, public garage, sales agency, service station, or public parking place. An exception is made when such an excluded person is a resident of the named insured’s household, or for any partner, agent, or employee of such resident while using a covered automobile.

NON-OWNED CAR
Coverage
The policy will cover the insured, his or her spouse, and resident relatives while driving any other automobile (with certain limitations). Similarly, the policy will cover persons or organizations legally responsible for the insured’s use of any other automobile, except one that is owned or hired by the applicable person or organization.

Non-owned car coverage provided by the policy responds as excess insurance over any other insurance covering the borrowed automobile itself.

Exclusions
The personal automobile policy isn’t intended to cover automobiles that are furnished or available for an insured’s regular use. The policy specifically excludes any other automobile owned by the insured or a member of his or her household because such automobiles should have their own insurance coverage. An exclusion exists for any automobile other than a temporary substitute automobile (discussed later in the topic) owned by or furnished for regular use to the insured or a member of his or her household other than a domestic servant.

The policy also excludes all automobiles used in the insured’s business or occupation other than private passenger vehicles. Finally, no coverage is available for any accident arising out of the operation of an automobile repair shop, public garage, sales agency, service station, or public parking place (these situations should be covered by a commercial auto policy).

Extended Non-Owned Coverage
The policy may be endorsed to cover the insured’s liability while driving a non-owned automobile that is furnished for his or her regular use, e.g., a company vehicle.

TEMPORARY SUBSTITUTE AUTOMOBILE
If the automobile described in the policy is unavailable while it is being repaired or serviced, or during a period when it has been lost or wrecked, the policy covers the use of any other automobile that acts as a substitute, provided the insured does not own the automobile. No notice of the substitution is required and no additional premium is charged.

NEWLY ACQUIRED AUTOMOBILE
If the automobile described in the policy is traded for a different one, the newly acquired vehicle is automatically covered without notice to the company. If the insured or insured’s spouse acquires a new car in addition to the one described in the policy, similar automatic coverage is extended to the new automobile. However, the extension applies only if the company insures all of the automobiles that are owned by the insured on the date of delivery of the new automobile. Also, the insured must notify the company within a given number of days. Thirty-days’ notice is typical for liability coverage, but shorter notice is likely when physical damage coverage is involved. No automatic coverage would extend, however, if the insured’s spouse who owns a car insured in another company were to acquire an additional automobile.