(August, 2005)

Protection under the basic Personal Auto Policy (PAP) is designed for the "typical" personal auto exposure. This approach achieves several goals. A basic policy can be used for a very large base of customers, create uniformity of coverage, and help to control the cost of coverage for the greatest number of consumers. How are costs controlled? By making additional or broader coverages optional, those insureds whose needs are met by the basic policy don't have to subsidize those who need or desire special coverage.

This design also facilitates updates since changes, such as ISO's '05 edition of the PAP, can be reviewed, approved and implemented more quickly. Use of a basic policy also reduces the chance that changes to a particular coverage will affect the entire Personal Auto Policy. Finally, the basic PAP acts as a foundation for any necessary coverage modifications.

Modifications to the basic policy are required in order to provide customized coverage according to an individual's particular need. ISO has a variety of endorsements. Most of these optional forms are designed for consumers whose coverage needs are not met by the basic PAP contract; the forms typically require additional premium. ISO uses a common system to number its forms: two letters followed by a four digit form number, then the form's edition month and year. The current edition of the Personal Auto Policy is PP 00 01 01 05. The first two numbers represent the form category. We provide the following for your reference:

*'05 Change: In order to be more clear about intended coverage, ISO will change various State Amendatory endorsements. Instead of making reference to providing coverage at a state's minimum, the forms will refer to a given state's actual minimum limits.

Note: This analysis reflects ISO's '05 edition of the Personal Automobile Policy and endorsements.

COVERAGE ANALYSIS

Note: The various endorsements are presented in order of Insurance Services Office's form numbers.

This form was withdrawn with the introduction of the PAP 01 05 program.

This form is designed to, essentially, transform a 06 98 Personal Auto Policy into the 01 05 edition. The change is made by modifying the sections to incorporate the changes introduced to the PP 00 01 form.

This form allows an insured to suspend protection under their PAP for any (or all) vehicles that are listed on the policy (or policy declarations) as covered autos.

'05 Change: The wording of this form was changed in order to (according to ISO) make its intent more clear. Its reference to autos was changed to make it consistent with the base policy form (PP 00 01) wording.

This form reverses the action initiated by form PP 02 01, restoring coverage on a suspended policy. The restoration is effective per the date stated on the form.

This form allows an insured who is a federal employee to be covered under a PAP, with the important exception of when an auto is used on behalf of his or her government duties.

This form was changed from increased limits to optional limits, which can be purchased in order to increase the amount of coverage for transportation expenses. Coverage may be triggered by a loss to either an owned or a non-owned auto. This endorsement increases the daily and maximum limit available under Coverage Part D, Damage to Your Auto, Transportation Expenses. Instead of merely raising the limit to a specified higher amount, the form now allows an insured to select their preferred limits for covering the expense of a covered auto that's not available for regular use.

This endorsement pays up to the amount shown in its schedule or in the policy declarations for towing and labor costs when a covered auto is disabled. Note that covered labor costs just include those incurred at the point of disablement. In other words, no coverage is provided for work performed at a garage or any other location.

This form is used to attach any vehicle financial interests for the covered autos to the policy.

Endorsement PP 03 06 expands liability and medical payments coverage for a named individual by several policy exclusions. The effect is to: cover the carrying of persons or property for a fee; cover use of a vehicle in business other than automobile-related; cover use of a vehicle furnished or available for regular use of the individual. Of course, the broader coverage applies only while a non-owned vehicle is being used.

The endorsement does not provide coverage for any accident involving a vehicle owned by the named individual, owned by a member of the same household, or for any vehicle used as a temporary substitute for any owned vehicle.

'05 Change: The title of the form has been changed and coverage was altered to adjust for the fact that the coverage this form used to provide is now handled by new form PP 03 06, Extended Non-Owned Coverage - Vehicles Furnished Or Available For Use As Public Or Livery Conveyances.

This endorsement was substantially changed from the previous edition and it pays for loss to described trailer or camper body as well as to awnings, and cabanas or other equipment which are attached to a covered auto and are designed to create additional living facilities. The schedule was substantially expanded so that it can describe up to three vehicles and can show whether an insured has selected Collision or Other Than Collision coverage and the accompanying premiums for each vehicle.

The form specifically excludes loss to business or office equipment, sales samples or property used in exhibitions. It also excludes damage to clothing or luggage. Any loss payment is less any applicable deductible shown in the Schedule or Declarations. This endorsement should not be confused with ISO's Customizing Equipment endorsement described below.

'05 Changes: This form used to exclude electronic equipment that, even when permanently installed, was located in areas that a car maker did not designate for such equipment. The form will now offer its applicable limit to cover any eligible equipment that is permanently installed and designed to run from the vehicle's power plant.

Endorsement PP 03 08 amends Part D of a Personal Auto Policy in order to provide coverage to a described vehicle on a stated amount basis. The company's limit is the lesser of the stated amount shown, actual cash value or the repair or replacement cost; subject to the applicable deductible. New language reminds the agent and customer that the stated amount represents the maximum amount which may be received as a result of a total loss and not a guaranteed amount.

Endorsement PP 03 09 is available to convert the split limits liability coverage of a Personal Auto Policy to a combined single limit basis. Uninsured Motorists coverage and Underinsured Motorists coverage may also be established on a combined single limit basis by use of comparable endorsements.

*'05 Change: In order to be more clear about intended coverage, ISO will change this form's reference to minimum limits. Its use will obligate an insurer to apply a given state's required minimum limits.

This form is designed to properly attach any other optional coverage to a PAP when the endorsement is added after the policy has been issued.

Endorsement PP 03 11 pays when Bodily Injury Liability insurance carried by a liable third party has been exhausted by payment of judgments or settlements. Within coverage limits, it pays the excess of damages which a covered person is legally entitled to recover from the owner or operator of an underinsured motor vehicle because of bodily injury. Underinsured Motorists coverage and Uninsured Motorists coverage are mutually exclusive, applying to different situations. The limit of liability provision in this endorsement clarifies its statement that no insured will be entitled to receive duplicate payments for the same element of loss. The form has expanded sections on Other Insurance, Additional Duties and the General Provision, "Our Right to Recover Payment." These sections explain how loss payment is shared among other primary or excess coverages, notification of suit and/or settlement and the company's ability to recover advanced payments to the insured from other, responsible parties.

'05 Change: The latest edition of the PAP has modified its approach to other existing coverage. This form now reads that, even for autos that qualify as temporary substitutes for covered autos, it will respond as excess coverage over protection that may exist elsewhere.

Endorsement PP 03 13 provides coverage for audio, visual and data electronic equipment media on a scheduled basis. If coverage for electronic equipment is purchased, additional coverage for $200 worth of tapes, records, discs or other accompanying media is provided at no extra charge. This form also covers what it calls "excess" sound reproducing equipment. "Excess" refers to equipment that just plays media and which is permanently installed, but not in the area (i.e., the center of dashboard) contemplated by the vehicle-maker. An example would be a CD player that is permanently bolted to the floor of an auto. The use of the term "excess" might be confusing and should be defined (or alternative wording may be more appropriate).

'05 Changes: This form used to have the daunting title of "Coverage For Excess Sound Reproducing Equipment, Audio, Visual And Data Electronic Equipment And Tapes, Records, Discs And Other Media." Further, it used to exclude electronic equipment that, even when permanently installed, was located in areas that a car maker did not designate for such equipment. The form will now offer its applicable limit to cover any eligible equipment that is permanently installed and designed to run from the vehicle's power plant.

No deductible applies to a loss to any scheduled equipment or its media. Settlement is the lesser of the stated amount, the equipment's actual cash value or the cost to repair or replace with like kind or quality.

Endorsement PP 03 18 provides coverage for customizing equipment on pickups and vans that is excluded from Part D—Damage to Your Auto of the Personal Auto Policy. Instead of rating according to a stated amount, coverage is available only on an actual cash value basis. The endorsement protects furnishings that are now commonly installed in vans and trucks such as thick carpeting and insulation, beds, bars, sinks, cabinets, water heaters and other items. External custom features which are eligible for coverage include hand paintings, decals and height-extending roofs. The same coverage and deductible extends from the covered vehicle.

'05 Changes: This form used to exclude electronic equipment that, even when permanently installed, was located in areas that a car maker did not designate for such equipment. The form will now offer its applicable limit to cover any eligible equipment that is permanently installed and designed to run from the vehicle's power plant.

This endorsement allows you to add the insurable interest for a lessor onto a PAP that is insuring a leased automobile. Coverage may be added on either a single or split liability limit basis and actual cash value minus the deductible for Collision and Other Than Collision losses.

Endorsement PP 03 20 is available under the Personal Auto Policy to schedule coverage for snowmobiles, and it includes an option to exclude the Passenger Hazard.

The Definition Section of the PAP is changed so that coverage applies to use of any described snowmobile. Coverage is excluded for any person or organization renting or leasing a snowmobile, other than the named insured. There is no coverage for racing or speed contests or for snowmobiles that are powered by airplane type fans or propellers.

Note: A newly acquired snowmobile must be reported within 14 days.

'05 Changes: This form used to exclude electronic equipment that, even when permanently installed, was located in areas that a car maker did not designate for such equipment. The form will now offer its applicable limit to cover any eligible equipment that is permanently installed and designed to run from the vehicle's power plant.

Also, rather than making reference to an "insured," the form mentions "person."

Endorsement PP 03 21 extends all Liability, Medical Payments, Uninsured Motorists, Damage to Your Auto, and any no-fault coverage afforded to a covered person, to accidents occurring in Mexico within 25 miles of the United States border, while the covered person is on a trip of 10 days or less. The intent of this endorsement is to extend the coverage territory to the border towns of Mexico if you should be involved in an accident with another U.S. citizen.

In order for this endorsement to apply; liability insurance must have been purchased separately through a licensed Mexican insurance company, the suit must be brought in the United States, and/or the suit cannot involve a Mexican citizen or resident. The insurance provided by the endorsement is excess over the Mexican insurance policy and other collectible insurance. Coverage under Damage To Your Auto is made only for repairs performed in the United States. Please refer to PF&M section 410.6-12, Excess Mexican Coverage for a Personal Auto Policy, for details of coverage and arranging of the prerequisite insurance written by a licensed Mexican insurance company.

'05 Change: This form was changed, merely by replacing "and" with "or" in reference to the three situations that would trigger an exclusion of coverage. The change is an attempt to discourage the form from being interpreted as requiring all three (rather than any one of the three) to cause a bar to coverage.

Endorsement PP 03 22 may be used with a Personal Auto Policy to provide coverage for an individual who does not own an auto. (It is not to be confused with Extended Non-Owned Coverage for Named Individual Endorsement PP 03 06, described above.)

The endorsement provides Liability, Medical Payments and Uninsured Motorists coverages for named individuals. If a named insured buys an auto, he or she is covered up to 14 days. Coverage terminates when the insured purchases insurance on the acquired auto during that time. This coverage is excess over other available insurance.

'05 Changes: This form was changed in the following manner:

• it now includes an option to extend protection to an insured's spouse and resident relatives
• the wording, particularly references to "your covered auto" makes it dovetail with the language used in the base policy (PP 00 01) form
• the form no longer has a provision that replaces the PP 00 01 provision on property damage to an insured's home or garage.
• the form includes an option to add underinsured motorist coverage

• the form no longer deletes the PP 00 01 form's business exclusions

Endorsement PP 03 23 is available for use with the Personal Auto Policy to provide coverage for the use of motorcycles, motor scooters, motor homes, golf carts, or other similar type vehicles. The endorsement is designed to substantially provide all coverages otherwise written under the Personal Auto Policy. It does not provide coverage for non-owned vehicles except for temporary substitute vehicles. There is an option to exclude the Passenger Hazard. The unendorsed PP 00 01 does not properly cover the insurable interest in vehicles that are jointly owned by two resident relatives. Use PP 03 34—Joint Ownership Endorsement for other than husband and wife ownership situations.

'05 Changes: This form was revised editorially. Rather than making reference to an "insured," the form mentions "person."

PP 03 24—Participating Coverage For Damage To Your Auto

'05 Changes: This form was withdrawn from use with the introduction of the 01 05 PAP program.

Use of this endorsement amends the PAP so that no liability coverage is provided. It is more common that, for those jurisdictions that permit it, companies use their own forms for such coverage situations.

This endorsement is (apparently) intended to supplement a Personal Auto Policy that is modified with the PP 03 23, Miscellaneous Type Vehicle endorsement. For an analysis of the coverage provided by this form, please refer to PF&M Section 410.6-11.

PP 03 33—Certificate Of Insurance—Trusts

'05 Changes: This form was withdrawn from use with the introduction of the 01 05 PAP program. Please see form 13 03, Trust Endorsement.

This form allows relatives other than husband and wife (regardless of residency) or unrelated, resident individuals who jointly own private passenger vehicles to be insured as joint owners and thus be eligible for full coverage under the Personal Auto Policy. Siblings who own a car, nontraditional households, roommates, separated spouses are all examples of situations where this endorsement is appropriate.

'05 Changes: This form was changed to make its coverage more broad. The new version of the endorsement now includes an option to eliminate the form's exclusion of non-owned auto liability. The form wording was changed so that it reads that the exclusion is in force UNLESS the form schedule's checkbox to eliminate the exclusion is marked.

Endorsement PP 03 35 is a coverage that should be discussed with all insureds who finance or lease an auto. Traditional car loan/lease periods are lengthening from an average of 36 to 60 months and beyond. An auto's value may depreciate more quickly than the customer's loan balance. Thus, in a total loss, the insured may receive an actual cash value payment that is less than the loan amount. This gap can now be covered by endorsement PP 03 35. The coverage will not pay any excessive use payments for leased vehicles, or costs for warranties and other loan add-ons, or any late fees or overdue lease or loan payments.

PP 04 01—Single Uninsured Motorists Limits

This form allows an insured to convert the limits of insurance that is provided for uninsured motorists coverage from the (default) split limit of liability to a single limit basis.

PP 04 02—Single Underinsured Motorists Limits

This form allows an insured to convert the limits of insurance that is provided for underinsured motorists coverage from the (default) split limit of liability to a single limit basis.

PP 13 01—Coverage For Damage To Your Auto Exclusion

The form adds an additional definition and exclusion to the PAP and, per ISO, has no rating impact because it acts only to clarify the intent of coverage under Part D - Coverage for Damage To Your Auto. For a detailed explanation, please refer to PF&M section 410.6-15, Coverage For Damage To Your Auto Exclusion.

PP 13 02 - Trip Interruption Coverage

'05 Changes: This form was introduced with the introduction of the 01 05 PAP program. It provides coverage for certain additional expenses an insured has to pay because of the breakdown and, subsequent, loss of use of a covered auto. Coverage is capped at $600 per covered incident and the covered vehicle must be unavailable for more than 24 hours. Further, the loss has to take place at least 100 miles away from the insured's home. Covered expenses include the cost of hotels/motels and meals.

PP 13 03, Trust Endorsement

'05 Changes: This form was introduced with the introduction of the 01 05 PAP program. It replaces the form PP 03 33, Certificate of Insurance - Trusts.

This new form better addresses the nature of a typical trust arrangement. It includes a schedule for listing the applicable trust and it alters the base policy so that the named trust is given status as a covered person under the PAP. It also changes the notification provision so that a notice of either a policy cancellation or non-renewal is sent to the trustee.

PP 13 05 - Extended Non-Owned Coverage - Vehicles Furnished Or Available For Use As Public Or Livery Conveyances.

'05 Change: This form has been introduced with the new PAP program. It allows an insured to add liability (and medical payments) coverage for non-owned vehicles a covered person uses for certain transport situations (either persons or goods).