Personal Automobile Policy

Overview

The personal automobile Policy (PAP) is a personal lines policy that covers damages resulting from the noncommercial use of an automobile. It is designed to cover an individual’s or family’s personal use of an automobile, and is comprised of six major parts, each of which are discussed in this chapter.

Glossary

Bodily Injury: Bodily harm, sickness, or disease, including death that results from accident.

Business: Trade, profession, or occupation.

Covered Automobile:

1. Any vehicle shown in the Declaration
2. A newly acquired automobile.
3. Any trailer that the insured owns.
4. Any automobile or trailer that an insured doesn’t own, while being used as a temporary substitute for any other vehicle described in this definition which is out of the normal use because of its:
   1. Breakdown
   2. Repair
   3. Servicing
   4. Loss
   5. Destruction

Family Member: A person related to the named insured by blood, marriage, or adoption who is a resident of the household. This includes a ward or a foster child.

Newly Acquired Automobile: Any of the following types of vehicles for which the insured becomes the owner during the policy period.

1. A private passenger automobile.
2. A pickup or van for which no other insurance policy provides coverage, if the automobile:
   1. Has a gross weight of less than 10,000 pounds.
   2. Isn’t used for delivery or transportation of goods and materials, unless such use is incidental to the insured’s business of installing, maintaining, or repairing furnishings or equipment, or for farming or ranching.

Note: The newly covered automobile will have the broadest coverage that the insurer provides on any existing vehicle shown in the Declarations. However, for coverage to apply, the insured must ask the insurer to insure the vehicle within 14 days after becoming the owner.

Occupying: In, upon, getting in, on, out, or off.

Private Passenger Automobile: Shall be deemed to be owned by a person if the automobile is leased under contract for a continuous period of at least six months.

Trailer: A vehicle (including a farm wagon or farm implement) designed to be pulled by a private passenger automobile, pickup, or van.

We, US, and Our: The insurer providing the coverage

You and Your: Refer to the named insured listed in the declarations, and the spouse if a resident of the same household.

Part A – Liability Coverage

Insuring Agreement

1. The insurer will:
   1. Pay damages for bodily injury or property damage for which any insured becomes legally responsible due to an automobile accident, including prejudgment interest awarded against the insured.
   2. Settle or defend, as it considers appropriate, any claim or suit asking for such damages.
   3. Pay all defense costs it incurs, in addition to the liability limit. The insurer’s duty to settle or defend ends when the limit of liability is exhausted.
2. The insurer won’t defend or settle any suit or claim that isn’t covered under this policy.
3. The policy defines insured as used in Part A as:
   1. The named insured or any family member (even if not licensed).
   2. Any person using the covered automobile with permission.

Note: A mechanic who is test driving an insured automobile would not be covered.

Supplementary Payments

In addition to the limit of liability, the insurer will pay on behalf of the insured:

1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic law violations.
2. Premiums on appeal bonds.
3. Interest accruing after a judgment is rendered in any suit defended by the insurer.
4. Up to $200 a day for the insured’s loss of earnings due to attendance of trials or hearings at the insurer’s request.
5. Other reasonable expenses incurred at the insurer’s request.

Exclusions

1. Liability coverage isn’t provided for:
   1. Any insured who intentionally causes bodily injury or property damage.
   2. Damage to property owned, or being transported, by an insured.
   3. Damage to property rented to, used by, or in the care of the insured, except a residence or private garage.
   4. Bodily injury to an employee, except a domestic employee, during the course of employment.
   5. Damages arising out of the ownership or operation of a vehicle being used as a public or livery conveyance. The exclusion doesn’t apply to a share-the-expense car pool.
   6. Any insured while employed or otherwise engaged in the business of selling, repairing, servicing, storing or parking vehicles designed for use mainly on public roads, including vehicles used for road testing and delivery. This exclusion doesn’t apply to a covered vehicle owned or used by an insured.
   7. The maintenance or use of any vehicle while an insured is employed or is engaged in any business, other than farming or ranching. The exclusion doesn’t apply to the maintenance or use of a private passenger automobile, pickup, or van, or trailer that is owned by the named insured.
   8. A vehicle being used without a reasonable belief that an insured is entitled to do so.
   9. Damages covered under a Nuclear Energy Liability Policy.
2. Liability coverage isn’t provided for the ownership, maintenance, or use of:
   1. Any vehicle with fewer than four wheels, or designed mainly for use off public roads. This exclusion doesn’t apply to such vehicles while being used by an insured in a medical emergency, to any trailer, or to any non-owned golf cart.
   2. Any vehicle, other than the insured automobile, owned by or furnished for the regular use of an insured or a family member.
   3. Any vehicle, located inside a facility designed for racing, for the purpose of competing in practicing for, or preparing for any prearranged or organized race or speed contest.

Limit of Liability

1. The limit of liability shown in the Declarations is the maximum the insurer will pay in any one accident, regardless of the number of:
   1. Insureds.
   2. Claims made.
   3. Vehicles or premiums shown in the Declarations.
   4. Vehicles involved in the accident.
2. If the loss is covered under more than one Part of the policy, payment will not be duplicated.

Out of State Coverage

While the covered automobile is away from the state where it is principally garaged, the policy’s limit of liability insurance will increase to comply with any higher specified compulsory insurance of financial responsibility law in the state where the covered automobile is being used.

Financial Responsibility

When the policy is certified as future proof of financial responsibility, the policy shall comply with the law to the extent required.

Other Insurance

If there is other liability coverage applicable to the insured automobile, the insurer will pay only the proportion that the limit of liability bears to the total of all applicable limits. However, coverage for non-owned vehicles shall be excess over any other collectible insurance.

Part B – Medical Payments Coverage

Insuring Agreement

1. The insurer will pay reasonable expenses incurred for necessary medical and funeral services caused by an accident, sustained by an insured, and incurred within three years from the date of an accident.
2. The policy defines insured as used in Part B, as:
   1. The named insured or any family member occupying any automobile or as a pedestrian when struck by a motor vehicle designed for use mainly on public roads.
   2. Any other person, such as a passenger, while occupying the insured automobile.

Exclusions

Medical Payments Coverage isn’t provided for any person while occupying:

1. Any motor vehicle that has fewer than four wheels.
2. The insured’s vehicle when it’s being used as a public livery conveyance. This exclusion doesn’t apply to a share-the-expense car pool.
3. A vehicle that is being used as a residence.
4. A vehicle used during the course of employment if Workers’ Compensation benefits are required or available for bodily injury.
5. A vehicle, other than the covered vehicle, which is owned by or furnished for the regular use of the insured or any family member.
6. A vehicle:
   1. Occupied without a reasonable belief that the insured has permission to do so.
   2. Use in the insured’s business, other than a private passenger automobile, pickup, or van.
   3. To which damage is caused by discharge or a nuclear weapon, war, civil war, resurrection, rebellion, or revolution.
   4. Exposed to nuclear reaction, radiation, or radioactive contamination.
   5. Being used in a recognized racing activity.

Limit of Liability

The limit of liability shown in the Declarations is the maximum the insurer will pay for each person injured in any one accident. This is the most the policy will pay regardless of the number of insureds, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident. If the loss is covered under more than one Part of the policy, payment won’t be duplicated.

Other Insurance

If there is other applicable automobile Medical Payments insurance, the insurer will pay only the proportion that its limit of liability bears to the total of all applicable limits. However, coverage for non-owned vehicles shall be excess over any other collectible automobile insurance providing payment for medical or funeral expenses.

Part C- Uninsured Motorist Coverage

Insuring Agreement

1. The insurer will pay damages that an insured is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury.
2. The policy defines insured as the named insured, a family member, or any other person occupying the insured automobile.
3. The policy defines uninsured motor vehicle as a vehicle that is uninsured at the time of the accident; a hit-and-run vehicle; or a vehicle for which there is a liability policy or bond in force at the time of accident, but the insurer denies coverage, becomes insolvent, or the policy limit for bodily injury is less that that required by the financial responsibility law.

Uninsured motor vehicle doesn’t include any vehicle:

1. Owned by a named insured or family member.
2. Owned by any governmental unit or agency.
3. Owner by a self-insurer.
4. On rails or crawler treads.
5. Designed for off-road use.
6. While used as a residence.

Exclusions

The policy doesn’t provide Uninsured Motorist Coverage to or for:

1. Anyone who occupies or is struck by a vehicle owned by the insured, other than a vehicle which is insured for this coverage under this policy.
2. Anyone who occupies a vehicle without permission of the insured, or if the vehicle is being as a public livery or conveyance, except a share-the-expense car pool.
3. Anyone who has coverage under Workers’ Compensation or a Disability Benefits law.
4. Any insured settling a claim without the insurer’s consent
5. Punitive or exemplary damages.

Limit of Liability

The limit of liability shown in the Declarations is the maximum the insurer will pay in any one accident. This is the most the insurer will pay regardless of the number of insureds, claims made, vehicles or premiums shown in the Declarations, or vehicles involved in the accident. If the loss is covered under more than one Part of the policy, payment will not be duplicated.

Other Insurance

1. If more than one policy applies, the limit of liability may equal, but may not exceed, the highest applicable policy limit.
2. The insurer pays only its share of the loss, which is the proportion that its limit of liability bears to the total amount of all applicable coverage.
3. If the loss occurs while the insured is occupying a non-owned vehicle, the policy covering the non-owned vehicle is primary, and the insured’s coverage is excess.

Arbitration

If the insurer and the insured don’t agree on the recovery of damages or the amount recoverable by the insured, each party may select an arbitrator ( at each party’s own expense) who then jointly select a third arbitrator (with the expense split equally by each party). A decision agreed upon by the arbitrators will be binding as to the insured’s entitlement to, and the amount of, damages. This applies if the amount doesn’t exceed the state’s minimum bodily injury liability limit. If the amount exceeds the limit, either party may demand a right to trial within 60 days of the arbitrator’s decision.

Underinsured Motorist Coverage

This coverage is slightly different from Uninsured Motorist Coverage, and may be required by state statues as part of the Uninsured Motorist Coverage. It protects the insured against drivers who do have automobile liability insurance, but whose coverage limits aren’t enough, The coverage pays only up to the amount that exceeds the limit of the of liability of the party that was at fault.

Part D – Coverage for Damage to Your Automobile

Insuring Agreement

The insurer will pay for direct and accidental physical loss to the covered automobile or any non-owned automobile, minus any applicable deductible, from collision and comprehensive. (Payment is made regardless of fault.)

Collision – The upset of the covered vehicle or a non-owned automobile, or their impact with another vehicle or object, such as a tree.

Other Than Collision (Comprehensive) – Any other cause of loss which isn’t defined as a collision and which isn’t otherwise excluded in the policy. Comprehensive includes but isn’t limited to following causes of loss:

1. Missiles or failing objects
2. Fire
3. Theft or larceny
4. Explosion or earthquake
5. Windstorm
6. Hail, water or flood, including a flash flood
7. Malicious mischief or vandalism
8. Riot or civil commotion
9. Contact with a bird or an animal
10. Breakage of glass. If glass breakage is caused by a collision, the insured may choose to have it considered as a loss caused by a collision.

Note: Both Collision and Comprehensive coverages may have their own deductible. Deductibles tend to discourage petty claims and help lower premiums.

The policy defines non-owned automobile as:

1. Any private passenger automobile, pickup, van, or trailer not owned by, furnished, or available for regular use by the named insured or a family member.
2. Any automobile or trailer being used as a temporary substitute for the covered automobile, while the covered automobile is out of normal use because of its:
   1. Breakdown
   2. Repair
   3. Servicing
   4. Loss
   5. Destruction

Transportation Expenses

The insurer will pay, without application of a deductible, $20 per day, up to $600, for transportation expenses incurred because of a collision or comprehensive loss, as long as such coverages are provided in the Declarations. If the loss is caused by a total theft of the covered automobile or a non-owed automobile, the insurer will pay only expenses incurred during the period beginning 48 hours after the theft, and ending when the automobile is returned to use or the insurer pays for the loss. If the loss is caused other than by theft of the automobile, the insurer will pay only expenses beginning when the automobile is withdrawn from use for more than 24 hours.

Exclusions Part D of the policy won’t pay for:

1. Loss to an insured vehicle being used as a public of livery conveyance. The exclusion doesn’t apply to a share-the-expense car pool.
2. Damage due to wear and tear, freezing, mechanical or electrical breakdown, or road damage to tires.
3. Loss caused by radioactive contamination, discharge of a nuclear weapon, war, etc.
4. Loss to electronic equipment designed for the reproduction of sound and any accessories. This includes but isn’t limited to radios, stereos, tape decks, or compact disc players. This exclusion doesn’t apply to sound reproduction equipment that is permanently installed.
5. Loss of electronic equipment that receives or transmits any audio, visual, or data signals and any accessories. This includes but not limited to citizen band radios, telephones, two-way mobile radios, scanning monitor receivers, television monitor receivers, video and audio cassette recorders, and personal computers. This exclusion doesn’t apply to electronic equipment that is necessary for the normal operation of the vehicle or a permanently installed telephone powered by the vehicle.
6. Loss to tapes, records, and discs, used with the described electronic equipment.
7. A total loss due to the destruction or confiscation by governmental or civil authorities.
8. Loss to any camper body, trailer, or motor home owned by the insured, that isn’t listed on the Declarations.
9. Loss to any non-owed vehicle used by the insured without permission.
10. Loss of radar detectors.
11. Loss to custom equipment on a pickup or van.
12. Loss to a non-owned vehicle used in any business unless the non-owned vehicle is a private passenger automobile being used by the named insured or a family member.
13. Loss to a covered automobile when located at a racing facility for organized racing.
14. Loss to, or loss of use of, a rental vehicle if the rental car company is precluded from recovering such loss or loss of use from the insured by any applicable rental agreement or state law.

Limit of Liability

1. The insurer’s limit of liability for loss is the lesser of the actual cash value of the vehicle, or the amount necessary to repair or replace the vehicle with another of like kind and quality.
2. In the event of a total loss, adjustments will be made for depreciation and physical condition when determining the actual cash value.
   1. If a repair or replacement results in better than like kind or quality, the insurer won’t pay for the amount of the betterment.

Payment of Loss

The insurer may pay for loss in money, including applicable sales tax, or repair or replace the damage or stolen property.

No Benefit to Bailee

The policy won’t directly, or indirectly, benefit any carrier or other Bailee for hire.

Other Sources of Recovery

If other sources of recovery also cover a loss, the insurer will pay only its share of the loss. Any insurance provided with respect to a non-owned vehicle is excess over any other collectible source of recovery.

Appraisal

In the event the insurer and insured disagree on the amount of loss, either party may demand an appraisal. Each party selects an appraiser, and the appraisers then jointly select an umpire. Agreement by any two of the three will be binding. Each party pays for its appraiser, and the parties share the umpire expenses equally.

Part E – Duties After an Accident or Loss

1. The insured must:
   1. Notify the insurer promptly of how, when, and where an accident or loss happened.
   2. Cooperate with the investigation and settlement of any claim.
   3. Promptly send to the insurer any copies of notices or legal papers received.
   4. Submit to a physical exam as required by the insurer.
   5. Authorize the insurer to obtain medical reports and other pertinent records.
   6. Submit a proof of loss when required by the insurer.
2. When seeking Uninsured Motorist Coverage, the insured must promptly notify the police if a hit-and-run driver is involved.
3. An insured making a claim under Part D must protect the property from further damage, notify the police promptly if the vehicle is stolen, and allow the insurer to inspect and appraise the damaged vehicle before its repair or disposal.

Part F – General Provisions

Bankruptcy

Bankruptcy or insolvency of an insured doesn’t relieve the insurer of its obligations under the policy.

Changes

The terms of the policy may not be changed or waived except by written endorsement issued by the insurer.

Fraud

The insurer won’t provide coverage for any insured that has made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss which coverage is sought under the policy.

Legal Action Against Us

Legal action may not be brought against the insurer until the insured has fully complied with all terms of the policy.

Our Right to Recover Payment

If the insurer makes a payment under the policy and the person to, or for, whom payment was made, has a right to recover damages from another, the insurer is subrogated to that right.

Policy Period and Territory

The policy provides coverage only for accidents and losses that occur during the policy period and within the policy territory. The policy territory is the USA, its territories and possessions, Puerto Rico, and Canada, and while being transported between their ports.

Termination

Cancellation

1. The named insured may cancel the policy for any reason by either returning it to the insurer or giving the insurer advance written notice of the date the cancellation is to take affect.
2. The insurer may cancel the policy by mailing notice to the named insured shown on the Declarations. Notice of at least 10 days is required for cancellation due to nonpayment of premium, and at least 20 days in all other cases.
3. After the policy has been in effect for 60 days, the insurer may cancel only for the following reasons.
   1. Nonpayment of premium
   2. The insured or anyone else who customarily uses the insured vehicle has had their license suspended during the policy period.
   3. The policy was obtained through material misrepresentation.

Nonrenewal

The insurer may nonrenew the policy for the same reasons a policy may be cancelled by giving at least 20 days’ notice before the end of the policy period. The reason for canceling must be clear and simple, and the insurer can’t refuse to renew solely because of age.
Note: The time frames for cancellation and nonrenewal can vary by state.

Automatic Termination

If the insurer offers to renew the policy, the policy will automatically terminate at the end of the policy period if the insured doesn’t accept the renewal offer.

Other Termination Provisions

1. Proof of mailing of any notice constitutes sufficient proof of notice.
2. If the policy is cancelled, the insured may be entitled to a premium refund. If so, the insurer will send the refund.
3. The effective date of cancellation stated in the notice will become the end of the policy period.

Transfer of Your Interest in This Policy

The insured’s rights and duties under the policy may not be assigned without the insurer’s written consent. However, if the named insured dies, coverages will be provided for the surviving spouse, if a resident in the same household at the time of death; and for the legal representative of the deceased person, as if they are a named insured shown in the Declarations.

Two or More Automobile Policies

If two or more policies issued by the same insurer apply to the same accident, the maximum limit of liability that will be paid won’t exceed the policy with the highest limit.

Selected Endorsements

Extended Non- Owned Coverage for a Named Individual Endorsement

1. This endorsement provides coverage by removing or altering some of the Personal Automobile Policy exclusions or limitations.
2. The endorsement covers non-owned autos furnished or available for the regular use of the insured.
3. The endorsement provides excess liability coverage, for the individual named on the endorsement, for the business use of a commercial type vehicle that the named insured doesn’t own.
4. The endorsement can be used to provide excess liability coverage for public or livery use of a non-owned vehicle.

Towing and Labor Costs Coverage Endorsement

1. This endorsement provides payment, in a selected amount, for towing to a garage or for labor performed at the site of mechanical disablement.
2. The coverage applies per occurrence and to the insured’s use of non-owned automobile.

Joint Ownership Coverage Endorsement

1. This endorsement amends the definition of you and yours to refer to two or more individual, other than husband and wife, residing in the same household, or to non-resident relatives who jointly own the insured vehicle.
2. Non-resident relatives – two or more persons related by blood, marriage, or adoption who live in separate households. This includes a ward or foster child.

Miscellaneous Type Vehicle Endorsement

1. This endorsement amends the definition of covered auto to include motorcycles, motor homes, golf carts, all terrain and dune buggies. The definition doesn’t include snowmobiles.
2. The endorsement excludes coverage for any non-owned vehicles, other than a temporary substitute vehicle.

Named Nonowner Coverage for a Named Individual Endorsement

1. This endorsement covers individuals who don’t own an automobile, but who need insurance to cover borrowed or rented automobiles, or to prove financial responsibility.
2. The endorsement covers only the person specified thereon, and provides only Liability, Medical, Payments, and Uninsured Motorist coverages.

Coverage for CDs, DVDs or Other Devices Endorsement

1. This endorsement will pay for direct and accidental loss to CDs, DVDs or other devices used with sound reproduction equipment.
2. Coverage applies only if CDs, DVDs or other devices are the property of the named insured or family members, and are in the covered auto at the time of the loss.
3. This endorsement is written with a specified limit for any one occurrence, and no deductible applies.

Coverage for Audio, Visual, and Data Electronic Equipment and CDs, DVDs and Other Media Endorsement

1. This endorsement will pay for direct and accidental loss to any electronic equipment that receives or transmits audio, visual or data signals and isn’t designed solely for the reproduction of sound.
2. Coverage applies only if the equipment is permanently installed in the automobile, or removable from a housing unit which is permanently installed in the automobile, and designed to be operated solely by the automobile’s electrical system.
3. The endorsement will also pay for direct and accidental loss to any accessories used with such equipment including discs or other media if they are the property of the named or a family member, and are in the covered auto at the time of the loss.
4. The equipment is scheduled on the endorsement, and accessories are limited to a specified amount. No deductible applies to either the scheduled equipment or the accessories.

Mexico Coverage Endorsement

1. This endorsement extends the policy’s coverage to act as excess over liability insurance issued by a licensed Mexican insurance company, provided the insured is within 25 miles of the boarder on a trip of ten days or less in duration.
2. The purchase of Mexican liability insurance is a prerequisite to this extended coverage.

Rental Reimbursement Coverage Endorsement

1. This endorsement is available to those who purchase Part D – Coverage for Damage to Your Automobile.
2. This endorsement pays a specified amount per day for the insured to rent a vehicle in the event the covered automobile is out of service due to a covered loss, such as a collision.

Stated Amount Endorsement

1. This endorsement is used when determining the value of a vehicle at the time of loss might be difficult, such as in the case of antique or classic automobiles.
2. This endorsement allows the insurer and insured to establish a maximum value, usually via an appraisal, on the covered vehicle at the beginning of the policy period as opposed to at the time of loss.
3. The stated amount is inserted in the endorsement, along with a description of the vehicle.

Rating Factors

Rates & Premiums Rates and premiums for automobile insurance are determined by individual insurance companies using the following factors:

1. For liability coverage, rating factors typically include:
   1. Age
   2. Years of driving experience
   3. Sex
   4. Marital status
   5. Driving record
   6. Vehicle use
   7. Annual mileage
   8. Garaging territory
   9. Liability limit selection
2. For physical damage coverage, rating factors typically include: all of the above, and vehicle’s
   1. Year
   2. Make
   3. Model
   4. Deductibles selected

Rates aren’t approved if or when they discriminate based upon race.

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