(Referred to as “Part D” in some policies) Coverage for damage to an insured automobile is subject to a deductible, therefore any payments made by the insurance company will be reduced by the amount of the deductible. The purpose of the deductible is to eliminate the number of small claims and thereby keep the premiums affordable. The specific amounts of the deductible available will vary by company. The higher the deductible, the lower the premium.
Coverage is provided only under collision which is defined as the upset or impact with another vehicle or object, by the covered automobiles. Coverage may be provided if “Other than Collision Coverage” is provided on the automobile (discussed later). Most policies list losses that are not considered as “collision”, such as
CONSUMER APPLICATION
Larry has a PAP and with glass breakage included under collision coverage. If the insured chooses either collision or other than “collision” or both, depending upon the options offered by the particular company, he will have to decide which deductibles he wants for each coverage for each vehicle he owns. Few (if any) offer a “no deductible” collision coverage, therefore the insured must choose a collision deductible. However, he has the choice of no deductible for comprehensive coverage, which if he elects, and there is glass breakage in a collision loss, he may choose to have the glass replaced under the “other than collision” coverage (no deductible applied). If he has a comprehensive coverage deductible (which will reduce the premium) he can choose to have the glass breakage as part of the collision loss so that only one deductible is applied to the entire loss.
Larry has a collision, with a loss of $3,000 and a $200 deductible, glass breakage is $200 with a $200 comprehensive coverage deductible. If Larry chooses to keep the 2 losses separate, the company will deduct $200 from the collision amount, and pay $2,800. The company will deduct $200 from the comprehensive amount and pay nothing for the glass. Larry receives $2,800. However, if the insured combines the glass breakage with the collision loss, the total damages will be $3,200 under collision. The company will then deduct $200 from that total and will pay Larry $3,000. The comprehensive deductible doesn’t come into play.
CONSUMER APPLICATION
LeRoy bought a Mustang with expensive Bose stereo equipment installed by the previous owner. This provision differentiates between "total” theft, and “partial” theft. If his Mustang is stolen and never recovered, it is a “total” theft. If the stereo equipment is stolen from the car, then there is a “partial” theft. If the car is recovered but the stereo is gone, the payments are still considered theft payments because damage wouldn’t occurred if the car had not been stolen.
If there is a loss to an automobile that is considered “Non-owned”, the broadest coverage applicable to any covered auto is provided, as shown in the Declarations. Non-owned means any private passenger car, pickup, van or trailer, not owned or furnished to the insured or a family member, but while in the custody of or being operated by the insured or a family member, or an automobile or trailer that is not owned by the insured(s) but is being used as a temporary substitute while a covered automobile is being repaired or serviced, etc. Note that previous discussions involved a vehicle the insured did not own and therefore the policy did not provide coverage. This section covers situations where the insured will be covered if the vehicle that is damaged is owned by someone else.
The insuring agreement is necessarily broad, as the insurer agrees to pay for direct and accidental loss to "your covered auto” and any “non-owned auto.” Also, collision is defined here because the insured has the option of insuring against loss by (1) collision, (2) perils other than collision, or (3) both, or (4) neither. It may be noted that the term “collision” also includes upset. – as an example, a motorist who lost control of his vehicle and ended up in a ditch, has had an “upset” collision, even though he never “collided” with anything other than the ditch itself.
CONSUMER APPLICATION
John Murphy has a PAP that covers three cars. Vehicle #1 does not have Part D Coverage. Vehicle #2 only has “Other Than Collision.” Vehicle #3 has “Collision” and “Other Than Collision.”
John borrows his neighbors pickup to deliver a piano to his home that he had recently purchased at an estate sale. On the way home, he accidentally “side-swipes” a van parked on the side of the road. Damage was minimal to the truck. Therefore, his Vehicle #3 coverage would provide the broadest coverage.
A. We will pay for direct and accidental loss to “your covered auto” or any “non‑owned auto,” including their equipment, minus any applicable deductible shown in the Declarations. We will pay for loss to your covered auto caused by:
1. Other than “collision” only if the Definitions indicate that Other Than Collision Coverage is provided for that auto,
2. "Collision" only if the Declarations indicate that Collision Coverage is provided for that auto.
If there is a loss to a “non‑owned auto,” we will provide the broadest coverage applicable to your “covered auto” shown in the Declarations.
B. “Collision” means the upset of “your covered auto” or, a “non‑owned auto” or their impact with another vehicle or object.
Loss caused by the following is considered other than “collision:”
1. Missiles or falling objects;
2. Fire;
3. Theft or Larceny;
If breakage of glass is caused by a "collision," you may elect to have it considered a loss caused by “collision”.
C. "Non‑owned auto" means:
1. Any private passenger auto, pickup, van or trailer not owned by or furnished or available for the regular use of you or any “family member” while in the custody of or being operated by you or any “family member;” or
2. Any auto or "trailer" you do not own while used as a temporary substitute for “your covered auto” which is out of normal use because of its:
a. breakdown; d. loss; or
b. repair; e. destruction.
c. servicing;
In case the automobile insured is stolen, transportation expenses will be paid (if the Other Than Collision coverage is elected), and the policy will also pay for “loss of use” expenses under these conditions. However, the insurance company will pay only for a stipulated period (such as 48 hours) after the theft, and until the stolen automobile is recovered or the insured is paid for the loss.
Note that Transportation Expenses only apply to a total theft of the vehicle as discussed in the policy. It does not apply when the covered automobile is being repaired or otherwise not useable. If coverage is desired to cover these other situations, it can be purchased as Extended Transportation Expenses Endorsement, for an extra premium (See Endorsements section).
TRANSPORTATION EXPENSES
In addition we will pay, without application of a deductible, up to $15 per day, to a maximum of $450, for
1. Transportation expenses incurred by you in the event of the total theft of "your covered auto." This applies only if the Declarations indicate that Other Than Collision Coverage is provided for that auto.
2. Loss of use expenses for which you become legally responsible in the event of the total theft of a non‑owned auto. This applies only if the Declarations indicate that Other Than Collision Coverage is provided for any "your covered auto."
We will pay only expenses incurred during the period:
1 .Beginning 48 hours after the theft; and
2. Ending when "your covered auto" or the "non‑owned auto" is returned to use or we pay for its loss.
This section of the policy contains many of the type of exclusions that confuse and irritate policyholders if not explained properly. The following list contains the majority of exclusions under the typical personal auto policy:
(The above exclusions do not apply if the auto is stolen)
Losses due to or as a consequence of
Losses due to
Confiscation by governmental or civil authorities because of illegal activities of the insured or family member, or because of failure to comply with EPA or Department of Transportation standards will not be covered under this section.
Coverage will not be provided for loss to any non-owned automobile used by the insured or any family member without a reasonable belief that the insured or the family member are entitled to do so. Note: This is an exclusion that is present in other Parts of the policy. This exclusion means that if the insured or a member of his family (family member) borrow another person’s automobile without that person’s knowledge or approval, then this policy will not cover any claims arising from the usage of that auto. However, if there was a reasonable expectation that they were using the car legally, then the policy coverage would apply.
Losses to awnings or cabanas, or vehicles designed to create additional living facilities, or equipment used to detect radar (fuzz-busters), loss to any custom furnishings or equipment on a pickup or van (such as special carpeting, furniture facilities for cooking or sleeping, murals or graphics, or extending roofs) are not covered under this section.
Also not covered is any loss to non-owned autos used while employed in selling, repairing, servicing, storing or parking vehicles; or to any loss to a non-owned auto being used for any business.
Note: These exclusions show that the PAP is not intended to cover the normal wear and tear of vehicles or parts of vehicles. However, even though such things as worn-out mufflers, worn tires, torn seat fabric, faded paint, etc., will not be covered, in those cases when the car has to be repaired because of a covered accident, certain things will be replaced or repaired. Example would be a faded hood which would be replaced if damaged in an accident. The hood would be painted the original color. If the covered auto is stolen and the thieves severely damage the tires, the tires will be replaced.
Also, only permanently installed equipment in the auto is covered under the policy. If a Walkman radio is stolen from the seat of the car, it is not covered under the PAP. Items such as cell phones, CB radios, television and VCR’s cannot be insured, however coverage can be purchased as an Endorsement for an additional premium (See Endorsements Section).
The confiscation provision of the policy is called into play because of the ongoing “war on drugs” and subsequent legislation. If an insured uses his covered Motorhome (or van or auto) for the transport of drugs, the government can, and will, confiscate the vehicle. and this would be not covered under a PAP.
Many policies have statements such as “This exclusion does not apply to the interest of Loss Payees in “your covered auto.” This applies to the “government confiscation.” This protects a lienholder if the insured purchased the car with an auto loan.
EXCLUSIONS
We will not pay for
1. Loss to “your covered auto” or any non-owned auto which occurs while it Is being used as a public or livery conveyance. This exclusion (1.) does not apply to a share‑the expense car pool.
2. Damage due and confined to:
a. wear and tear;
b. freezing;
c. mechanical or electrical breakdown or failure; or
d. road damage to tires.
This exclusion (2.) does not apply if the damage results from the total theft of “your covered auto” or any “non‑owned auto.”
3. Loss due to or as a consequence of
a. radioactive contamination;
b. discharge of any nuclear weapon (even if accidental);
c. war (declared or undeclared);
d. civil war;
e. insurrection; or
f. rebellion or revolution.
4. Loss to:
a. any electronic equipment designed for the reproduction of sound, including, but not limited to:
(1) radios and stereos;
(2) tape decks; or
(3) compact disc players;
b. any other electronic equipment that receives or transmits audio visual or data signals, including, but not limited to:
(1) citizens band radios;
(2) telephones;
(3) two‑way mobile radios;
(4) scanning monitor receivers;
(5) television monitor receiver;
(8) video cassette recorders;
(7) audio cassette recorders; or
(8) personal computers;
c .tapes, records, discs, or other media used with equipment described in a. or b. , or
d. any other accessories used with equipment described in a. or b.
This exclusion (4.) does not apply to:
a. equipment designed solely for the reproduction of sound and accessories used with such equipment, provided such equipment is permanently installed in your covered auto or any non‑owned auto; or
b. Any other electronic equipment that is:
(1) necessary for the normal operation of the auto or the monitoring of the auto's operating systems; or
(2. an integral part of the same unit housing any sound reproducing equipment described in (a) and permanently installed in the opening of the dash or console of “your covered auto” or any non‑owned auto normally used by the manufacturer for installation of a radio.
5. Loss to your covered auto or any non-owned auto due to destruction or confiscation by governmental or civil authorities because you or any family member.
a. engaged in Illegal activities; or
b. failed to comply with Environmental Protection Agency, or Department of Transportation standards.
This exclusion (5.) does not apply to the Interests of Loss Payees in “your covered auto.”
6. Loss to a camper body or trailer you own which is not shown in the Declarations. This exclusion does not apply to a camper body or trailer you:
a. acquire during the policy period; and
b. ask us to insure within 30 days after you become the owner.
7. Loss to any non-auto when used by you or any family member without a reasonable belief that you or that family member are entitled to do so.
8. Loss to:
a. awnings or cabanas; or
b. equipment designed to create additional living facilities.
9. Loss to equipment designed or used for the detection or location of radar.
10. Loss to any custom furnishings or equipment in or upon any pickup or van. Custom furnishings or equipment include but are not limited to:
a. special carpeting and insulation, furniture or bars;
b. facilities for cooking and sleeping;
c. height‑extending roofs; or
d. custom murals, paintings or other decals or graphics.
11. Loss to any non‑owned auto being maintained or used by any person while employed or otherwise engaged in the business of:
a. selling; d. storing; or
b. repairing; e. parking;
c. servicing;
vehicles designed for use on public highways. This includes road testing and delivery.
12. Los to any non‑owned auto being maintained or used by any person while employed
or otherwise engaged in any business not described in exclusion 11. This exclusion (12.) does not apply to the maintenance or use by you or any family member of a non-owned auto which is a private passenger auto or “trailer."
CONSUMER APPLICATION
Bert’s PAP states as an exclusion under Part D, “Loss to any “non-owned auto” when used by you or any “family member” without a reasonable belief that you or that “family member” are entitled to do so.”
Bert buys a new pickup on Monday, then leaves on Tuesday on a business trip. His brother, Steve, visits Bert’s wife on Tuesday, to “check out the new truck.” Bert’s wife tells Steve that his brother is out of town, but she gives him the truck keys so that he can take it for a drive. Steve decided that he would use the truck to haul several railroad ties he was going to use for landscaping. While loading the ties, one fell and smashed the side of the pickup bed and badly scratched the back of the cab.
Steve filed a claim for damage to the truck under his PAP, but was not covered because of the provision stated above. (Bert could have the damage paid for under his own comprehensive coverage).
The limit of liability under this section will be the lesser of
(a) the Actual Cash Value of the stolen or damaged property - or
(b) the amount necessary to repair or replace the property.
However, there may be a maximum amount for a trailer as a non-owned vehicle, such as $500.
In determining the Actual Cash Value under this section, an adjustment for depreciation and physical condition will be made in determining actual cash value at the time of loss. This provision – as short and succinct as it appears, frequently causes settlement problems during settlement. Invariably, a person will attach a higher value to an automobile than the offer that is made by the insurance company. If, for instance, the automobile was recently overhauled, painted, with a new interior and new tires, etc., insurance companies may offer more for actual cash value if this is pointed out to them and given proof the condition exists. If an older vehicle in superb condition is being insured, it may be wise to ask the insured to have the auto appraised, or at least take frequent pictures of the vehicle, showing its condition.
LIMIT OF LIABILITY
A. Our limit of liability for loss will be the lesser of the:
1. Actual cash value of the stolen or damaged property; or
2. Amount necessary to repair or replace the property.
However, the most we will pay for loss to any non‑owned auto which is a trailer is $500.
B. An adjustment for depreciation and physical condition will be made in determining actual cash value at the time of loss.
CONSUMER APPLICATION
Jerry owns a three year old Buick LaSabre and is involved in a single car accident, causing extensive damage to his car. When the adjuster from the insurance company receives the necessary information, it is determined that the cost to replace the vehicle would be $13,000 with the same equipment as the original car.
The adjuster also discovered that Jerry put considerably more mileage on the car than expected, which reduces the value of the car by $2,000. Therefore, Jerry’s insurer will pay $11,000 to replace the auto if necessary.
When the adjuster receives the estimates to repair the car, it is discovered that it would cost $6,000 to restore it to its pre-accident condition. Therefore, the insurer only has to pay for the repair of the car, or $6,000.
The insurance company has the right to either pay for any loss in money to the insured, or repair or replace the damaged or stolen property. They also have the right to return the property to the insured and they will pay for any damage resulting from the theft. The insurance company may keep all or part of the property at an agreed or appraised value.
PAYMENT OF LOSS
We may pay for loss in money or repair or replace the damaged or stolen property. We may, at our expense, return any stolen property to:
1. You; or
2. The address shown in this policy.
If we return stolen property we will pay for any damage resulting from the theft. We may keep all or, part of the property at an agreed or appraised value.
NO BENEFIT TO BAILEE
This insurance shall not directly or indirectly benefit any carrier or other bail for hire.
If another insurer also covers the loss, the insurance company will only pay their share of the loss, which is the proportion that their limit of liability bears to the total of all applicable limits. However, if the auto is a non-owned auto, any insurance provided under the policy would be excess of any other coverage provided by the owner of the “non-owned auto”, or any other applicable physical damage insurance, or any other source of recovery applicable to the loss.
If other sources of recovery also cover the loss, we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a non‑owned auto shall be excess over any other collectible source of recovery including, but not limited to:
1. Any coverage provided by the owner of the non‑owned auto;
2. Any other applicable physical damage insurance;
3. Any other source of recovery applicable to the loss.
If the insurance company and the insured do not agree on the amount of loss, either party can demand an appraisal of the loss. Similar to arbitration, each party will appoint a competent appraiser, who will select an “umpire.” The appraisers will then state their estimate as to actual cash value and amount of loss, and if they disagree, the umpire will make the final decision.
In order to keep every claim of this type from being contested in an effort to get an inflated cash value appraisal, the policy provides that if such appraiser arbitration is effected, each party must pay the charges for their chosen appraiser, and pay the expenses of the appraisal and umpire equally.
While this provision is similar to other such provisions, there is one apparent difference. No other rights are abrogated by agreeing to an appraisal. This means that if an appraisal sets the amount of loss in excess of the insurer’s determination, the insurer may still decide to repair the vehicle. Appraisal is concerned only with determining the amount of the loss, and not the amount payable.
A. If we and you do not agree on the amount of loss, either may demand an appraisal of the loss. In this event, each party will select a competent appraiser. The two appraisers will select an umpire. The appraisers will state separately the actual cash value and the amount of loss. If they fall to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding. Each party will:
1. Pay its chosen appraiser, and
2. Bear the expenses of the appraisal and umpire equally.
B. We do not waive any of our rights under this policy by agreeing to an appraisal.
STUDY QUESTIONS
1. Part D, Coverage for Damage to an Insured Automobile, is subject to a deductible. Which of the following statements regarding a deductible is NOT true?
A. The higher the deductible, the higher the premium.
B. The higher the deductible, the lower the premium.
C. The purpose of the deductible is to eliminate small claims and help keep premiums affordable.
D. The specific amounts of the deductible will vary from company to company.
2. Coverage for damage to an insured automobile is provided under
A. Property Damage.
B. Medical Coverage.
C. Uninsured Motorists.
D. Collision.
3. Under Part D, which vehicles may be covered.
A. All owned vehicles and vehicles not owned by the insured.
B. Only owned vehicles.
C. Vehicles that are rented or leased only.
D. Trailers or Vehicles owned by the insured only.
4. Under the PAP, “Collision” is defined as
A. upset or impact with another vehicle or object, by the insured vehicle.
B. two or more insured automobiles striking each other.
C. mechanical breakdown or damage caused by natural forces.
D. an insured vehicle striking an inanimate object.
5. Dave has the “Other than Collision” coverage on his PAP. Dave’s car is stolen. What coverage does he have?
A. The insurer will pay for a private detective to aid in the search for the stolen automobile.
B. The policy will pay if the automobile is being repaired or stolen, a stipulated amount.
C. The policy will pay “loss of use” expenses for a stipulated amount and period of time if the automobile is a total theft.
D. The policy will pay for any damage caused by the stolen car during the period of time that it is stolen.
6. Henry’s daughter, Marie, who lives with Henry and is covered under his PAP, attends a local college. One evening the rest of the family were out of the house, and Marie had to make a class but her car would not start. So she borrowed the neighbors car as they had told her to take it in case of emergency and she knew where the key was (they were not at home). On the way to school, she was forced off the road by a weaving automobile, she hit a fire hydrant, causing considerable damage to the car. Will Henry’s collision coverage pay for damages to the car Marie was driving?
A. No. Coverage is not provided for loss to an auto owned by the insured or family member.
B. Collision coverage only applies to cars owned and driven by the insured.
C. Yes. Collision coverage is provided as there was a reasonable expectation that Marie was using the car legally. But the insurance would be “excess” over any amounts paid by the neighbor’s insurance.
D. No, but the neighbors’ collision coverage would cover the entire loss.
7. Ken’s car was broken into and the following items were stolen: (1) the Stereo system installed in the dash, along with the speakers installed in the back, (2) a cell phone laying in the front seat, (3) a small television set not permanently mounted, but used in long trips, and (4) Ken’s girlfriend’s small purse containing a small amount of marijuana. Which would be covered under the PAP?
A. All items.
B. All items except for the marijuana.
C. Only the installed stereo system, as it was permanently installed.
D. The stereo and the television set.
8. Marvin inherited a 12 year old auto that had been garaged and had only 7500 miles on the odometer. In reading his PAP, he saw where in case of total loss, for instance, he would only receive the actual cash value, including depreciation. He believes that the car is worth nearly as much as it was purchased for 12 years ago. What can he do?
A. Nothing. He will only receive the actual cash value regardless.
B. He can purchase another automobile policy from the same company that would double the cash value in case of claim.
C. He can go to the State Licensing Department and get a certification that the car has the mileage of a much newer car.
D. He should have the auto appraised by an appraiser approved by the insurer, and then take frequent photos of the car.
9. When an automobile is stolen and later found with considerable damage to the car, the insurance company may
A. pay to have the car fixed, or pay for a total loss at an appraised or agreed value.
B. only return the car to the insured and pay to have the car fixed.
C. keep the automobile and pay the cash value to the insured, regardless of the amount of damage done to the insured auto.,
D. give the car to a charity, and pay the insured the difference between what he can get as a tax write-off, and the actual value of the car.
10. Marvin’s 12 year old car is struck by a hit-and-run driver while being driven to a car show. Marvin and the insurer are over $8,000 apart in determining the value of the car. Marvin demands an appraisal of the loss, where each party pays for their appraiser, a third appraiser is appointed by the other 2 appraisers as an “umpire.” If the cash value is still not agreed upon by the two parties, the umpire will declare the final decision. Now what?
A. Both parties are absolutely bound by the decision of the umpire.
B. Marvin can tell the umpire that he does not agree and refuse to pay any expenses.
C. The insurer can decide to repair the vehicle if they do not agree with the umpire’s decision.
D. Only the insurance company is totally bound by the decision of the umpire.
ANSWERS TO STUDY QUESTIONS
1A 2D 3A 4A 5C 6C 7C 8D 9A 10C