Lesson 1 Introduction to the Personal Auto Policy

Transcription

1 Lesson 1 Introduction to the Personal Auto Policy During this lesson we will lay the foundation for our study of the Personal Auto Policy. You will learn about the coverage parts that make up the Personal Auto Policy and what vehicles are eligible for the Personal Auto Policy. The last part of the lesson is a discussion of key terms, which are defined on the first two pages of the policy and used in all sections of the policy and the remaining lessons of this course. Learning Objectives When you complete this lesson you will be able to: 1. Determine whether or not a specific vehicle is eligible to be written on a Personal Auto Policy. 2. Decide whether or not a given person is a "you" under a specific Personal Auto Policy. 3. Determine whether or not an activity is a "business" activity. 4. Determine whether or not a specific person is a "family member" under a specific Personal Auto Policy. 5. Recognize the definitions found in the Personal Auto Policy and understand the effect they have on coverage 6. Decide whether or not a vehicle is a "your covered auto." 7. Determine whether or not a vehicle is a "newly acquired auto." Forms that you need to print for this lesson. PP Personal Auto Policy PP Miscellaneous Type Vehicle PP Joint Ownership Coverage PP Trust Endorsement Note: Form PP is 13 pages long, and it will take some time to print. We will refer to this form throughout this course, so it is a good idea to keep it handy. PA Rev. 06/10 Page 10

2 Lesson 1 Topic A - Policy Structure and Eligibility In this topic we identify the six parts of the Personal Auto Policy, each of which we will review in subsequent lessons of this course. In Topic A, we also discuss factors that must be considered when determining policy eligibility. In an effort to focus your study of these concepts, we have organized this discussion around two main areas: Personal Auto Policy Structure Eligibility Personal Auto Policy Structure The Personal Auto Policy is a plain-language policy written to cover most of the auto exposures of the typical American family. There are six parts to the policy: 1. Definitions 2. Part A - Liability Coverage 3. Part B - Medical Payments Coverage 4. Part C - Uninsured Motorists Coverage 5. Part D - Coverage for Damage to Your Auto 6. Conditions The Personal Auto Policy (PAP) is a package policy made by combining four policies together with common definitions and conditions. These definitions are found on the first page of the policy and are followed by Parts A through D, each of which is a small policy within the policy. The conditions, which are common to all parts, are on the final pages of the Personal Auto Policy. The definitions are common to all parts of the policy unless superseded by a definition of the same word or phrase in one of the subsequent parts. Parts A through D are policies within the Personal Auto Policy. These four parts operate independently of each other. Each has an insuring agreement, definitions, exclusions, and conditions. Language used in one of these four parts cannot be applied in the others, unless it is reprinted in that part of the policy. PA Rev. 06/10 Page 11

3 Part A is a Liability Policy inserted into the Personal Auto Policy. Part B is an accident policy called Medical Payments and or PIP. Part C is an Uninsured Motorists Policy. Part D is an inland Marine Policy designed for the personal auto exposure and called Damage to Your Auto. Learning Objective: Determine whether or not a specific vehicle is eligible to be written on a Personal Auto Policy. Eligibility There are two main factors to consider for eligibility. A vehicle must meet both factors to be eligible for a Personal Auto Policy. Let's look at each of these factors. They are: 1. Type of vehicle and 2. Ownership or who owns the vehicle PA Rev. 06/10 Page 12

4 Learning Objective: Determine whether or not a specific vehicle is eligible to be written on a Personal Auto Policy. ISO lists eligibility criteria, and each company has similar criteria displayed in its Personal Auto Manual. Vehicles that are eligible include: Private passenger cars Pickup trucks and vans These vehicles are eligible if the gross vehicle weight rating (GVWR) is 10,000 lbs or less and the vehicle is not used in a delivery business. Trailers Miscellaneous vehicles Note: You must use an endorsement to add miscellaneous vehicles to a Personal Auto Policy. The endorsement is Miscellaneous Type Vehicle Endorsement (PP 03 23) PA Rev. 06/10 Page 13

5 Learning Objective: Determine whether or not a specific vehicle is eligible to be written on a Personal Auto Policy. Ownership or Who Owns the Vehicle Since the Personal Auto Policy is for personal exposures, the vehicle must be owned by one of the following: Individual Husband and wife who reside in the same household Note: There are several states that define spouse to include a domestic partnership. Individuals who are not related and live in the same household For example, an unmarried couple who jointly own their car or cars. Note: The vehicle must be jointly owned. When this situation occurs you must use the Joint Ownership Coverage Endorsement (PP 03 34). Individuals who are related and live in different households For example, a father and son who live on opposite sides of town and jointly own a pickup truck that they use to tow their fishing boat. Note: Again, the vehicle must be jointly owned. When this situation occurs you must use the Joint Ownership Coverage Endorsement (PP 03 34). Owned by trust A certificate is available for proof of insurance for the trust. Note: Use the Trust Endorsement (PP 13 03). The chart below summarizes Personal Auto Policy eligibility criteria Agents Types of Vehicles Private Passenger Cars Vans Pickup Trucks Trailers Miscellaneous Vehicles Must use Miscellaneous Type Vehicle Endorsement (PP 03 23) Ownership Individual Husband and wife Unrelated persons who live in the same household Must use Joint Ownership Coverage Endorsement (PP 03 34) Related people who live in different households Must use Joint Ownership Coverage Endorsement (PP 03 34) Owned by trust Must use Trust Endorsement (PP 13 03) PA Rev. 06/10 Page 14

6 Knowledge Check True or False: Andy and Alice are engaged to be married, but do not live together. Alice buys a new car. John and Alice are both eligible to be listed on the Declarations Page for the new car. The correct answer, False. Andy and Alice must purchase the car together and live together in the same household or be related to be eligible for Joint Ownership. Learning Objective: Determine whether or not a specific vehicle is eligible to be written on a Personal Auto Policy. The previous definitions are from the ISO eligibility rule and are subject to the underwriting guidelines of the insurance company that will insure the vehicle. For example, many companies will not use a Personal Auto Policy to insure pickups or vans used in business. They will require these vehicles to be insured on a Business Auto Policy. Do not confuse eligibility and coverage, which are two different concepts. Eligibility determines which vehicles can be written on a Personal Auto Policy, that is, which can be shown on the Declarations Page. We will cover the use of many different types of ineligible autos for some insureds, as we will see in the examples in other lessons of this course. Please refer to the end of Lesson 1 Topic A to complete Self Quiz 1. PA Rev. 06/10 Page 15

7 Lesson 1 Topic B - Policy Definitions These definitions are common to all of the provisions of a Personal Auto Policy. They are on the first page of the policy, so that the meaning of key words is presented before the discussion of coverage. The defined words and phrases are in quotation marks wherever they appear in the policy. As you study this topic, please keep in mind that we are discussing only the definitions, not coverage under a Personal Auto Policy. Please refer to pages 1 and 2 of the Personal Auto Policy as we discuss each term. Learning Objective: Decide whether or not a given person is a "you" under a specific Personal Auto Policy. "You and Your" This definition is most important, because a person who fits this definition gets the broadest coverage the policy provides. Note: Every time either "you" or "your" appears in the policy, it refers to this specific definition. This is the most important definition because so much coverage is determined by whether or not an individual qualifies as a "you." To qualify as a "you," a person must either: Be named on the Declarations Page. Be the spouse of a person named on the Declarations Page and be a resident of the same household as the person named on the Declarations Page. The phrase "resident of the same household" means that the person's legal residence is the household of the spouse named, even though he or she may be temporarily living somewhere else. For example, the person could be living in another state or country on a temporary work assignment and be a resident of the named spouse's household. PA Rev. 06/10 Page 16

8 Learning Objective: Decide whether or not a given person is a "you" under a specific Personal Auto Policy. The definition includes a provision that a spouse who is not named on the Declarations Page and is not a resident of the same household as the person named on the Declarations Page will be a "you" for a period of time. The period of time is determined by three criteria, and the period ends when any one of these criteria occur. The three criteria are: 1. In no case will the unnamed spouse be a "you" for more than 90 days. or 2. The unnamed spouse will cease to be a "you" in less than 90 days if he or she purchases his or her own auto insurance policy. or 3. The unnamed spouse will cease to be a "you" under the policy in force at the time he or she ceases to live in the named spouse's household, if that policy expires. He or she will, however, be "you" under the renewal or replacement policy of the named spouse, for the remainder of the 90-day period. Note: When determining whether or not an unnamed spouse is a "you" for a given accident, always consider the situation from the perspective of the policy in force at the time of the accident. PA Rev. 06/10 Page 17

9 Definition of a You and Your John and Ethel are married and live in the same home. John has two cars insured under a 2005 Personal Auto Policy. Both cars are in John's name and Ethel's name is not on the Declarations Page. On July 15, John and Ethel decide to separate and Ethel moves out of the house. Scenario 1 July 15 Aug 15 Nov 10 John & Ethel separate Ethel has an accident while driving her friend's car. Ethel will be a "you" under John's policy, because the 90 days have not elapsed. Ethel has another accident. Ethel will not be "you under John's Personal Auto Policy because the 90 days have elapsed. Scenario 2 July 15 Aug 1 Aug 15 John & Ethel separate John s policy renews Ethel has an accident while driving her brother s car. Ethel is a "you" under the renewal policy. This is easier to understand, if you read the policy language and remember to look at this from the perspective of the policy in force at the time of the accident. Scenario 3 July 15 July 30 July 31 John & Ethel separate Ethel buys a new car and purchases her own policy Ethel has an accident. Ethel is no longer a "you" under John s Personal Auto Policy because she has her own policy, which lists her as a named insured. Scenario 4 July 15 July 31 Aug 15 John & Ethel separate John s policy expires Ethel has an accident while driving her mother s car. Ethel still qualifies as you under the replacement policy because she continues to qualify as "you" until 90 days following her change of residency. Tip: Whenever possible, name both spouses on the Declarations Page. PA Rev. 06/10 Page 18

10 Learning Objective: Decide whether or not a given person is a "you" under a specific Personal Auto Policy. We, Us and Our The words "we," "us," and "our" all refer to the insurance company that writes the policy. Leased Vehicle An eligible type of vehicle that is leased will be considered owned by a "you," if: 1. The Lease is in writing, and 2. The term of the lease is at least 6 months. This allows us to treat and insure leased vehicles as though they were owned by the named insured. Bodily Injury Harm, sickness, disease and anything that results from that harm, sickness, disease, including resulting death. PA Rev. 06/10 Page 19

11 Learning Objective: Determine whether or not an activity is a "business activity." This short definition includes many activities and has serious impact on coverage. The Personal Auto Policy is a Personal Lines Policy intended to cover personal activities. Business is a commercial activity so the policy defines and excludes "business." The policy then gives back coverage for "business" use of some autos, as we'll see in our study of the coverages in the other lessons. The courts have defined business as activities involving: 1. A trade, profession or occupation; 2. Habitually occupying time, effort, attention; and which are 3. Engaged in with the expectation for gain, livelihood, or profit Note: There does not need to be a profit for an activity to be considered business. Examples Anyone who works for a salary or wages is engaged in "business" while working. A person who works as an electrician for a contractor, and moonlights by doing electrical work for money on weekends, is engaged in a "business" while working for the contractor and while moonlighting. A person who refinishes furniture as a hobby, and becomes so good at it that friends bring her furniture to refinish, is engaged in a "business" if the friends pay for the work. PA Rev. 06/10 Page 20

12 Learning Objective: Determine whether or not a specific person is a "family member" under a Personal Auto Policy. Family Member Since "family members" get the second broadest coverage under a Personal Auto Policy, in order to be a "family member" a person must meet both of two criteria. The person must: 1. Live in the household of a person defined as "you," and 2. Be related to "you" by blood, marriage or adoption. This also includes a ward or foster child of any age. Note: A child away at school or military may still be considered a member of the household. John and Ethel's son, Ralph, who lives with John and Ethel. John and Ethel's daughter, Penelope, who lives in a dormitory at the college she is attending. Ralph's three-year-old son, Jeff, who lives with John and Ethel. A 16-year-old exchange student from Germany, who is staying with John and Ethel for the school year. John and Ethel's son, Jerry, who is in the military and lives in a barrack on the base where he is stationed. Jerry will remain a "family member" as long as he does not establish a residence of his own, because his residence is still John and Ethel's address. The term "resident in" means more than living in the same house. Children away at college or in the military are residents in their parents' household as long as the children do not establish separate residences of their own. Visiting relatives are not considered "family members" because they don't satisfy the residency criterion. They are only visiting. PA Rev. 06/10 Page 21

13 Knowledge Check According to the definition in the Personal Auto Policy, a family member" would best be described by which of the following statements? A. The named insured s stepdaughter who resides with the named insured. B. The named insured s girlfriend who has been living with him for 5 years. The correct answer is A, "The named insured s stepdaughter who resides with the named insured" because the person must live in the household of a person defined as a "you," and be related to "you" by blood, marriage, or adoption. This also includes a ward or foster child of any age. Learning Objective: Recognize the definitions found in the Personal Auto Policy and understand the effect they have on coverage Occupying Anyone who is inside an auto, on an auto, or getting into, on, out or off of an auto is considered to be "occupying" the auto. The word is defined for determining coverage in Medical Payments, Uninsured Motorists, Underinsured Motorists and, where applicable, Personal Injury Protection. Examples Riding on a lowered tailgate Having door shut on fingers while exiting a vehicle Property Damage This is injury to or destruction of someone else's tangible property. It includes loss of use of the damaged or destroyed tangible property. Examples If an insured negligently damages someone else's car, the damage includes the cost of substitute transportation while the other person's car is being repaired or replaced. If an insured runs into someone else's house and damages it so that the people who live there must go to a motel for period of time, the cost of the motel is part of the damage. PA Rev. 06/10 Page 22

14 Learning Objective: Recognize the definitions found in the Personal Auto Policy and understand the effect they have on coverage Trailer Any vehicle designed to be towed by a private passenger auto; or pickup or van. Size and number of wheels do not affect whether the vehicle is a trailer. It also means a farm wagon or farm implement while being towed by a private passenger auto; or pickup or van. Examples Small trailer that the insured uses to carry his dirt bike to a place where he can ride A 35-foot camper trailer that connects to an insured's pickup truck by a fifth wheel bolted in the bed of the pickup A flatbed trailer an insured uses to tow her classic car to competitions behind her pickup A farm wagon or farm implement while towed by a private passenger car, pickup truck or van A hay bailer being towed by a pickup truck Learning Objective: Decide whether or not a vehicle is a "your covered auto." Your Covered Auto There are four categories to this definition. Any vehicle that fits any one of these categories is a "your covered auto" under this policy. Four Categories of "Your Covered Auto" 1. A vehicle shown on the Declarations Page A vehicle shown on the Declarations Page is a "your covered auto" even if it is an ineligible auto that has been listed on the Declarations Page by mistake. 2. A newly acquired auto Any vehicle that fits the definition of "newly acquired auto," which is the next definition in the policy, is a "your covered auto." PA Rev. 06/10 Page 23

15 3. Any "trailer" you own Any vehicle that fits the definition of "trailer" and is owned by "you" is a "your covered auto." These get broad coverage at no charge, as we will see. 4. A temporary substitute This is a special case of non-owned auto. It is an auto that "you" don't own and that is being used because one of the vehicles described in the first three categories of "your covered auto" is unavailable to "you" because of one of five reasons. The five reasons are that "your covered auto" is being serviced, being repaired, is broken down, is destroyed, or is lost. These reasons are listed in the policy. Learning Objective: Decide whether or not a vehicle is a "your covered auto." See the examples of temporary substitutes below. Example 1 John's car won't start one morning and he borrows a neighbor's large truck to drive to work. The borrowed truck is a "your covered auto" under John and Ethel's Personal Auto Policy. Example 2 Ethel's car is being serviced at a local dealer and the dealer lends Ethel a car to drive for the day. The car loaned to Ethel by the dealer is a "your covered auto" under John and Ethel's Personal Auto Policy. Knowledge Check True or False: John's car is damaged in an accident and John rents a car while his car is being repaired. The rental car is a "your covered auto" under John and Ethel's Personal Auto Policy. The correct answer, True. The rental car is a "your covered auto" because it is a temporary substitute while John's car is being repaired. PA Rev. 06/10 Page 24

16 Knowledge Check True or False: John and Ethel rent a car while on vacation. The rental car is a "your covered auto" under John and Ethel's Personal Auto Policy. The correct answer, False. The rental car is not a "your covered auto" because it is not a temporary substitute automobile for breakdown, repair, servicing, loss, or destruction. Learning Objective: Determine whether or not a vehicle is a "newly acquired auto." Newly Acquired Auto This is a long and simple definition. It is different in this version of the policy than in previous versions so you may see some different language in the policies with which you work. Remember that any vehicle that fits this definition is a "your covered auto" because "newly acquired auto" is a part of the "your covered auto" definition. In order to be a "newly acquired auto" a vehicle must first meet two criteria, which are: 1. Be an eligible type of vehicle, and 2. Be acquired by "you" during the policy period Note: If an eligible vehicle is acquired by anyone other than "you" it is not a "newly acquired auto." For example, if John and Ethel's son buys a new private passenger car during the period of John and Ethel's Personal Auto Policy, that private passenger car is not a "newly acquired auto" under John and Ethel's Personal Auto Policy. PA Rev. 06/10 Page 25

17 Learning Objective: Determine whether or not a vehicle is a "newly acquired auto." The definition describes the various coverages in three separate provisions: 1. All coverage except for Coverage For Damage to Your Auto ("Collision" and Other than "Collision") A "newly acquired auto" gets the broadest coverage of any vehicle on the policy. If the "newly acquired auto" is an additional vehicle that is, it increases the number of vehicles insured by the policy the insured must notify the agent or company within 14 days of becoming the owner for coverage to apply on the date the insured becomes the owner of the auto. If the "newly acquired auto" replaces an auto already insured by the policy, the insured does not have to give notice until the renewal date of the policy. 2. "Collision" Coverage If the policy provides "Collision" Coverage, the "newly acquired auto" gets the broadest "Collision" Coverage provided by the policy. In order for this coverage to apply, the insured must notify the company or agent within 14 days of becoming the owner. If the policy does not provide "Collision" Coverage, the "newly acquired auto" is covered for "Collision" with a $500 deductible. The insured must notify the company or agent within 4 days of becoming the owner. 3. Other Than "Collision" Coverage If the policy provides Other Than "Collision" Coverage the "newly acquired auto" gets the broadest Other Than "Collision" Coverage provided by the policy. In order for this coverage to apply, the insured must notify the company or agent within 14 days of becoming the owner. If the policy does not provide Other Than "Collision" Coverage the "newly acquired auto" is covered for Other Than "Collision" with a $500 deductible. In order for this coverage to apply, the insured must notify the company or agent within 4 days of becoming the owner. If the insured gives notice within the time frames mentioned above, coverage for the "newly acquired auto" is effective when the insured becomes the owner of the auto. If notice is not given within the above time frames, coverage is effective when the insured gives notice. PA Rev. 06/10 Page 26

18 Learning Objective: Determine whether or not a vehicle is a "newly acquired auto." Knowledge Check Yes or No: Ralph has a Personal Auto Policy insuring two cars for Liability Coverage, Uninsured Motorists Coverage, and "Collision" and Other Than "Collision" with $500 deductible. Ralph trades in one of his cars on a new private passenger car. If Ralph gives no notice to his agent or company will the new car have Liability Coverage and Uninsured Motorists Coverage until the end of the policy period? The correct answer, Yes. The new car will have Liability Coverage and Uninsured Motorists Coverage until the end of the policy period. It will also have "Collision" and Other Than "Collision" with $500 deductible for 14 days. Knowledge Check Yes or No: John and Ethel have two cars insured under a Personal Auto Policy for Liability Coverage, Uninsured Motorists Coverage and Other Than "Collision" with $1,000 deductible. John buys an additional vehicle. If John and Ethel do not give notice to their agent or company, will the additional vehicle have any Liability Coverage, Uninsured Motorists Coverage and Other Than "Collision" Coverage? The correct answer, Yes. The additional vehicle will have Liability Coverage, Uninsured Motorists Coverage and Other Than "Collision" Coverage, with $1,000 deductible, for 14 days and "Collision" with $500 deductible for 4 days. PA Rev. 06/10 Page 27

19 Learning Objective: Determine whether or not a vehicle is a "newly acquired auto." Damage to Your Auto Coverage Replacement Auto Additional Auto Liability, Medical Payments, Uninsured Motorists and Underinsured Motorists "Collision" and/or Other Than "Collision" if carried on the policy Covered to end of policy. No notice required. Get broadest coverage carried on any auto, if company notified within 14 days. Covered if company notified within 14 days. Get broadest coverage carried on any auto, if company notified within 14 days. "Collision" and/or Other Than "Collision" if not carried on the policy Covered with $500 Ded. if company notified within 4 days. Note: Coverages will be discussed in Lesson 5. Covered with $500 Ded. if company notified within 4 days. Please refer to the end of Lesson 1 Topic B to complete Self Quiz 2. PA Rev. 06/10 Page 28