PAPs Vs. BAPs: What's The Difference?

One of the most entertaining commentators on TV is Andy Rooney of “60 Minutes.” He often begins his discussion with a question: “Did you ever wonder ? If Mr. Rooney were to ever compare the personal auto policy with the business auto policy, he might wonder about the following items.

Did you ever wonder why the transportation expenses in the PAP are paid in the event of any covered loss, but such expenses under the BAP provisions are paid only for the total theft of the covered auto?

Perhaps business autos arent susceptible to any loss except theft.

Or maybe personal auto insureds are more careless drivers than their business auto counterparts.

And, is there such a thing as a partial theft of an auto?

Did you ever wonder why insurers of business autos feel it is necessary to specifically exclude loss due to diminution in value, but the PAP insurers have no such exclusion in their policies? After all, the physical damage sections of both the BAP and the PAP apply to direct and accidental loss.

This is supposed to convey the point that the coverage is only for the actual physical damage done to the covered auto, and not for an indirect loss or consequential damage like a loss in value.

And yet, it was felt necessary in the current revision of the BAP to add an exclusion for loss to a covered auto due to diminution in value–that is, loss in market value or resale value resulting from a direct loss.

Perhaps a covered auto under a PAP doesnt lose value after an accident and repair, so there is no vital need to remind an insured he has no coverage for such a loss.

Did you ever wonder why the coverage territory of the PAP is limited to the United States, Puerto Rico and Canada, while the BAP territory can be anywhere in the world? The BAP has its coverage territory anywhere in the world if a covered auto is leased, hired, rented or borrowed without a driver for a period of thirty days or less.

So, if an insured under a BAP goes to Mexico or Germany on a weeks business trip and rents a car, he can be content in the knowledge that his insurance policy is applicable. But if an insured under a PAP visits Mexico or Germany, he had better be prepared to buy local insurance because his PAP coverage ended at the U.S. border.

Maybe the difference in coverage territory exists because an insured on a business trip is more serious and will drive more carefully than an insured on vacation?

Did you ever wonder why the supplementary payments for the cost of bail bonds and reimbursement for loss of earnings on the BAP and PAP are different? The BAP will pay up to $2,000 for the cost of bail bonds; the PAP pays only up to $250. The BAP pays actual loss of earnings up to $250 a day because of time off from work for the insured; the PAP pays only up to $200 a day.

Did you ever wonder why the BAP includes a towing clause in the physical damage coverage section, while the PAP requires that an endorsement be added to the policy? The language of the towing coverage is the same under both the BAP and the PAP, but the coverage seems to be treated as an afterthought for personal auto insureds.

It might be that business autos break down more than personal autos, but this idea would probably seem strange to those PAP insureds who stand by their disabled cars on the side of the road waiting for the tow truck to arrive.

Did you ever wonder why the BAP considers the named insured as an insured for the ownership or use of “any covered auto, while the PAP says the named insured is an insured for the ownership or use of “any auto? This seems to be an odd limitation in the scope of coverage for a BAP insured, considering that BAP premiums are usually higher than PAP premiums.

And, finally, did you ever wonder about the difference in definitions in comparing the BAP with the PAP? For example, the BAP defines an “accident,” but the PAP doesnt. Maybe the business auto insured has to be enlightened as to when he has an actual accident.

Another example is in the definition of “trailer.” The PAP goes into a detailed explanation of what a trailer is, while the BAP says a trailer “includes a semitrailer.” Apparently in this instance, the business auto insured doesnt need any help in understanding what a word means.

There are probably valid underwriting reasons for these noted differences between the business auto policy and the personal auto policy, but the vast majority of insureds dont know those reasons.

Insureds who happen to have both a BAP and a PAP are simply left confused. And this is just one more example of the lack of understanding and information that exists between insureds and insurers.

Did you ever wonder if this is one of the reasons insureds sue their insurers so often?

David D. Thamann is associate editor of the FC&S Bulletins, published by the National Underwriter Company in Erlanger, Ky. The FC&S editors welcome comments and questions, and may be reached by fax at 859-692-2237 or via e-mail at FCS@NUCO.COM.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 13, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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PAPs Vs. BAPs: What's The Difference?

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