PAPs Vs. BAPs: What's The Difference?

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

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

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Perhaps business autos arent susceptible to any loss excepttheft.

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

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

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Did you ever wonder why insurers of business autos feel it isnecessary 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 PAPapply to direct and accidental loss.

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This is supposed to convey the point that the coverage is onlyfor the actual physical damage done to the covered auto, and notfor an indirect loss or consequential damage like a loss invalue.

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

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

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

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

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

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

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

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

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

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And, finally, did you ever wonder about the difference indefinitions in comparing the BAP with the PAP? For example, the BAPdefines an “accident,” but the PAP doesnt. Maybe the business autoinsured has to be enlightened as to when he has an actualaccident.

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Another example is in the definition of “trailer.” The PAP goesinto a detailed explanation of what a trailer is, while the BAPsays a trailer “includes a semitrailer.” Apparently in thisinstance, the business auto insured doesnt need any help inunderstanding what a word means.

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

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

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

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David D. Thamann is associate editor of the FC&SBulletins, published by the National Underwriter Company inErlanger, Ky. The FC&S editors welcome comments and questions,and may be reached by fax at 859-692-2237 or via e-mail [email protected].


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


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