Each issue, Claims CE provides several continuing education-based questions designed to test claim professionals on their knowledge of a particular topic. This is in an effort to help educate and inform adjusters and supervisors on appropriate claim-handling techniques. For this edition, we take a look at Auto Policy Part D–Coverage for Damage to Your Auto. Previous quizzes looked at the Homeowners 3–Special Form, Adjuster Licensing, Ethics, and Catastrophes.
The question-and-answer format is meant to be general in nature and does not necessarily account for the differences in law and practice in different venues. The authors of this question-answer column are not attorneys; content should not be construed as legal advice for the unique circumstances of any particular claim.
Question #1: Transportation Expenses Coverage
Julie contacted her insurance company at 6 p.m. in a frenzy, claiming that her new 2010 Honda Accord had been stolen the previous morning. She demanded a rental vehicle immediately, claiming that she had an important meeting with a client the next day and could not wait for the police to find her car any longer. Julie has liability coverage, uninsured motorist coverage, and physical damage coverage on her policy.
According to the Transportation Expenses section under Part D-Coverage for Damager to Your Auto, Julie's adjuster should tell her that:
a. She is eligible for a rental because her car has been stolen for more than 24 hours.
b. She is ineligible for rental coverage because she lacks the proper endorsement to provide rental coverage.
c. She is not yet eligible for a rental because the car has not yet been stolen for at least 48 hours.
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Answer and explanation
The best answer is "c."
ISO form PP 00 01 01 05 provides coverage for transportation expenses "beginning 48 hours after the theft." Coverage is provided for a loss other than theft when an auto "is withdrawn from use for more than 24 hours."
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Question #2: Road Repairs Needed
Bert, the town drunk, left his favorite bar at 2 a.m. on Saturday and started making his way home to his apartment four miles away. While Bert was looking down to change the radio station, his car hit a pothole, which blew out one of the front tires. He tried to regain control of the vehicle, but his car left the roadway and collided with a barbed wire fence. In addition to numerous scratches on the front and right sides of his vehicle, the fence punctured the other front tire. The local tow company and the police quickly arrived at the scene, and Bert's car was towed away at the same time he was arrested for DWI.
According to the Exclusions section under Part D Coverage for Damage to Your Auto, the damages to Bert's vehicle would be covered in their entirety, except for:
a. The deductible amount noted on the Declarations.
b. The damage caused by the pothole itself.
c. The damage to both tires.
d. The entire loss would be excluded, as Bert was violating the law while operating his motor vehicle.
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Answer and explanation
The best answer is "b."
Exclusion 2D states that "road damage to tires" is excluded from coverage. Although Bert would be responsible for his deductible amount, that is not an "exclusion" under the policy. (The application of the deductible is noted in the Insuring Agreement section.) Any damage caused by the collision with the fence would not be considered "road damage," so the second tire would be covered. Although Bert's alcoholism would be a very pertinent factor for the risk in general, his DWI does not have any bearing on coverage for this loss.
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Question #3: Great Paint Job!
Martha was more than proud of her van's unusual artwork. Although the brightly colored nature scene was not admired by everyone, she was sure that it made her vehicle a collector's item. When Martha forgot to put the vehicle in park and it rolled down a large hill into an oak tree, she was distressed but consoled herself by thinking of the extra payout that she would receive from her insurance company when it considered her van's artistic and sentimental value.
After Martha's vehicle was appraised by her insurer, she discovered that:
a. Since the mural was put on her van over five years ago, depreciation would have a significant effect on the value of her prized painting. The adjuster remarked: "An adjustment for depreciation and physical condition will be made in determining actual cash value in the event of a loss."
b. That although her van's special artwork added to its value, her personal attachment to the van had no bearing on the offer that she would receive. The adjuster explained the "Limit of Liability" section of Part D only allowed for compensation in the amount of the van's "actual cash value." Personal and sentimental attachments would not be determining factors in making a settlement offer.
c. Her custom painting would not be considered by her insurer during the settlement process.
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Answer and explanation
The best answer is "c."
Part D Coverage for Damage to Your Auto states under Exclusion #10 that "loss to any custom furnishings or equipment in or upon any pickup or van" is not covered under the policy. In fact, Part D of the exclusion states specifically that "custom murals, paintings, or other decals or graphics" are not covered.
Click the next page for Question 4!
Question #4: Comprehensive and Collision
According to Part D Coverage for Damage to Your Auto, which of the following types of losses can be considered as either collision or comprehensive?
a. Contact with a bird or animal
b. Breakage of glass
c. Missiles or falling objects
d. Windstorm or hail
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Answer and explanation
The best answer is "b."
Although the policy explicitly lists breakage of glass as a comprehensive loss, it also states that "If breakage of glass is caused by a 'collision,' you may elect to have it considered a loss caused by 'collision.'"
Barrett Evans, CPCU, AIC, is a regional claims manager with Insurance House in Winston-Salem, NC. He is a certified North Carolina Property and Liability CE Instructor and may be reached at bevans@insurancehouse.com; www.linkedin.com/pub/barrett-evans/18/93a/4a1.
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