Personal Auto Policy – Part A Liability

Personal Auto Policy – Part B Medical Payments

Personal Auto Policy – Part C Uninsured Motorists Coverage

Personal Auto Policy – Part D Coverage for Damage to Your Auto

Personal Auto Policy – Part E & F Duties after a Loss/General Provisions

Topics covered:

Insuring agreement

Insureds

Supplementary payments

Exclusions

Limit of liability

Additional provisions

Insuring Agreement

A. We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident. Damages include prejudgment interest awarded against the "insured". We will settle or defend, as we consider appropriate, any claim or suit asking for these damages. In addition to our limit of liability, we will pay all defense costs we incur. Our duty to settle or defend ends when our limit of liability for this coverage has been exhausted by payment of judgments or settlements. We have no duty to defend any suit or settle any claim for "bodily injury" or "property damage" not covered under this Policy.

Analysis

The promises to pay damages and to defend any claim or suit asking for those damages are separate and independent promises. The insurer has a duty to indemnify and a duty to defend the insured. That is why defense costs are considered to be in addition to the limit of liability. For example, if the policy has a limit of liability of $300,000, this full amount is available for indemnification; an attorney's fee of $10,000 plus court costs of $2000 will not reduce the limit of liability by $12,000. However, the insurer's duty to settle or defend does end when the limit of liability has been exhausted through the payment of judgments or settlements. Note this point, in that it means that the insurer can not just deposit the policy limits into an escrow account and walk away from the defense of the insured; the duty to defend the insured must be carried on until the actual payment of a judgment against the insured or if a settlement with the claimant exhausts the limit of liability.

Furthermore, the insuring agreement includes as covered damages, i.e., paid within policy limits, any prejudgment interest awarded against the insured. This coverage, which parallels similar coverages in other commercial liability policies, has resulted from the enactment in several states of laws that allow claimants to collect interest on judgments between the time suit was entered and judgment was rendered. Because the policy language states that such amounts are included as damages, they are subject to PAP limits that apply to all damages. In contrast, interest that accrues after a judgment is entered and up to the time that judgment is paid remains a supplementary payment, that is, payable in addition to the limit of liability.

Also present in the insuring agreement is a statement that the insurer has no duty to defend any suit or settle any claim for bodily injury or property damage not covered under the policy. This serves to clarify the insurer's duty to defend. The general rule is that the insurer's duty to defend is triggered by the allegations of the complaint against the insured regardless of the apparent facts, or the insurer's interpretation of facts, of a particular loss. If, for example, an obviously fraudulent suit is filed against the insured, the insurer is still required to defend so long as the suit alleges bodily injury or property damage that could conceivably be covered under the policy. However, a suit alleging the insured committed an assault with the express intention of causing bodily injury is not considered as alleging an act that is covered by the policy (regardless of the truth or falsity of the allegation), and so the insurance company would be on solid ground should it decide not to mount a defense.

Note that the personal auto policy ties coverage to "auto accident." Since 1966, general liability insurance provisions have used "occurrence"—defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions"—as the triggering event; the purpose has been to meet the particular needs of public liability where repeated exposure to dangerous conditions in areas of products, operations, professional activities, etc., is a large concern. In automobile liability insurance, the distinction between the two terms is of less significance. The reverting to "accident" in the personal auto policy might be viewed as no more than another of the drafters' attempts to achieve greater understandability.

Insureds

B. "Insured" as used in this Part means:

1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".

2. Any person using "your covered auto".

3. For "your covered auto", any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.

4. For any auto or "trailer", other than "your covered auto", any other person or organization but only with respect to legal responsibility for acts or omissions of you or any "family member" for whom coverage is afforded under this Part. This provision (B.4.) applies only if the person or organization does not own or hire the auto or "trailer".

Analysis

Of key importance to the liability insuring agreement provision is the meaning of "insured." The personal auto policy outlines four categories of insureds, which vary as to persons (for example, "you"—the named insured—as opposed to "any person") and vehicles (for example, "your covered auto" as opposed to "any auto").

First, the named insured and his or her family members are covered for the "ownership, maintenance or use of any auto or trailer." "Family member" is an important defined term, and is not as broad as many people suspect. It includes resident relatives, those related by blood or marriage, or foster children. It does not include significant others or partners, even though the insured may consider them family. Unless the significant other jointly owns the vehicle with the named insured, that person needs a separate policy. If the partners own a vehicle jointly, then the Joint Ownership Coverage PP 03 34 https://www.propertycasualty360.com/fcs/2008/06/25/personal-auto-endorsements-48/ should be added to the policy.

Although the policy does not specifically say that "use" includes loading and unloading—as previous automobile policies have—there is no reason to believe that the phrase "ownership, maintenance, or use" does not encompass loading and unloading. Dropping the reference to loading and unloading can be seen as avoiding redundancy in favor of simplicity. Besides, there is no exclusion or definition on the Personal Auto that even broaches the subject of "loading and unloading," so the insured would certainly be given the benefit of the doubt should any dispute arise in this area.

Also, it should be noted that "use" need not be equated with actual operation of a vehicle in all cases. A passenger of a car can be using the car, or a car can even be "used" by a person not occupying the car, as may be the case when a domestic servant runs an errand for an employer. In Miss. Farm Bureau Cas. Ins. Co. v. Powell, 336 So. 3d 1079 (Miss. 2022), an insured pickup truck and trailer were being used to support scaffolding that allowed workers to install trusses on a pole barn. Two workers were climbing down the scaffolding for lunch when one of them fell and suffered severe injuries to his eye socket. The insurer denied the claim because the truck was parked and the engine was off at the time of the injury, meaning the truck was not in use when the injury occurred, and therefore coverage did not apply. The Supreme Court of Mississippi disagreed. First, the terms "use" and "auto accident" were not defined anywhere in the policy, and the court refused to add language to the policy that wasn't already there. Second, there was nothing in the policy indicating that the covered auto's engine had to be running in order for coverage to apply. The court affirmed the trial court's dismissal of the insurer's motion for summary judgment.

The second category of insured includes any person using the named insured's covered auto. Previous auto policies have provided this coverage to persons other than family members only when the owner has given permission and the borrower uses the auto within the scope of this permission; likewise, the named insured and family members have not been covered for driving non-owned autos unless by permission of the owner and within the scope of permission. The current personal auto policy, however, excludes coverage only when the insurer can establish that the insured under this category did not have "a reasonable belief" that he or she was entitled to borrow the auto.

The third category of insured includes any person or organization for liability arising out of any insured's use of the covered auto on behalf of that person or organization. Thus, for example, if the named insured drives the covered auto on the business of his or her employer, the employer is covered to the extent of its liability for a resulting accident.

"Any person or organization" is the subject of the fourth category as well. But in this case, the person or organization is covered for the named insured's or family member's use of any auto or trailer other than the covered auto—and other than any auto or trailer owned by the "person or organization." If, for example, the employee named insured described above drives a fellow employee's car on his employer's business, this clause extends coverage to the employer in the event the employer becomes liable for the employee's operation of the car. The provision does not extend coverage to the employer when the named insured is using an auto that is owned by the employer.

Note that the auto policy applies separately to each insured who is seeking coverage or against whom a claim or suit is brought. This is the severability of interests or separation of insureds feature that is found in liability policies. The liability insuring agreement is the source of its severability of interests feature. In the personal auto policy, the liability insuring agreement specifies that the company will cover the liability of any insured and will settle or defend any claim or suit. Neither here nor elsewhere does the policy prevent a claim or suit by one insured against another. The "limit of liability" section fills out the intent of severability provisions by stating that regardless of the number of insureds involved in an accident, the limit of liability for the policy will not be increased. An insured, though able to bring a claim or suit against another insured, would not be able to collect on two suits, together exceeding the limit of liability, against two insureds for damages caused in one accident. The most any claimant-insured—or, for that matter, any other claimant—can recover for one accident is the limit that is stated in the declarations.

Supplementary Payments

We will pay on behalf of an "insured":

1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic law violations. The accident must result in "bodily injury" or "property damage" covered under this Policy.

2. Premiums on appeal bonds and bonds to release attachments in any suit we defend.

3. Interest accruing after a judgment is entered in any suit we defend. Our duty to pay interest ends when we offer to pay that part of the judgment which does not exceed our limit of liability for this coverage.

4. Up to $250 a day for loss of earnings, but not other income, because of attendance at hearings or trials at our request. 5. Other reasonable expenses incurred at our request.

These payments will not reduce the limit of liability.

Analysis

Besides settling or defending any claims or suits, the company agrees to pay certain supplementary payments on behalf of an insured. These payments are in addition to the limit of liability and do not reduce that limit as they are paid out by the company. Note that the payment for the cost of bail bonds are for when bonds are required for accidents resulting in bodily injury or property damage that is covered under the auto policy; a bail bond for a simple speeding ticket is not covered.

The loss of earnings limit has been increased in the 2018 form to $250 from $200 in the previous form. This applies when the insured has been asked to attend hearings or trials at the request of the insurer.

The insured is advised, following the five payments, that any payment made here will not reduce the limit of liability. In addition to the provisions being more consistent with other lines of coverage, the placement makes it clear that supplementary payments can be made whether or not any payments are made under the limit of liability provision.

Exclusions

A. We do not provide Liability Coverage for any "insured":

1. Who intentionally causes "bodily injury" or "property damage". 2. For "property damage" to property owned or being transported by that "insured".

Analysis

This exclusion reinforces the stipulation in the insuring agreement that damages for bodily injury or property damage must result from an auto accident. Note that the wording of the exclusion differs from the "expected or intended injury" exclusion that is found on the commercial general liability coverage form. Often, the "expected or intended" phrase is interpreted by courts as meaning that the exclusion does not apply unless the insured expects or intends the injury; in other words, even if the act is intended by the insured, the exclusion will not apply unless the insurer can show that the insured also intended the resultant injury. The wording on the personal auto form presents an exclusion that is clearer and more to the point.

The principle that underlies the exclusion of owned property is "you can't sue yourself." If, for example, the insured destroys his or her car (even if negligently), that insured can not make a claim against himself or herself and expect the liability insurer to pay for the loss. Instead, direct physical damage coverage is the appropriate insurance treatment for owned property. The exclusion of property transported by an insured is necessary to prevent a personal auto policy from becoming its insured's "cargo" policy. If the insured wants insurance coverage for property he or she transports for others, he or she will need to purchase coverage separate from the personal auto policy. .

3. For "property damage" to property:

a. Rented to; b. Used by; or c. In the care of; that "insured".

This exclusion (A.3.) does not apply to "property damage" to a residence or private garage. 4. For "bodily injury" to an employee of that "insured" during the course of employment. This exclusion (A.4.) does not apply to "bodily injury" to a domestic employee unless workers' compensation benefits are required or available for that domestic employee.

Analysis

This exclusion is the personal auto policy's version of the "care, custody, or control" exclusion. For example, if the insured accidentally backs his car into a boat that he has rented or borrowed, he will not be covered under part A of the auto policy if the boat owner asks for reparations. The exception to the exclusion should be noted because an exception tells what the exclusion does not apply to; it is, in effect, a statement of something that the policy does cover. An example of this exception for a residence or private garage is if the insured accidentally runs his car into the back porch of his apartment building, the insured's auto policy will respond to the landlord's claim.

The named insured and a nondomestic employee qualifying as an insured are both insured for liability to outsiders arising out of the employee's operation of a covered auto, but any injury to the employee is not covered. Rather, the employee would look to the applicable workers compensation law for benefits.

Of considerable note is the absence of any specific exclusion of liability for injury to fellow employees. Even though an employer-named insured may not receive any liability coverage for injuries sustained by an employee covered by workers compensation, any other insured injuring a fellow employee may, so long as some other exclusion does not apply. This is so because the exclusion precludes liability coverage for any insured for bodily injury to an employee of "that insured during the course of employment". The wording of this exclusion clearly shows a reference to an employer-insured and not a fellow employee, for how can one employee be an employee of a fellow employee? Therefore, if an employee is driving the named insured-employer's personal auto on business and injures a fellow employee, the personal auto policy of the employer will not extend liability coverage to the named insured-employer, but will provide liability coverage for the employee-driver.

Such coverage has to be considered in light of any coverage that the employee-driver has under his own personal auto policy. Under that policy, the employee-driver is the named insured and, as such, has potential coverage for the use of any auto, even non-owned autos (other than autos furnished or available for the insured's regular use). Using the same scenario described in the previous paragraph, the other insurance clause comes into effect with the statement that "any insurance we provide for a vehicle you do not own, including any vehicle while being used as a temporary substitute for 'your covered auto', shall be excess over any other collectible insurance". Therefore, the employee's auto policy will give him excess coverage over that provided by the employer's auto policy since a non-owned vehicle was used by the employee.

5. For that "insured's" liability arising out of the ownership or operation of a vehicle while it is being used as a public or livery conveyance. This includes but is not limited to any period of time a vehicle is being used by any "insured" who is logged into a "transportation network platform" as a driver, whether or not a passenger is "occupying" the vehicle.

This exclusion (A.5.) does not apply to:

a. A share-the-expense car pool; or b. The ownership or operation of a vehicle while it is being used for volunteer or charitable purposes.

Analysis

Coverage is excluded for use of the vehicle as a public or livery conveyance. This means the transportation of people or property for a fee. While many people assume this excludes pizza delivery, it does not. The pizza delivery person is not holding himself out for hire to go and get you a pizza; he brings you the pizza from the pizza restaurant. Holding oneself out for livery is having people hire you as an individual to deliver packages from A to B, for example. You do not hire John to deliver your pizza, you call the pizza restaurant and order a pizza. Whomever is on duty, but John or Mabel or George, will deliver your pizza.

A public conveyance is a taxi cab, where you hold yourself out for hire to give people rides to other locations. This became an issue when ridesharing was invented. People were signing up with transportation network companies not realizing that using their vehicle this way was excluded. Because there were gaps in coverage between the personal auto policy and the policy from the transportation network company, coverage needed to be explained. Therefore the 2018 edition of the policy has specified that the public or livery exclusion includes but is not limited to the insured's using a vehicle for rideshare, even without a passenger in the vehicle. Coverage is excluded from the moment the insured turns on the application to look for people to transport and while transporting passengers. This exclusion has been added to all sections of the policy.

An exception exists for this exclusion for share-the-expense carpools as that is different from hiring oneself out to strangers; with a carpool, it's the same riders daily, and riders take turns driving their vehicles.

A new exception has been added in the 2018 form and that is for the ownership or operation of a vehicle while being used for charitable purposes. If the insured helps out at church by delivering donated food to the local food bank, any accidents that would occur in transit would be covered.

6. While employed or otherwise engaged in the "business" of:

a. Selling; b. Repairing; c. Servicing; d. Storing; or e. Parking; vehicles designed for use mainly on public highways.

This includes road testing and delivery. This exclusion (A.6.) does not apply to the ownership, maintenance or use of "your covered auto" by:

(1) You; (2) Any "family member"; or (3) Any partner, agent or employee of you or any "family member".

Analysis

A number of exclusions to the liability agreement affect coverage with respect to any insured using autos in business. To illustrate this particular "auto business" exclusion, if the named insured were an employee at a garage and had an accident while road testing a customer's auto, there would be no liability coverage under the employee's personal auto policy (or the customer's policy). The liability for the accident would be the subject of the employer's garage liability insurance. However, a named insured driving his or her covered auto in an automobile business would still be a covered person.

7. Maintaining or using any vehicle while that "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in Exclusion A.6.

This exclusion (A.7.) does not apply to the maintenance or use of a:

a. Private passenger auto; b. Pickup or van; or c. "Trailer" used with a vehicle described in a. or b. above.

Analysis

This exclusion is another auto business exclusion making the case that the personal auto policy is not supposed to be used to cover a business auto exposure; that is the function of the business auto coverage form. Note the exceptions that allow coverage under the PAP for the maintenance or use of a private passenger auto, pickup or van, or a trailer. One way of looking at this is that the named insured, for example, is covered, while using in a business other than an "auto business", a private passenger auto, say, to deliver a contract proposal to a client.

8. Using a vehicle without a reasonable belief that that "insured" is entitled to do so. This exclusion (A.8.) does not apply to a "family member" using "your covered auto" which is owned by you.

Analysis

There is no liability coverage for an insured under the personal auto policy for bodily injury or property damage that occurs during the unentitled use of a vehicle. The key element here is the phrase "reasonable belief". The phrase is not defined in the policy and, therefore, is subject to an open interpretation. For example, an insured's son has a reasonable belief that he is entitled to use the covered auto (of course, being a family member would mean that the exclusion does not apply to the son anyway), but if the son allows his friends to drive the auto, do the friends have such a belief? If the friends are of driving age and the son allows them to drive that auto, a case can be made that the friends do have a reasonable belief that they are entitled to use the auto. On the other hand, if the son allows an underaged friend (say, for example, a thirteen-year-old) to drive the car, does that friend have a reasonable belief that he is entitled to use the car? In such a situation, the insurer would have a rational basis to deny coverage for the thirteen-year-old because someone so young should not have a reasonable belief that he is entitled to drive a car, especially if the state does not allow him to have a driver's license at that young age. (Montana, for example, will permit a thirteen-year-old to have a driver's license based on "individual hardship.")

9. For "bodily injury" or "property damage" for which that "insured":

a. Is an insured under a nuclear energy liability policy; or b. Would be an insured under a nuclear energy liability policy but for its termination upon exhaustion of its limit of liability.

A nuclear energy liability policy is a policy issued by any of the following or their successors:

(1) Nuclear Energy Liability Insurance Association; (2) Mutual Atomic Energy Liability Underwriters; or (3) Nuclear Insurance Association of Canada.

Analysis

In recognition of the potential hazards nuclear reaction poses to the public, Congress enacted the Price-Anderson act of 1957. The act, which has been amended since its original introduction, requires firms that own or operate nuclear reactors above a certain capacity to have proof of financial responsibility up to certain limits. The normal method of proving this financial responsibility is a nuclear energy liability policy issued by one of the nuclear insurance pools mentioned in the exclusion. This type of policy covers insureds against liability for causing some kind of nuclear damage. Because the personal auto policy is not intended to duplicate the coverage offered by the nuclear liability policies, the nuclear exclusion exists.

10. For the ownership, maintenance or use of "your covered auto" while:

a. Enrolled in a personal vehicle sharing program under the terms of a written agreement; and b. Being used in connection with such personal vehicle sharing program by anyone other than you or any "family member".

Analysis

This is a new clause in the 2018 policy. With the rise of ride-share programs where an insured may use their personal vehicle for hire, or applications where an insured may loan his vehicle out to others similar to renting a vehicle, these exclusions have been added. While the public/livery exclusion is intact this additional language makes it clear that using the vehicle to provide rides to others, or letting others hire your vehicle similar to a rental car are both excluded under the personal auto policy.

B. We do not provide Liability Coverage for the ownership, maintenance or use of:

1. Any vehicle which:

a. Has fewer than four wheels; or b. Is designed mainly for use off public roads.

This exclusion (B.1.) does not apply: (1) While such vehicle is being used by an "insured" in a medical emergency; (2) To any "trailer"; or (3) To any non-owned golf cart.

Analysis

The personal auto policy expresses its coverage in terms of "autos"; yet, there is no definition of "auto" in the policy. In many peoples' minds, autos are four-wheel motor vehicles, but this is not invariably the case when it comes to policy interpretation. Courts in some states have held that a motorcycle, for example, qualifies as an automobile. Because the purpose of the personal auto policy is to cover only certain four-wheel motor vehicles, this exclusion is presented. Basically, this exclusion makes the point that vehicles such as motorcycles or dune buggies should not be automatically covered "autos" under the personal auto policy. For information on available coverage for these types of vehicles, see Miscellaneous Type Vehicle Endorsement.

The exception pertaining to a medical emergency should be noted. If the named insured was on a dirt bike rushing to a ranger station to get help because someone had ridden off a cliff in a national park, and the insured accidentally ran into some hikers and injured them, the auto policy would provide liability coverage for the named insured.

The exception for a non-owned golf cart means that if the insured is driving a golf cart on the course and hits someone with the cart, the personal auto policy will apply to a claim against the insured. And, of course, many insureds live in communities where the mode of transportation is the golf cart; as long as the golf cart is not owned by the insured (a rented one or one that is loaned to the insured, for example), the personal auto policy is there to provide liability coverage in case the insured runs into someone or something while driving the cart.

2. Any vehicle, other than "your covered auto", which is:

a. Owned by you; or b. Furnished or available for your regular use.

Analysis

An automobile furnished to a named insured by an employer is a familiar example of the type of exposure customarily excluded from coverage. For an additional premium, the named insured or a family member can insure the use of furnished or available autos under the personal auto policy through use of the extended non-owned coverage for named individual endorsement. This point was noted in Withrow v. Liberty Mutual Fire Ins. Co., 595 N.E.2d 529 (Oh. App. 3d 1991). Withrow regularly drove a van owned by Wayne Backus for use in Backus's business. Even though he knew the vehicle to be uninsured, he did not ask his agent for coverage. While driving the van, he injured someone and asked his insurer to defend him. The court said "The general purpose of this type of provision [the exclusion for regularly used vehicles] is to cover occasional or incidental use of vehicles without the payment of an additional premium, but to exclude the habitual use of other cars, which would increase the risk on the insurance company without a corresponding increase in the premium."

This exclusion (and the following one) eliminates liability coverage for certain autos "furnished or available for the regular use of " the named insured or a family member. The phrase is not new—nor is it untested. In Hartman v. Progressive Max Ins. Co., 2006-Ohio-1629 (Ohio Ct. App. 2006), Hartman was buying a vehicle from his girlfriend's father; the father was keeping the title to the vehicle until Hartman made all the payments. The vehicle had engine problems when purchased, and Hartman replaced the engine after taking custody. He had an accident four days after the engine replacement; the vehicle was totaled and sold for salvage value. The vehicle was insured under the girlfriend's policy with Hartman listed as a driver, but the vehicle was not on the policy. Hartman filed a claim for UM/UIM benefits, which was denied.

Progressive argued that it did not owe Hartman UM/UIM benefits because he owned the vehicle outright or, in the alternative, the vehicle was furnished for his regular use. The court ruled for Progressive and Hartman appealed. The Ohio Court of Appeals found that, per the agreement between Hartman and his girlfriend's father, title to the vehicle had never transferred to Hartman, so he was not the vehicle owner. However, the vehicle was "made available" most of the time to Hartman because he had exclusive possession. The vehicle was non-functional for several months, and Hartman controlled the timing of the repairs. Hartman did not need permission to use the vehicle, and there was no evidence of a limited, express purpose for his use of the vehicle. Finally, the accident occurred in an area where vehicle use could reasonably be expected. The court ruled that the exclusion did indeed apply.

As for autos made available through car pools, such as those kept by corporations, government agencies, and other organizations, even though the named insured may not have used a particular pool auto regularly, his or her regular access to some car from the pool makes, in effect, a furnished auto of any auto driven under this arrangement. Courts have generally upheld this interpretation. See Galvin v. Amica Mutual Insurance Co., 417 N.E.2d 34 (Mass. App. 1981), for a summary of court cases so holding.

When does a short-term rental car become furnished or available for regular use? Unfortunately, there is no single objective guideline for answering this question, but it seems unlikely that a rental of a few days up to two or three weeks would be viewed as "regular use." In one case, a United States court of appeals applying Florida law held that a three-week rental of an auto did not constitute regular use. The case is Factory Mutual Liab. Ins. Co. v. Continental Cas. Co., 267 F.2d 818 (1959). In the case of American States Ins. Co. v. Tanner., 563 S.E.2d 825 (W. Va. 2002) the question to the court was "does a 'regular use' exclusion, in a motor vehicle insurance policy that insures one's automobile and provides coverage to the policyholder's spouse, preclude coverage for a rental vehicle driven by said spouse as a replacement vehicle for a different automobile insured under a separate policy of motor vehicle insurance?" June Tanner was involved in a crash with another driver, and the other driver's insurer, Harleysville Insurance, furnished a rented vehicle to Mrs. Tanner while her regular vehicle was in the shop. Three weeks after she began using the rental, Mrs. Tanner crashed into a storefront window, killing one person and seriously injuring another. State Farm, who insured Mrs. Tanner's regular vehicle and considered the rental a "temporary substitute vehicle," paid its policy limits to both the injured party and the decedent's estate. The rental vehicle's insurer also paid its full policy limits. Both Mrs. Tanner and the aggrieved parties filed for more insurance payments from Mr. Tanner's auto policy with American States Insurance. American States denied all claims as falling with the "regular use" exclusion, after which State Farm, the Tanners, and the decedent's estate all sued American States. The circuit court affirmed the denial, and the decedent's estate appealed. The Supreme Court of Appeals of West Virginia noted that a short-term rental agreement did not qualify as "regular use" under the generally accepted definition of the term in other jurisdictions. According to the court, "the general consensus [was] to consider, on a case-by-case basis, whether the facts of a particular controversy suggest regular use of the subject vehicle." The court ultimately ruled June Tanner's use of the rental vehicle did not constitute "regular use" so as to preclude the Estate's recovery from Mr. Tanner's American States policy.

3. Any vehicle, other than "your covered auto", which is:

a. Owned by any "family member"; or b. Furnished or available for the regular use of any "family member".

However, this exclusion (B.3.) does not apply to you while you are maintaining or "occupying" any vehicle which is:

(1) Owned by a "family member"; or (2) Furnished or available for the regular use of a "family member".

Analysis

The exception to this exclusion is designed to eliminate the troublesome situation in which named insureds (usually parents) might find themselves, that is, without liability insurance following an accident involving their use of a car owned by another household member; under this exception in the personal auto policy, the named insured and spouse have coverage for third-party claims in such an event.

The use of the term "occupying" in this exception to the exclusion should be noted. By such use, the insurer is requiring the named insured to physically be in or upon the vehicle in question in order for the exception to take hold. Thus, if the named insured, a father for example, directs his son to drive the son's car to the store to purchase an item for the father, it can not be said that the father is using the car. This possibility could exist if the exception stated that the exclusion did not apply to the named insured while he "uses" a vehicle owned by a family member. Since "use" is not a defined term as is "occupying", it could be interpreted in favor of the named insured thereby giving him coverage; a court could say that the father was really using the car because he directed the son on an errand to solely benefit the father and that is the only reason the son was driving the car. Except for the directed, albeit not physical, use of the car by the named insured, the accident would not have happened. Presumably, the phraseology in the current Personal Auto will preclude any such interpretation.

In Webb v. AAA Mid-Atlantic Ins. Group, 348 F. Supp. 2d 324(D.N.J. 2004), two sons lived with their parents; one son owned a vehicle. The other son was driving his brother's vehicle with a passenger and had an accident, causing injuries. The passenger filed a claim against the parents' auto policy, as the parents' policy included "any 'family member' for the ownership, maintenance, or use of any auto" in the definition of "insured". However, the policy excluded coverage for vehicles owned by a family member, with an exception for "your maintenance or use of any vehicle…." The parent's insurer denied the passenger's claim based on that exclusion and pointed out that the policy term "your" referred only to the named insureds, who were the parents. The passenger sued, claiming the exclusion and exception were ambiguous. The court disagreed, finding that the policy clearly stated "your" meant the named insureds and only the named insureds, and that the other son was not automatically a "named insured" simply because he was a family member in the household. Since the exclusion was not ambiguous, the court granted summary judgment for the insurer.

4. Any vehicle, located inside a facility designed for racing, for the purpose of:

a. Participating or competing in; or b. Practicing or preparing for; any prearranged or organized:

(1) Racing or speed contest; or (2) Driver skill training or driver skill event.

5. Any vehicle which is designed or can be used for flight.

Analysis

This is the standard exclusion for any type of racing, including preparing for such activity. . The weakness of the exclusion is in the use of the phrase "located inside a facility designed for racing". It is conceivable that an insured could use his covered auto to race on public roads; granted that this activity is illegal, the personal auto policy still has no exclusion that would preclude coverage if the insured injured someone while racing. The exclusion has been changed to include not just competing but participating in any race or speed contest, and it also excludes driver skill training or driver skill event.

A new exclusion has been added for any vehicle that is designed or can be used for flight. While such vehicles are not available for purchase by the public, they are in development. Therefore, the exclusion has been added so that when such vehicles are available it is clear that there is no coverage provided by the personal auto policy.

Limit of Liability

A. The Limit Of Liability shown in the Declarations for each person for Bodily Injury Liability is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by any one person in any one auto accident. Subject to this limit for each person, the Limit Of Liability shown in the Declarations for each accident for Bodily Injury Liability is our maximum limit of liability for all damages for "bodily injury" resulting from any one auto accident.

The Limit Of Liability shown in the Declarations for each accident for Property Damage Liability is our maximum limit of liability for all "property damage" resulting from any one auto accident. This is the most we will pay regardless of the number of:

1. "Insureds"; 2. Claims made; 3. Vehicles or premiums shown in the Declarations; or 4. Vehicles involved in the auto accident.

B. No one will be entitled to receive duplicate payments for the same elements of loss under this coverage and:

1. Part B or Part C of this Policy; or 2. Any Underinsured Motorists Coverage provided by this Policy.

Analysis

This clause allows split limits for bodily injury and property damage coverages. The limit of liability shown for bodily injury liability is the maximum amount the insurer will pay due to any one auto accident; the property damage limit of liability is the most the insurer will pay due to any one auto accident.

This clause also declares that the policy has a per person limit. The amount shown in the declarations is the most the insurer will pay for all damages arising out of bodily injury sustained by any one person in any one accident. In other words, the auto policy limits the amount that any one person can receive in an accident. If the stated limit is $25,000, that is the most any one person can receive, regardless of the total amount of damages suffered.

As an example, say the personal auto has a $25,000 per person BI limit; a $50,000 per accident BI limit; and a $25,000 PD limit. If an accident occurs and there are two people injured due to the negligence of the named insured, each person could receive $25,000 total for the bodily injuries. If there were more than two persons injured, the insurer would pay no more than the $50,000 limit for the accident; the amounts that the individuals would receive could vary (though no more than $25,000), but the insurer would pay no more than $50,000 total to all the injured parties combined. If there were only one person injured and the bodily injury damages amounted to $50,000, the named insured's personal auto would only pay the $25,000 per person limit. If the total property damages were $25,000, that is the amount the insurer would pay. It makes no difference how many cars were involved in the accident, or how many insureds (under one personal auto) were involved, or how much actual property damage occurred; the insurer will pay no more than the listed $25,000 figure.

The limit of liability clause also prohibits duplicate payments. This means that if the injured claimant receives payments under part A of the personal auto (liability coverage), that same claimant will not be entitled to payments under part B (medical payments coverage) or part C (uninsured motorists coverage) for the same elements of loss. This is sort of an anti-stacking clause; the insurer does not want to make duplicate or triplicate payments for the same injuries. Parts B and C of the personal auto have the same prohibition against duplicate payments.

Additional Provisions

Financial Responsibility

When this Policy is certified as future proof of financial responsibility, this Policy shall comply with the law to the extent required.

Analysis

Financial responsibility laws require drivers who have been involved in accidents to maintain proof of financial responsibility for the future. Most people called upon to do so use liability insurance as their proof. The personal auto guarantees that when it is certified as future proof of financial responsibility, the policy will comply with the law to the extent required. For example, if the limits of liability required by the financial responsibility law increase during the policy period, the policy will be interpreted as providing at least those limits. Most auto policies in use before the personal auto had a similar provision, yet they required the insured to reimburse the insurance company for the difference between the stated policy limits and any higher limits paid to a claimant. The current personal auto does not call for reimbursement.

Other Insurance

If there is other applicable liability insurance, 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 for a vehicle you do not own, including any vehicle while used as a temporary substitute for "your covered auto", shall be excess over any other collectible insurance except insurance written specifically to cover as excess over the limits of liability that apply in this Policy.

Analysis

This clause sets forth the extent of recovery when one or more other policies apply to a covered loss. In accidents covered by the named insured's policy and other liability insurance, the named insured's policy pays no more than its share, a pro-rata settlement. Insurance provided for vehicles not owned by the named insured, however, is excess over any other collectible insurance covering the loss; and the key term here is "collectible." For example, if the named insured is driving his son's car and has an accident, the son's insurance should be primary; however, if the son had allowed his insurance to lapse, there is no other "collectible" insurance and the named insured's coverage will become primary.

Note that the wording has been changed from the earlier personal auto. Because of some courts' decisions that primary coverage was intended to apply under both the policy insuring the owner of a temporary substitute vehicle and the policy insuring the operator of the temporary substitute, the language has been revised to clarify the intent that any insurance provided for a nonowned auto, including one used as a temporary substitute, is considered excess over any other collectible insurance.