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

Insured

Uninsured motor vehicle

Exclusions

Limit of liability

Other insurance

Arbitration provision

Underinsured Motorists Coverage

Insuring Agreement

A. We will pay compensatory damages which an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle" because of "bodily injury":

1. Sustained by an "insured"; and 2. Caused by an accident.

The owner's or operator's liability for these damages must arise out of the ownership, maintenance or use of the "uninsured motor vehicle".

Any judgment for damages arising out of a suit brought without our consent is not binding on us.

Analysis

An example of this coverage is if the insured George is injured by a negligent driver, Leroy, who has no insurance on his auto, George's uninsured motorists coverage will pay the damages to George that he, by rights, should have recovered from Leroy.

It should be noted that the word "compensatory" is an important item found in the current personal auto policy. This descriptive term was put into the insuring agreement to make clear that damages other than compensatory damages, such as punitive damages, are not covered by this part of the policy. This point is bolstered further by a specific exclusion of punitive or exemplary damages, and both items serve to counter the argument that if the policy does not specifically state that punitive damages are excluded, they are then covered.

A key element of the uninsured motorists coverage insuring agreement is that the operator or owner of the uninsured motor vehicle must be legally responsible to pay for the insured's damages. The insurance company has no obligation to pay for an insured's injuries unless the elements of legal liability are present. That is one of the reasons uninsured motorists coverage has been described as reverse liability insurance. Think of uninsured motorists insurance in this way: the insurance company becomes, in a sense, the liability insurer of any uninsured motorist that injures its insured.

Insured

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

1. You or any "family member". 2. Any other person "occupying" "your covered auto" or 3. Any person for damages that person is entitled to recover because of "bodily injury" to which this coverage applies sustained by a person described in 1. or 2. above.

Analysis

The named insured—"you" as stated in the policy—or any "family member" is an insured. Also, an insured is any other person occupying the named insured's covered auto. A third type of insured person is the person who may not be involved physically in an accident, but who is entitled to damages from the person or organization responsible for having caused bodily injury to an insured of either kind described previously. This type of covered person, often called a derivative insured, might be the husband of an injured wife claiming damages for loss of consortium, or the father of an injured child claiming damages for medical expenses.

"Occupying" means "in, upon, getting in, on, out or off"; "family member" and "covered auto" are defined terms, see Personal Auto Policy—Definitions.

Uninsured motorists coverage, like the medical payments coverage of the personal auto policy, is available to persons other than the named insured or a family member only while occupying the named insured's covered auto.

Uninsured Motor Vehicle

C. "Uninsured motor vehicle" means a land motor vehicle or trailer of any type:

1. To which no bodily injury liability bond or policy applies at the time of the accident.

2. To which a bodily injury liability bond or policy applies at the time of the accident. In this case its limit for bodily injury liability must be less than the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which "your covered auto" is principally garaged.

3. Which is a hit-and-run vehicle whose operator or owner can not be identified and which hits:

a. You or any "family member"; b. A vehicle which you or any "family member" are "occupying"; or c. "Your covered auto"

4. To which a bodily injury liability bond or policy applies at the time of the accident but the bonding or insuring company:

a. Denies coverage; or b. Is or becomes insolvent.

However, "uninsured motor vehicle" does not include any vehicle or equipment:

(1.) Owned by or furnished or available for the regular use of you or any "family member".

(2.) Owned or operated by a self-insurer under any applicable motor vehicle law, except a self-insurer which is or becomes insolvent.

(3.) Owned by any governmental unit or agency.

(4.) Operated on rails or crawler treads.

(5.) Designed mainly for use off public roads while not on public roads.

(6.) While located for use as a residence or premises.

Analysis

The insuring agreement of Part C of the Personal Auto says that covered damages must result from the ownership, maintenance, or use of an uninsured motor vehicle. The somewhat detailed definition of this term is obviously of the utmost importance. The first part of the definition is simple enough. The second part, dealing with limits of insurance that are less than financial responsibility law limits, deserves more discussion. As an example, say the named insured is hit by a vehicle that has $15,000 bodily injury liability coverage. If the named insured's state has a financial responsibility law that puts the minimum limit at $30,000, the other auto qualifies as an uninsured motor vehicle by definition under the named insured's policy. The named insured's insurance policy will pay for the damages suffered by the named insured up to the difference between the named insured's limit of uninsured motorist coverage and the amount recoverable under the auto policy of the uninsured motorist. For example, the named insured's UM limit is $50,000; the insured is in an accident with a person whose liability limits are $15,000 when the state minimum is $30,000. The at-fault party's insurer will pay $15,000; the insured's policy will pay the difference between the $15,000 and the insured's UM limit of $50,000. Since the insured's injuries are $45,000 and $15,000 has been paid by the at-fault party's insurer, the insured's policy will pay $30,000 so that the insured is fully compensated for the $45,000 in medical expenses.

A third type of uninsured motor vehicle is a hit-and-run vehicle. This type of vehicle is detailed in the definition of uninsured motor vehicle and calls for the hit-and-run vehicle to actually "hit", that is, make contact with the covered auto. However, this requirement is not enforced to the strict letter of the definition in all states. In an increasing number of states, the claimant need only establish that an unidentifiable auto caused him or her to sustain injury (ran him or her off the road perhaps). These are often known as "phantom vehicles" because the insured often doesn't get the license plate or enough identifying information to find the other party. .

The wide scope of the introductory statement—"a land motor vehicle or trailer of any type"—is limited substantially by six exceptions that follow the four-part definition of an uninsured motor vehicle. In language reminiscent of exclusions found in the liability and medical payments sections of the policy, any vehicle or equipment "owned by or furnished or available for the regular use of" the named insured or any family member is not considered an uninsured motor vehicle; neither is a vehicle "owned or operated by a self-insurer under any applicable motor vehicle law" (except, a self-insurer that is or becomes insolvent), nor a vehicle "owned by any governmental unit or agency" considered an uninsured motor vehicle.

The fourth and fifth exceptions relate to types of vehicles. Any vehicle "operated on rails or crawler treads" is not an uninsured motor vehicle, nor is a vehicle designed mainly for use off public roads while not on public roads. As the added emphasis indicates, this wording implies, for example, that a farm type tractor or other equipment may be considered an uninsured motor vehicle while actually upon public roads; so then, a tractor or other mobile equipment not operated on crawler treads may be considered an uninsured motor vehicle while crossing a public road.

The final exception is for vehicles used as a residence or a premises. A motor home being used as a construction office, for example is a vehicle being used as a premises.

Exclusions

A. We do not provide Uninsured Motorists Coverage for "bodily injury" sustained:

1. By an "insured" while "occupying", or when struck by, any motor vehicle owned by that "insured" which is not insured for this coverage under this Policy. This includes a trailer of any type used with that vehicle. 2. By any "family member" while "occupying", or when struck by, any motor vehicle you own which is insured for this coverage on a primary basis under any other policy.

Analysis

Under these provisions, the insurer is basically saying that it does not choose to provide uninsured motorists coverage if such coverage is not on the policy it writes for the named insured and the insurer is thus not receiving the premium for the exposure. However, this particular pair of exclusions may run afoul of state law. It is important to remember that states require vehicle owners to have and maintain certain insurance coverages in order to protect themselves and other innocent drivers. State law can control and dictate coverages under an insurance policy, the policy language to the contrary notwithstanding.

B. We do not provide Uninsured Motorists Coverage for "bodily injury" sustained by any "insured":

1. If that "insured" or the legal representative settles the "bodily injury" claim and such settlement prejudices our right to recover payment. 2. While "occupying" "your covered auto" when it is being used as a public or livery conveyance. This includes but is not limited to any period of time "your covered auto" 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 (B.2.) does not apply: a. To a share-the-expense car pool; or b. While "your covered auto" is being used for volunteer or charitable purposes.

3. Using a vehicle without a reasonable belief that that "insured" is entitled to do so. This exclusion (B.3)does not apply to a "family member" using "your covered auto" which is owned by you. 4. While "occupying", or when struck by, "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".

5. While "occupying", or when struck by, any vehicle which is designed or can be used for flight.

Analysis

The first section of this exclusion requires the insurer's participation in any settlement of a claim, and emphasizes the point that the insurer's subrogation rights should not be compromised. Any settlement of the UM claim by the insured that prejudices the rights of recovery of the insurer will not be covered.

The public livery or conveyance exclusion addresses only the named insured's covered auto; it does not eliminate an insured's uninsured motorists coverage while occupying any other car for hire; a taxi, for example. The current edition of the Personal Auto has a second sentence in exclusion three; it clarifies that the exclusion does not apply to a family member while using the named insured's car.

The 2018 edition of the form modifies the public/livery exclusion to include in the exclusion the use of the vehicle while logged into a "transportation network platform" as a driver. This is the same as the other ride-sharing exclusions found in parts A and B of the policy.

The public/livery exclusion does not apply to share-the-expense carpools or when the vehicle is being used for volunteer or charitable purposes. Activities such as carpools and activities such as taking the girl scouts to the mall to sell girl scout cookies are not holding the vehicle out to the public for hire.

Exclusion 3 is for use of the vehicle without reasonable belief that the "insured" is entitled to do so. This does not apply to "family members" while using an insured's covered auto. If an insured steals a vehicle, he should have no expectation that his policy will provide coverage for any injuries he might receive should he have an accident.

Another new exclusion has been added, and that is for "occupying" or when struck by the covered automobile while it is enrolled in a personal vehicle sharing program and is being used in connection with that sharing program by anyone other than the insured or any "family member". The personal insurance policy is not designed to provide coverage for the insured allowing others to use his vehicle as a rental car. It's one thing if the insured on occasion lets a friend borrow the pickup truck to haul mulch for the yard, but it's another thing entirely for the insured to be renting out his extra vehicle on weekends to make some extra money.

One last new exclusion has been added for any vehicle that is designed or can be used for flight. As mentioned in earlier sections, such vehicles are not available for purchase by the public but 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.

C. This coverage shall not apply directly or indirectly to benefit any insurer or self-insurer under any of the following or similar law:

1. Workers compensation law; or 2. Disability benefits law.

D. We do not provide Uninsured Motorists Coverage for punitive or exemplary damages.

Analysis

In certain states, under some circumstances, a workers compensation insurer or a self-insured employer may have a right of subrogation against a third party who has caused a compensable injury to an employee. Thus, the WC insurer or self-insurer may sue the uninsured motorist or, theoretically, make a claim as a derivative insured under the employee's uninsured motorists coverage. The purpose of the exclusion is to keep the uninsured motorists insurer from having to provide reimbursement to a workers compensation insurer or self-insurer. A workers compensation setoff, not to be confused with this exclusion, is discussed under the limit of liability provision below.

In order to respond to case law in a few states that held that punitive damages were covered because they were not specifically excluded, the policy states that the insurer does not provide uninsured motorists coverage for punitive or exemplary damages. This exclusion, combined with the definitive statement in the insuring agreement that compensatory damages will be paid by the insurer, should serve to clarify and reinforce the intent that uninsured motorists coverage and underinsured motorists coverage is for compensatory damages and not punitive damages.

Limit of Liability

A. The Limit Of Liability shown in the Declarations for each person for Uninsured Motorists Coverage 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 accident. Subject to this limit for each person, the Limit Of Liability shown in the Declarations for each accident for Uninsured Motorists Coverage is our maximum limit of liability for all damages for "bodily injury" resulting from any one 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 accident.

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

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

C. We will not make a duplicate payment under this coverage for any element of loss for which payment has been made by or on behalf of persons or organizations who may be legally responsible.

D. We will not pay for any element of loss if a person is entitled to receive payment for the same element of loss under any of the following or similar law:

1. Workers' compensation law; or 2. Disability benefits law.

Analysis

The single limit of liability for uninsured motorists coverage in the declarations is the most the insurance company will pay "for all damages resulting from any one accident…regardless of the number of insureds, claims made, vehicles or premiums shown in the declarations, or vehicles involved in the accident." Split limits can be arranged by endorsement.

The policy has language about "care, loss of services" etc. This careful wording is an attempt to prevent "stacking" of uninsured motorists coverage in accidents insured against by a policy covering more than one auto of the named insured. In such circumstances, some insureds have successfully argued that if the uninsured driver's liability for bodily injury exceeds the limit applying to one auto, then the amounts of the uninsured motorists limits for other autos under the policy would also be available for that accident. The effectiveness of the current language in countering this argument depends on how the policy is interpreted under various state laws. See Uninsured Motorists Requirements for state by state information regarding the question of "stacking."

Another provision of the "limit of liability" section states that no one will be entitled to receive duplicate payments for the same elements of loss under the uninsured motorists coverage and Part A or Part B or any underinsured motorists coverage provided by the policy. The insurer will not make any duplicate payments under the UM coverages for any element of loss for which payment has already been made by or on behalf of any persons or organizations who may be legally responsible. Additionally, the insurer will not pay for any element of loss if a person is entitled to receive payment for the same element of loss under any workers compensation law or disability benefits law. The bottom line to all this is that the insurer is attempting to clarify the point that it does not intend to make duplicate payments under uninsured motorists coverage.

Other Insurance

If there is other applicable insurance available under one or more policies or provisions of coverage that is similar to the insurance provided under this Part of the Policy:

1. Any recovery for damages under all such policies or provisions of coverage may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis. 2. Any insurance we provide with respect to a vehicle you do not own, including any vehicle while used as a temporary substitute for "your covered auto", shall be excess over any collectible insurance providing such coverage on a primary basis. 3. If the coverage under this Policy is provided:

a. On a primary basis, we will pay only our share of the loss that must be paid under insurance providing coverage on a primary basis. Our share is the proportion that our limit of liability bears to the total of all applicable limits of liability for coverage provided on a primary basis. b. On an excess basis, we will pay only our share of the loss that must be paid under insurance providing coverage on an excess basis. Our share is the proportion that our limit of liability bears to the total of all applicable limits of liability for coverage provided on an excess basis.

Analysis

There are several provisions to this part of the personal auto policy. First, if there is other applicable insurance available under one or more policies, any recovery for damages under such policies may equal but not exceed the highest applicable limit for any one vehicle under any insurance providing coverage on either a primary or excess basis; this is an anti-stacking provision.

Second, any insurance provided with respect to a vehicle not owned by the named insured (including temporary substitute vehicles) is excess over any collectible insurance that provides coverage on a primary basis.

Finally, the "other insurance" clause states that if the coverage under the insured's Personal Auto is on a primary basis, the insured's policy will pay only its pro rata share—"the proportion that our limit of liability bears to the total of all applicable limits of liability provided". The insured's coverage will also be paid pro rata if the policy applies to coverage on an excess basis.

Arbitration

A. If we and an "insured" do not agree:

1. Whether that "insured" is legally entitled to recover damages; or 2. As to the amount of damages which are recoverable by that "insured"; from the owner or operator of an "uninsured motor vehicle", then the matter may be arbitrated. However, disputes concerning coverage under this Part may not be arbitrated.

Both parties must agree to arbitration. If so agreed, each party will select an arbitrator. The two arbitrators will select a third. If they cannot agree within 30 days, either may request that selection be made by a judge of a court having jurisdiction.

B. Each party will:

1. Pay the expenses it incurs; and 2. Bear the expenses of the third arbitrator equally.

C. Unless both parties agree otherwise, arbitration will take place in the county in which the "insured" lives. Local rules of law as to procedure and evidence will apply. A decision agreed to by at least two of the arbitrators will be binding as to:

1. Whether the "insured" is legally entitled to recover damages; and 2. The amount of damages. This applies only if the amount does not exceed the minimum limit for bodily injury liability specified by the financial responsibility law of the state in which "your covered auto" is principally garaged. If the amount exceeds that limit, either party may demand the right to a trial. This demand must be made within 60 days of the arbitrators' decision. If this demand is not made, the amount of damages agreed to by the arbitrators will be binding.

Analysis

In most liability claims, the interest of an insurance company and its insured are the same—to protect the insured from the claims of an injured third party. Uninsured motorists' claims present a very different situation. The insured's interest now comes into conflict with those of the insurance company. Unless the insured can show that the other driver was actually negligent and not just "uninsured," the insured may be left without any recovery under his insurance. And the insurance company, unless it guards against invalid uninsured motorists claims, might incur significant underwriting losses.

The insurance industry has long recognized the heightened potential for disputes between an insurer and its insured with uninsured motorists claims. Accordingly, previous automobile policies have provided a method, namely mandatory and binding arbitration for settling disputes without either party having to take legal action. The current personal auto policy offers arbitration if the insured and the insurer do have a disagreement about the uninsured motorists coverage.

The arbitration provision states that if an insured and the insurance company disagree on that insured's legal entitlement to recover damages or on the amount of damages that are recoverable by that insured, then the matter may be arbitrated (disputes concerning coverage itself may not be arbitrated). Both parties must agree to arbitration, and if so agreed, each party selects an arbitrator. The two chosen arbitrators are to select a third. If the two arbitrators are unable to agree upon a third within thirty days, either may request that the selection of the third party be made by "a judge of a court having jurisdiction".

Each party pays the expenses it incurs, and both parties share equally the cost of the third arbitrator. Unless both the insured and the insurer agree otherwise, arbitration takes place in the county and state in which the covered person lives; so, local rules of law as to procedure and evidence apply. When two arbitrators reach an agreement, their decision is binding, with one exception.

If the amount of damages exceeds the minimum limit for bodily injury as required by the financial responsibility law of the state in which the covered auto is garaged in, then either party may demand a trial. The demand must be made within 60 days of the arbitrator's decision. If no demand is made, the agreement of the arbitrators is binding.