Insurance Continuing Education - Personal Auto Coverage

Bob and Mary Gordon are both employed. Bob is a supervisor for a large automobile repair firm. Marie is a social worker for the State Welfare Department. Bob and Marie have two children. Karen, aged 20, is at­tending college 200 miles from home. Ken, aged 16, lives at home and attends high school. The Gordon’s own 4 vehicles. Marie is the principal driver of a 1-year old sedan, which she uses to drive to and from work. The car is also driven occasionally on state business.

Bob is the principal driver of a 3-year old customized van, which he uses to drive to and from work. The van is also used by the family for fishing, camping and outdoor recreation. Karen is the principal driver of a 4-year old sedan, which she uses at col­lege and to travel home on holidays and weekends. Ken is the principal driver of a 6-year old compact car, which he drives to and from school. All vehicles are legally titled in the names of Robert and Marie Gordon.

Personal Auto Policy Coverages

No-Fault Auto Insurance does not apply in Gordon's state. Endorsement PP 03-03 is the Towing and Labor Costs Coverage and en­dorsement PP 03-11 is the Under-Insured Motorists Coverage with limits of $100,000 for each acci­dent.

Loss Situations

The Loss Situations involve the various types of coverage provided by the Gor­don's Per­sonal Auto Policy. Their PAP covers not all of these losses, the comments about each loss explain the coverage that applies or why the loss is not covered.

Liability Coverage

The following Loss Situations apply primarily to the Liability Coverage (Part A) under the PAP. Each loss is a sepa­rate occurrence.

Loss - Bob is involved in an accident with another motorist who claims that Bob did not have the right of way. Damage to the other driver's car is $5,000. The other motorist also sues Bob for $100,000 and is awarded dam­ages for Bodily Injury in the amount of $50,00­0. The court also awards $2,250 as a prejudgment interest. Legal de­fense costs incurred by Bob's insurer are $25,000.

Comment - The Property Damage Claim of $5,000, the Bodily Injury Claim of $50,000, and prejudgment interest of $2,500 is paid by Bob's insurer under the Liability Section of the PAP. The legal defense costs of $25,000 are paid in addition to the amount that Bob is legally required to pay.

Loss - Bob is confronted by an irate customer who claims that the brakes of his car are not repaired properly. The mechanic who re­paired the brakes states that the brakes are fine. To determine who is correct, Bob de­cides to road test the customer's car. While Bob is road-testing the car, the brakes fail and Bob hits another motorist. The motorist is seriously injured and Bob is personally sued for $200,000. Damage to the customer's car is $4,00­0. Bob also has medical expenses of $3,000 resulting from the collision.

Comment - The Bodily Injury incurred by the injured motorist and the Property Damage to the customer's car are clear­ly excluded under the Liability Section of the PAP, since Bob was using the cust­omer's car in the automo­bile or garage business. The medical ex­penses in­curred by Bob are excluded under Med­ical Payments Coverage, since the injury occurred during the course of employ­ment and benefits are required and available to Bob under the State's Wor­kers' Compensation Law. The excluded Liability Losses are Com­mercial Loss Exposures that would be covered under a commercial Garage Liability Policy. Bob's injury is covered by the firm's Workers’ Compensation Insurance.

Loss - Ken, Bob and Marie's son was driving his girlfriend's car. After a football game, they went to a party. He was involved in an accident with anoth­er motorist who became permanently disabled from the accident. The police arrested Ken and charged him with driving while intoxicated. He was required to post a bail bond of $2,500. Ken is later con­victed of driving while intoxicated. The in­jured motorist is awarded a judgment against Ken in the amount of $500,000. The liability limit of the girlfriend's car is $25,000.

Comment - Ken's girlfriend's PAP is primary and pays the first $25,000 of the judgment. The girlfriend's policy will also pay up to $250 for the cost of the bail bond. Gordon's PAP pays only $300,000 as Excess Insurance, since that is the applicable Limit of Liability. If Bob and Marie were in­sured under a Per­sonal Umbrella Policy, the remaining $175,000 of the judg­ment would have been paid by the Umbrella Insurer. As a result of the driving while intoxicated conviction, Ken will most likely be excluded from future coverage under his parent's poli­cy.

Loss - Marie is attending a profession­al meeting in a large city. She rents a car at the airport. While driving to her hotel, she is involved in an accident with another motorist when she sudden­ly changes lanes without signaling. The other driver is seriously in­jured and is later awarded a judgment of $250,000. The rental agency carries liability limits of $100,000 on the rental car.

Comment - The loss is covered under the Non-Owned Auto Coverage of the Gordon's PAP. The first $100,000 of the judgment, however, is paid by the rental agency's insurer as primary in­surance. The Gordon's PAP pays the remaining $150,000 as Excess Insur­ance.

Insurance Continuing Education

Continuing Education Insurance

Continuing Insurance Education