Many states have adopted the 2005 edition of the Personal Auto Policy. The following summarizes the major differences between the 2005 Personal Auto Policy and the 1998 Personal Auto Policy.
Medical Payments coverage now applies to injuries sustained while occupying a nonowned up or van used in the business of an insured.
The Uninsured Motorists coverage provision that excludes coverage for claims settled without the insurer's consent now applies only if the claim settlement prejudiced the insurer's
subrogation rights.
The Part D limit for physical damage coverage to nonowned trailers was increased to $1,500.
The Part D exclusion for loss to electronic equipment was modified to provide coverage for electronic equipment that reproduces, receives or transmits audio, visual or data signals and is permanently installed. This includes navigation systems and Internet access systems.
The Part D limit for sound reproducing equipment now applies to electronic equipment that reproduces, receives or transmit audio, visual or data signals that is permanently installed in the auto, but not in the location used by the auto manufacturer. The limit is $1,000.
Section VII Review
Review of Actual Claim: Mr. Smith, a widower, died and wills his estate to his only son, John. Mr. Smith died of a heart attack in the local bank and his car was parked on the bank's parking lot. John flew in from out of town to settle his father's estate and the bank requested that he pick up his father's car. John picked up the vehicle and went to the courthouse as well as an attorney's office to work on the estate. While driving away from the attorney's office he ran a red light and had an accident. Was John covered for this accident?
Review Questions
1. Items under the General Provisions section include:
A. Bankruptcy B. Fraud
C. Legal action against the company D. All of the above
2. Should the insured become bankrupt, the insurance company is relieved of its obligations in the policy to protect the insured.
A. True B. False
3. The insured loans his car to a friend and the friend is guilty of fraud. This can void the insured's policy.
A. True B. False
4. When the "named insured" dies, coverage will remain in force until the end of the policy period for the surviving spouse or a legal representative of the estate of the deceased.
A. True B. False
5. An insured would like to have his van "customized". He will not need to notify his agent because the new items will be covered under his existing policy.
A. True B. False
Answers to Claim Review
John was covered because of the clause in the policy that covers (until the end of the policy period) a "legal" representative of the estate of the deceased.
Answers to Review Questions 1. D
2. B 3. B 4. A 5. B
VIII. Review of Personal Auto Claims
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Review of Actual Claims
We have now concluded the line-by-line discussion of the personal auto policy. We will now discuss claims and review how they are resolved different courts with some alarming
differences in opinion. You, the student, are asked to form your opinions after reviewing a short discussion of the claim and referring to the form where necessary. The court decision is stated with its reasoning on the following page.
Case #1:
In property and casualty insurance, the adjuster always looks for the proximate cause of the loss. Most courts hold that the proximate cause consists of an unbroken chain of events that leads to the loss. The insured's vehicle had been involved in a collision when the vehicle struck a culvert. The vehicle had to be towed into town for repairs. The vehicle was towed in such a way that the wheels touched the pavement. Since the motor was not running, the fluids that are needed by the transmission were not circulating and this caused severe damage to the transmission. Answer the following questions:
1. Was the damage to the transmission part of the collision loss?
2. Was this a mechanical breakdown and if so is that covered?
3. Would this loss be covered under comprehensive coverage?
4. Should the towing company pay the loss?
5. Should the damage to the transmission be considered a separate issue aside from the collision?
Case #2:
Some courts in certain states have ruled that if the insured can prove the damage was caused by a third party, the mechanical failure exclusion does not apply and the insurance company has to pay the claim. In this case the fan belt of the insured's vehicle broke and the vehicle had to be towed to a garage for repairs. As a result of improper towing, the transmission was severely damaged. Answer the following questions:
1. Is a broken fan belt covered or excluded from coverage?
2. Is the resultant damage covered (the towing damage)?
3. Should the insurance company pay the loss?
4. Should the towing company pay the loss?
5. If other damage to the engine had occurred as a result of the fan belt breaking, would this be covered?
Case #3:
A broken thermostat caused an engine to overheat causing damage to insured's motor. The following are some questions of coverage in this case:
1. Is a defective thermostat considered a mechanical breakdown?
2. Should the resultant damage to the rest of the engine be covered?
3. Is this claim covered under comprehensive?
Case #4:
The insured carried only comprehensive coverage on his vehicle. One night, on a gravel road, his car went over an embankment and made contact with the side of the car against a tree. The insured could not observe any damage to the vehicle as a result of striking the tree. In his attempt to remove the vehicle, he scraped the side of the vehicle on the tree doing damage.
The insured argued that the proximate cause of the loss was not the collision with the tree but by applied power after the car had already made contact with the tree.
1. Some questions regarding this case are as follows:
2. Is the damage done to the vehicle covered under comprehensive?
3. Are the there two different losses involved?
4. Is this strictly a collision claim and not covered since the insured failed to carry collision coverage?
Case #5:
The insured struck a rock in the road with the bottom of the car. The oil pan was damaged and all the oil leaked out of the engine and ruined it. The insured only carried comprehensive coverage. The questions regarding this case are as follows:
1. Was the striking the rock a comprehensive claim?
2. Should the entire loss be denied?
3. Were there two separate claims, namely the damage to the oil pan and the damage as a result of the oil leak?