Assignment 10, Chapter 20 & 21 NAME _____________________________
1. A. List the major exclusions that apply to liability coverage (Part A) of the PAP.
Liability coverage excludes liability arising out of intentional injury or damage, property owned or transported by an insured, property rented to or in the insured’s care, workers compensation claims, using the vehicle as a public or livery conveyance, vehicles used in the automobile business, other business vehicles, using a vehicle without a reasonable belief of permission, nuclear energy exclusion, vehicles with fewer than four wheels, vehicles furnished or made available for the named insured’s or family member’s regular use, and using the vehicle as a racing vehicle inside a racing facility.
B. List the major exclusions that apply to medical payments (Part B) of the PAP.
Medical payments coverage excludes injuries sustained while occupying a vehicle with fewer than four wheels, using the vehicle as a public or livery conveyance, using the vehicle as a residence, work injuries covered by workers compensation, vehicles furnished or made available for the named insured or family member’s regular use, using a vehicle without a reasonable belief of permission, and racing vehicles.
2. The PAP provides coverage for your covered auto. Identify the four classes of vehicles that are considered to be covered autos.
A covered auto is any auto shown in the declarations, a newly acquired auto, a trailer owned by the named insured, and a temporary substitute vehicle.
3. Jeremy has a PAP with the following coverages:
Liability coverages: $100,000/$300,000/$50,000
Medical payments coverage: $5000 each person
Uninsured motorists coverage: $25,000 each person
Collision loss: $250 deductible
Other-than-collision loss: $100 deductible
With respect to each of the following situations, indicate whether the loss is covered and the amount payable, if any, under the policy. Assume that each situation is a separate event.
a. Jeremy’s son, age 16, is driving a family car, runs a red light, and kills a pedestrian. The family of the deceased pedestrian sues and damages are awarded in the amount of $500,000.
Covered. Fred is covered as a member of the family. The maximum amount paid would be $100,000.
b. Jeremy borrows a friend’s car to go to the supermarket. He fails to stop at a red light and negligently smashes into another motorist. The other driver’s car, valued at $15,000, is totally destroyed. In addition, repairs to the friend’s car are $5000.
Covered. Damage to the other car is covered under property damage liability for $15,000. Collision coverage, if any, on the friend’s car would be primary, and Fred’s policy would be excess. If there is no collision coverage on the friend’s car, Fred’s policy would be primary and would pay $4750.
c. Jeremy’s daughter, Heather, attends college in another state and drives a family auto. Heather lets her boyfriend drive the car, and he negligently injures another motorist. The boyfriend is sued for $50,000.
If the boyfriend can establish a reasonable belief that permission would have been granted, he would have coverage under Fred’s policy, and $50,000 would be paid if he were legally liable.
d. Jeremy’s wife is driving a family car in a snowstorm. She loses control of the car on an icy street and smashes into the foundation of a house. The property damage to the house is $30,000. The damage to the family car is $8000. Jeremy’s wife has medical expenses of $5000.
Covered. Property damage to the house in the amount of $30,000 would be paid. The amount paid for damage to the family car is $7750. The wife’s medical expenses in the amount of $5000 are also paid.
e. Jeremy is walking across a street and is struck by a motorist who fails to stop. He has bodily injuries in the amount of $15,000.
Covered. Under the uninsured motorists coverage, Fred would recover $15,000.
f. Jeremy’s car is being repaired for faulty brakes. While road testing the car, a mechanic injures another motorist and is sued for $50,000.
Not covered. The mechanic is not covered under Fred’s policy. If a person is employed or engaged in the automobile business, liability arising out of operation of vehicles in the automobile business is excluded. However, the exclusion does not apply to the operation of any covered auto by the named insured, family member, or partner.
g. Jeremy’s car hits a cow crossing a highway. The cost of repairing the car is $2500.
Covered. This loss is covered under Part D (coverage for damage to your auto). Loss caused by contact with a bird or animal is considered to be other-than-a-collision loss. The amount paid would be $2400.
h. A thief breaks a car window and steals a camera and golf clubs locked in the car. It will cost $400 to replace the damaged window. The stolen property is valued at $500.
The broken window is covered as other-than-a-collision loss; the amount paid is $300. The theft of the camera and golf clubs is not covered under the PAP.
i. Jeremy’s wife goes shopping at a supermarket. When she returns, she finds that the left rear fender has been damaged by another driver who did not leave a name. The cost of repairing the car is $2000.
Covered. This is considered to be a collision loss. The amount paid is $1750.
j. Jeremy works for a construction company. While driving a large cement truck, he negligently injures another motorist. The injured motorist sues Jack for $25,000.
Not covered. Liability coverage for commercial vehicles and large trucks used in a business, such as a large cement truck, is excluded under the liability section of the PAP.
k. Jeremy’s son drives a family car on a date. He gets drunk, and his girlfriend drives him home. The girlfriend negligently injures another motorist, who has bodily injuries in the amount of $200,000.
Covered. From the facts, it appears that the girlfriend can establish a reasonable belief that permission to drive the automobile would have been given. However, the amount paid would be only $100,000.
l. Compact discs (CDs) valued at $500 are stolen from Jeremy’s car. The car was locked when the theft occurred.
Not covered. The theft of compact discs (CDs) from a car is not covered even if the car is locked. Coverage can be obtained by adding an endorsement to the policy.
m. While driving a rented golf cart, Jeremy accidentally injures another golfer with the cart.
Covered. The PAP covers liability arising out of non-owned golf carts. Thus the loss is covered.
4. Jake has a PAP with liability limits of $50,000/$100,000/$25,000. Jake failed to stop at a red light and hit a van. The van sustained damages of $15,000. Three passengers in the van were injured and incurred the following bodily injuries:
Passenger A, $15,000
Passenger B, $60,000
Passenger C, 10,000
Jake was also injured and incurred medical bills of $10,000. His car sustained damages of $10,000. Because of his injury, Jake was unable to work and lost $5000 in wages. How much will Jake’s insurer pay under the liability coverage (Part A0 section of his PAP? Explain your answer.
Jake ran a red light and is legally liable for the property damage to the van and bodily injuries to the passengers. The liability coverage (Part A) pays a maximum of $90,000 as illustrated by the following:
Property damage to the van $15,000
Bodily injury to Passenger A $15,000
Bodily injury to Passenger B $50,000 (limit per person under the policy) Bodily injury to Passenger C $10,000
The liability coverage under Jake’s policy will not cover his medical bills or lost earnings.