6.2 Part A Liability and Supplementary Payments

Part A - Liability Coverage

Part A is the heart of the PAP and the most litigated coverage on the exam. The insuring agreement promises that the insurer will pay damages for bodily injury (BI) or property damage (PD) for which an insured becomes legally responsible because of an auto accident. The coverage is third-party liability: it protects the insured against claims brought by others, not the insured's own injuries.

The insurer also assumes the duty to defend the insured in any suit asking for such damages, hiring and paying for counsel. This defense duty exists even for groundless or fraudulent suits, and defense costs are paid in addition to the limit of liability - a key distinction from claims-made liability forms where defense erodes limits.

Split Limits vs. Combined Single Limit

Most PAPs are written with split limits, shown as three numbers such as 100/300/50 (in thousands):

• $100,000 maximum BI per person;
• $300,000 maximum BI per accident (all persons combined);
• $50,000 maximum PD per accident.

A Combined Single Limit (CSL) instead provides one pooled amount (e.g., $300,000) for all BI and PD in a single accident, offering more flexibility because dollars are not trapped in separate buckets.

Worked split-limit example: An insured with 100/300/50 limits causes a crash injuring three people - $150,000, $80,000, and $60,000 in damages - plus $70,000 in property damage. The per-person cap reduces the first claim to $100,000 and the third stays at $60,000... but the second is $80,000, leaving $100,000 + $80,000 + $60,000 = $240,000, under the $300,000 per-accident cap, so BI pays $240,000. PD of $70,000 is capped at the $50,000 PD limit. The insured personally owes the $20,000 PD shortfall plus the $50,000 BI shortfall on the first claim.

Supplementary Payments

Part A pays the following in addition to the limit of liability - these are not subtracted from the BI/PD limits and are a guaranteed exam topic:

Note the two numeric traps: bail bonds are capped at $250 and lost-earnings reimbursement at $200/day. These figures are frequently swapped in distractor answers.

Key Part A Exclusions

Part A contains a long exclusion list; the exam concentrates on a handful. The insurer will not pay for:

• Intentional bodily injury or property damage caused by an insured;
• Damage to property owned, rented to, used by, or in the care of an insured (your own car, or a building you rent and occupy);
• Liability from vehicles used to carry persons or property for a fee (ride-share/livery), except a genuine share-the-expense car pool;
• Use of a vehicle without a reasonable belief of being entitled to use it (joyriding, unauthorized borrowing);
• An insured's use of a non-owned vehicle furnished or available for regular use - the "company car" or "borrowed-too-often" exclusion.

The regular-use exclusion is a perennial trap: occasional borrowing of a friend's car is covered, but a vehicle routinely available to the insured (an employer's pool car driven daily) is not. The owned-property exclusion is why Part A never pays to repair the insured's own auto - that is Part D's job.

Out-of-State Coverage and the Other-Insurance Clause

Part A includes an out-of-state coverage condition: if an accident happens in a state or province whose financial-responsibility or compulsory-insurance law requires higher limits or a broader form of coverage than the policy provides, the PAP automatically increases to meet that minimum. This protects an insured who drives into a state with tougher requirements and is a favorite distractor topic.

When two or more auto policies apply, the other-insurance condition controls priority. For your covered auto, the policy is primary. For a non-owned auto the insured is driving, the PAP is excess over any other collectible insurance - meaning the owner's policy pays first and the borrower's PAP pays only the remaining gap. Memorize the rule: coverage follows the car first (primary on owned autos), then the driver (excess on borrowed autos).

Part A Liability Limits and Supplementary Payments

PAP Part A pays damages for bodily injury and property damage for which any insured becomes legally responsible from an auto accident, and the insurer has the duty to defend. Liability is written with either split limits (e.g., 100/300/50) or a combined single limit (CSL).

Like the CGL, Part A pays supplementary payments in addition to the limit: all defense costs; premiums on bonds to release attachments; up to $250 for bail bonds; post-judgment interest; up to $200 per day for loss of earnings to attend hearings/trials at the insurer's request; and other reasonable expenses. Trap: supplementary payments do not reduce the liability limit — defense is on top of the policy limit.

Part A Exclusions and a Worked Split-Limit Example

Part A excludes liability for: intentional injury; damage to property owned or being transported by the insured; property rented to/used by/in the care of the insured (except a residence/garage); bodily injury to an employee (workers comp); use as a public/livery conveyance (ride-share gaps); vehicles used in the business of selling/repairing/parking autos; and using a vehicle without reasonable belief of permission.

Worked example: with 100/300/50 limits, the insured causes an accident injuring three people ($90,000, $150,000, $120,000) and $70,000 of property damage. BI per person caps at $100,000 (so $90,000 + $100,000 + $100,000 = $290,000, within the $300,000 per-accident cap) and PD pays $50,000 (capped), totaling $340,000 of the $360,000 demanded — the insured owes the $20,000 excess. Trap: the second and third claimants are reduced to the $100,000 per-person cap even though the per-accident limit is not fully used.