7.1 Part D: Coverage for Damage to Your Auto

Part D: Coverage for Damage to Your Auto

Part D of the ISO Personal Auto Policy (PP 00 01 09 18) is the physical-damage section. While Parts A through C cover liability, medical payments, and uninsured motorists, Part D pays to repair or replace the insured's own vehicle. It is first-party, property coverage, and unlike liability it is optional in most states unless a lienholder requires it. Exam questions almost always turn on the split between the two coverage triggers and how the deductible and loss-settlement clauses apply.

The Two Coverage Triggers

Part D provides two distinct, separately purchased coverages, each with its own deductible:

• Collision - direct and accidental loss caused by the vehicle's upset (overturning) or its impact with another vehicle or object. Hitting a guardrail, a parked car, or a pothole that bends a rim are collision losses. Rolling the car on an icy curve is collision even though no second object is struck.
• Other Than Collision (OTC), also called Comprehensive - everything else listed as covered: fire, theft, larceny, explosion, earthquake, windstorm, hail, water, flood, malicious mischief or vandalism, riot or civil commotion, contact with a bird or animal, and breakage of glass.

The classification matters because the deductibles usually differ and because an exam favorite is the glass and animal trap. Hitting a deer is OTC (contact with an animal), not collision - even though it feels like an impact. Likewise, a cracked windshield is OTC. But swerving to avoid a deer and hitting a tree is collision, because the loss-causing event was impact with an object. The policy lets the insured elect to have glass breakage treated as collision when it results from a collision, to avoid two deductibles for one event.

What "Your Covered Auto" Includes

Part D follows the same definition of "your covered auto" used throughout the policy: any vehicle shown in the Declarations, a newly acquired auto, a trailer you own, and certain temporary substitute vehicles. A key limitation: a newly acquired auto receives the broadest physical-damage coverage you carry on any other auto only if you ask the insurer to insure it within a stated window. Under the 09 18 edition the window is 14 days if you already carry collision/OTC on at least one auto; if you carry no physical damage on any auto, you must request it within 4 days to get OTC and collision (with a $500 deductible default).

Loss Settlement - ACV and the Limit of Liability

Part D pays the lesser of (1) the actual cash value (ACV) of the stolen or damaged property, or (2) the amount necessary to repair or replace the property with like kind and quality, in either case minus the deductible. There is no stated dollar limit on the Declarations for the vehicle itself - the ACV ceiling is the limit. ACV is generally replacement cost minus depreciation, which is why an older car is "totaled" quickly: the repair estimate can exceed a depreciated ACV.

Worked example (deductible application). A 6-year-old sedan has an ACV of $9,000. After a collision, the body shop estimate is $7,400 and the policy carries a $500 collision deductible. The insurer pays the lesser of ACV ($9,000) or repair cost ($7,400), then subtracts the deductible: $7,400 - $500 = $6,900. Had the repair estimate been $9,800 (a total loss because it exceeds ACV), the insurer would pay $9,000 - $500 = $8,500 and take the salvage.

Transportation Expenses (Built-In Sub-Coverage)

Part D includes a small built-in transportation expenses benefit: typically $30 per day, up to $900 (limits vary by edition; the 09 18 form uses $30/$900 as the default). It pays for a rental car or other transportation when the covered auto is stolen, beginning 48 hours after a theft, or when the auto is being repaired following any other covered Part D loss. This benefit applies only if the insured carries the corresponding physical-damage coverage; it is not free standalone rental coverage. Higher limits are available by endorsement.

Deductible Strategy and Stacking of Deductibles

Because each coverage carries its own deductible, an insured who suffers two unrelated losses in one period pays two deductibles. A frequent fact pattern: a hailstorm dents the roof (OTC, $250 deductible) and, a month later, the same car is in a fender-bender (collision, $500 deductible). The insured absorbs $250 + $500 = $750 across the two claims. Raising deductibles lowers premium but shifts more first-dollar cost to the insured, which is the classic risk-retention trade-off tested on the exam.

Common Exam Traps

• Wear, tear, freezing, and mechanical/electrical breakdown are excluded - Part D never pays for a worn transmission or a failed alternator. It is accident coverage, not a warranty.
• Tires damaged only by road hazards (a blowout) are excluded unless damaged in a covered collision or by vandalism.
• Diminished value - the loss of resale value after a quality repair - is not payable under the standard PAP; courts in most states uphold this exclusion for first-party claims.
• Custom equipment (non-factory sound systems, murals, custom paint beyond manufacturer-installed) is limited and may need an endorsement.
• Betterment is generally not charged on auto repairs the way it is in property; the insurer pays like kind and quality up to ACV.