7.2 Exclusions and Part E: Duties After an Accident
Key Takeaways
- The public or livery conveyance exclusion removes coverage when carrying passengers for a fee; ride-share/TNC use needs the PP 23 40 endorsement, while share-the-gas carpools remain covered.
- Part D also excludes wear and tear, mechanical/electrical breakdown, road-hazard tire damage, war, nuclear hazard, and auto-business use.
- Part E duties include prompt notice, cooperation, forwarding legal papers, examination under oath, and authorizing release of records.
- Physical-damage losses add duties to protect the auto from further loss, notify police of theft, and allow inspection before repair.
- The notice-prejudice rule often bars automatic denial for late notice, but theft police-report and examination-under-oath duties are enforced strictly.
Part D Exclusions and Part E Duties After an Accident
This section covers the limits on physical-damage coverage (the Part D exclusions) and the Part E - Duties After an Accident or Loss conditions that the insured must satisfy to receive payment. Exam writers like these topics because failing a duty can void an otherwise valid claim, and several exclusions reflect public-policy and moral-hazard rules that are tested verbatim.
Key Part D (Physical Damage) Exclusions
The standard PAP excludes the following from Part D coverage:
- Public or livery conveyance - using the auto to carry persons or property for a fee (the ride-share/taxi exclusion). Volunteer car pools and share-the-expense arrangements are not excluded.
- Wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires (unless caused by a covered loss).
- Radar/laser detectors, certain electronic equipment not permanently installed, and tapes/records/discs media.
- Government destruction or confiscation, war, nuclear hazard, and radioactive contamination.
- Loss to a non-owned auto or rented auto used while the insured is employed in the auto business (selling, repairing, parking, storing).
The Ride-Share and Auto-Business Traps
The public or livery conveyance exclusion is heavily tested because of the gig economy. A personal auto driven for Uber or Lyft while the app is on and a passenger is being carried is excluded under the unendorsed PAP - both Part D and the liability parts. Insurers respond with a ride-sharing endorsement (PP 23 40) or transportation-network-company (TNC) coverage. Watch the distinction: a once-a-week, share-the-gas commuter pool is covered; charging passengers a fare is not.
An insured drives for a transportation network company. While carrying a paying passenger with the app on, the car is damaged in a collision. Under the UNENDORSED PAP, the physical damage is:
Part E - Duties After an Accident or Loss
Part E lists the conditions precedent to coverage. The insured (and any person seeking coverage) must:
- Promptly notify the insurer how, when, and where the accident or loss happened, including the names and addresses of injured persons and witnesses.
- Cooperate with the insurer in the investigation, settlement, or defense of any claim.
- Promptly send copies of any legal papers (notices, summonses) received in connection with the accident.
- Submit to examination under oath and to physical exams by physicians the insurer selects, as often as reasonably required.
- Authorize the insurer to obtain medical records and other pertinent information.
Additional Duties Specific to a Part D (Physical Damage) Loss
When the claim is for damage to the covered auto, three extra duties apply:
- Take reasonable steps to protect the auto from further loss (e.g., tow a wrecked car off the highway, board a broken window). The insurer will reimburse reasonable expenses to do so.
- Notify the police promptly if the auto is stolen. Failure to file a police report is a common reason theft claims are denied.
- Permit the insurer to inspect and appraise the damaged property before its repair or disposal.
| Duty | Applies to | Consequence of breach |
|---|---|---|
| Prompt notice of accident/loss | All claims | Claim may be denied if prejudice shown |
| Cooperate / examination under oath | All claims | Forfeiture of coverage |
| Forward legal papers | Liability claims | Loss of defense; possible default judgment |
| Notify police of theft | Part D theft | Theft claim denial |
| Protect property / allow inspection | Part D losses | Reduced or denied payment for added damage |
The "Prejudice" Rule
A frequently missed point: in many states an insurer cannot automatically deny a claim solely because notice was late. Under the notice-prejudice rule, the insurer must usually show that the delay materially prejudiced its ability to investigate or defend before it can void coverage. However, the theft police-report duty and the examination-under-oath duty are typically enforced more strictly because they go to the heart of proving the loss and detecting fraud.
Which action is NOT a listed duty after a loss under PAP Part E?
Appraisal When Value Is Disputed
Separate from Part E, the policy's appraisal provision (located in general conditions) lets either party demand appraisal when the insurer and insured disagree on the amount of a physical-damage loss. Each side hires a competent appraiser; the two appraisers select an umpire, and an agreement by any two of the three sets the amount. Appraisal resolves value disputes only - it does not decide coverage. Confusing appraisal (amount) with the duty to cooperate (process) is a common exam error.
Exam Takeaways on Conditions
Remember that Part E duties are the policyholder's obligations, while Part F (next section) houses the insurer's and policy's general provisions. A clean way to keep them straight on the exam: Part E = what the insured must do after a loss; Part F = how the policy operates (territory, legal action, subrogation, termination). Breach of a Part E duty is a defense the insurer raises; many states soften it with the notice-prejudice rule, but the theft-report and inspection duties are enforced firmly.