6.2 Part A Liability and Supplementary Payments

What Part A Covers

Part A — Liability Coverage is the core of the PAP and the coverage states make compulsory. It is third-party coverage: it pays others when an insured is legally liable for an auto accident. Two damage categories apply:

Part A merges both into one insuring agreement and adds the insurer's duty to defend the insured against any covered suit — even a groundless or fraudulent one. The insurer also has the right to settle any claim as it sees fit. Defense is provided regardless of the merits; payment requires legal liability.

How Limits Are Written

Split limits

The classic format is three numbers — BI per person / BI per accident / PD per accident. Read 100/300/50 as:

• $100,000 maximum BI to any one person
• $300,000 maximum BI for all persons in one accident
• $50,000 maximum PD in one accident

Worked multi-claimant example. You are at fault and four people are injured. Limits are 100/300/50.

The first claimant is capped at the per-person $100,000. The remaining three share what is left under the $300,000 per-accident ceiling, so Person 4 is squeezed to $30,000.

Combined Single Limit (CSL)

A CSL is a single pooled amount — say $300,000 — available for all BI and PD in one accident with no per-person or BI/PD split. The same accident above would pay the full $380,000 demand only up to $300,000, but it could pay a single severely injured claimant the entire $300,000, which split limits would never allow.

Supplementary Payments — Paid ON TOP of the Limit

A heavily tested feature: supplementary payments are paid IN ADDITION to the limit of liability, not subtracted from it. The PAP pays, for any covered claim it defends:

• All defense costs the insurer incurs (attorneys, investigation, expert fees).
• Up to $250 for the cost of bail bonds required because of an accident, including related traffic violations.
• Premiums on appeal bonds and bonds to release attachments in any defended suit.
• Interest accruing after a judgment (post-judgment interest) until the insurer pays/offers its limit.
• Up to $200 per day for the insured's lost earnings for attendance at hearings or trials at the insurer's request.
• Other reasonable expenses incurred at the insurer's request.

Worked example. Limit is $100,000. A judgment is $100,000, and defense costs ran $18,000 with a $300 bail bond and $600 in lost-earnings reimbursement. The insurer pays the $100,000 judgment PLUS $18,000 defense + $250 (bail capped at $250) + $600 = a total outlay of $118,850. Defense and supplementary costs do not erode the $100,000.

Duty to Defend and Key Exclusions

The duty to defend ends once the insurer exhausts the applicable limit through a settlement or judgment. Tendering the limit terminates the obligation to keep funding defense.

Major Part A exclusions (no coverage when):

• The insured intentionally causes BI or PD.
• The vehicle is used as a public or livery conveyance (taxi, ride-share for hire) — carpools are an exception.
• The vehicle is used in the auto business (repair, sales, parking) by employees of that business.
• Racing — using the auto in a prearranged or organized racing/speed contest.
• Owned but not insured: liability while operating a vehicle the named insured owns that is not on the policy (you cannot insure one car and drive an uninsured owned car for free coverage).
• Furnished/available for regular use: vehicles available for the insured's regular use that are not described (the 'company car' trap).
• Named driver exclusion where allowed by state, removing a specifically named high-risk household driver.

Out-of-State, Other-Auto, and the Financial-Responsibility Provision

Part A contains provisions that adjust the promise to the facts. The out-of-state coverage clause automatically raises the insured's limits to meet a higher compulsory or financial-responsibility minimum of a state the insured is visiting, so a driver carrying Delaware minimums is brought up to a stricter state's required floor while traveling there.

The other insurance rule makes the policy on a non-owned auto excess over any other collectible coverage, while coverage on the insured's own auto is primary. The financial responsibility provision states that when the policy is certified as proof of future responsibility (an SR-22 situation), it will comply with the law to the extent required.

Candidates should also recall that supplementary payments — defense costs, up to $250 bail bonds, premiums on appeal bonds, post-judgment interest, and up to $200/day for lost earnings to attend trial — are paid in addition to the limit, so they do not erode the bodily-injury or property-damage coverage available to claimants.