6.2 Part A Liability and Supplementary Payments

6.2 Part A: Liability Coverage and Supplementary Payments

Part A — Liability Coverage is the heart of the PAP. It pays damages for bodily injury (BI) and property damage (PD) for which any covered person becomes legally responsible because of an auto accident. The insurer also has the duty to defend the insured, even against suits that are groundless, false, or fraudulent, and that defense is provided in addition to the limit of liability — it does not erode the limit.

Who is a "covered person" under Part A

Part A protects a broad class of people:

• You and any family member for the ownership, maintenance, or use of any auto or trailer (not just the scheduled car).
• Any person using your covered auto with permission.
• Any person or organization legally responsible for acts of a covered person while using a covered auto (for example, an employer for an employee's use, subject to exclusions).
• Any person or organization legally responsible for the named insured's use of a vehicle other than a covered auto only if that vehicle is not owned by or furnished to that person or organization.

Split limits versus combined single limit

Liability limits are written two ways. Split limits appear as three numbers, e.g., 100/300/50, meaning $100,000 per person for BI, $300,000 per accident for BI, and $50,000 per accident for PD. A combined single limit (CSL) is one number — say $300,000 — that applies to the total of all BI and PD in one accident.

Worked split-limit example

Assume 100/300/50 limits. An insured causes an accident injuring three people — claims of $120,000, $90,000, and $40,000 in BI, plus $60,000 in property damage.

The insured personally owes the $20,000 unpaid on Person 1 plus the $10,000 PD overage = $30,000. With a combined single limit of $300,000, the insurer would instead pay $300,000 toward the $310,000 total, reducing the insured's out-of-pocket exposure.

Supplementary payments — paid in addition to the limit

Part A pays the following on top of the liability limit, with no separate dollar cap unless noted:

1. Up to $250 for the cost of bail bonds required because of an accident, including traffic-law violations.
2. Premiums on appeal bonds and bonds to release attachments in a suit the insurer defends.
3. Interest accruing after a judgment in a suit the insurer defends, until the insurer pays/offers its limit.
4. Up to $200 per day for loss of earnings (not other income) for attendance at hearings or trials at the insurer's request.
5. Other reasonable expenses the insured incurs at the insurer's request.

Exam trap: Supplementary payments and defense costs are paid in addition to the limit of liability. Many candidates wrongly assume defense costs reduce the policy limit — that is a claims-made/D&O style feature, not the PAP. Also memorize the two dollar caps: $250 bail bonds and $200/day lost earnings.

Out-of-state coverage and the financial-responsibility clause

Part A contains an out-of-state coverage provision: when an accident occurs in a state with a compulsory or financial-responsibility law requiring higher limits than the policy carries, the PAP automatically increases its limits to meet that state's minimum. If the other state requires any motorist to carry a particular type of coverage (such as no-fault PIP), the policy provides at least the required minimum coverage for that accident. This prevents an insured from being underinsured simply by driving across a state line.

The policy is also written to satisfy financial-responsibility laws generally — a clause states the policy will comply with the law of any state where it is certified as proof of financial responsibility, to the extent of those requirements.

Other-insurance and out-of-state limit stacking trap

When liability coverage applies to a vehicle the insured does not own, the PAP is excess over any other collectible insurance on that vehicle. Coverage on an owned vehicle is primary. This primary/excess ordering is heavily tested with borrowed-car and non-owned-auto fact patterns.

Key Part A exclusions

Part A contains a long exclusion list the exam mines repeatedly:

• Intentional injury caused by a covered person.
• Property owned, transported, rented, or in the care/custody of a covered person (their own car damage belongs in Part D, not Part A).
• Liability arising from a vehicle used as a public or livery conveyance — the modern ride-share/Uber/Lyft application — unless the carpool exception applies.
• A vehicle the insured does not own that is furnished or available for the regular use of the insured or a family member (the classic "company car" / "borrowed-too-often" exclusion).
• Liability while employed or engaged in the business of selling, repairing, servicing, storing, or parking vehicles (the auto-business exclusion), for non-owned autos.
• Coverage for someone using a vehicle without a reasonable belief of permission.