6.2 Part A Liability and Supplementary Payments
Key Takeaways
- Part A is third-party coverage paying bodily injury (BI) and property damage (PD) the insured is legally liable for, and it includes the insurer's duty to defend covered suits
- Limits are written as split limits (such as 100/300/100, meaning BI per person / BI per accident / PD per accident) or as a single Combined Single Limit (CSL)
- Supplementary payments are paid in addition to the limit: defense costs, bail bonds up to $250, appeal and attachment bond premiums, post-judgment interest, and up to $200 per day for lost earnings to attend trial
- The duty to defend ends once the insurer pays the limit of liability through a settlement or judgment
- The out-of-state provision automatically raises the insured's limits to a visited state's compulsory minimum, and state minimums vary widely
What Part A Covers
Part A — Liability Coverage is the core of the PAP and the coverage states make mandatory. It is third-party coverage: it pays others when an insured is legally liable for an auto accident.
| Coverage | Pays for |
|---|---|
| Bodily Injury (BI) | Others' medical bills, lost wages, pain and suffering, death claims |
| Property Damage (PD) | Damage to others' property: vehicles, fences, light poles, buildings |
Part A combines both into one insuring agreement and adds the insurer's duty to defend the insured against covered suits.
How Limits Are Written
Split Limits
The split format is three numbers — BI per person / BI per accident / PD per accident. Read 100/300/100 as $100,000 BI to any one person, $300,000 BI for all persons in one accident, and $100,000 PD per accident.
Worked example. The insured is at fault; four people are injured. Limits are 100/300/100.
| Claimant | Proven BI | Part A pays | Uncovered |
|---|---|---|---|
| Person 1 | $150,000 | $100,000 (per-person cap) | $50,000 |
| Person 2 | $80,000 | $80,000 | $0 |
| Person 3 | $90,000 | $90,000 | $0 |
| Person 4 | $50,000 | $30,000 (only $30K of $300K left) | $20,000 |
| Total | $370,000 | $300,000 | $70,000 |
No one person collects more than $100,000, and all BI together is capped at $300,000. PD has its own separate $100,000 limit, untouched by BI payments.
Combined Single Limit (CSL)
A CSL — say $500,000 — is one pool for any mix of BI and PD with no per-person sub-limit. A single badly injured claimant could collect the full $500,000.
| Feature | Split limits | CSL |
|---|---|---|
| Written as | 100/300/100 | $500,000 |
| Per-person BI cap | Yes | No |
| Separate PD pot | Yes | No |
| Flexibility | Lower | Higher |
Supplementary Payments — Paid in Addition
Part A pays these costs on top of the limit of liability:
| Supplementary payment | Detail |
|---|---|
| Defense costs | Attorney fees, experts, court costs |
| Bail bonds | Up to $250 per bond from a covered accident |
| Appeal and attachment bonds | Premium for bonds (insurer need not apply) |
| Post-judgment interest | Interest accruing after a judgment |
| Lost earnings to attend trial | Up to $200 per day at insurer's request |
| Other reasonable expenses | Incurred at the insurer's request |
Defense example: limit $100,000; settlement $100,000; defense costs $30,000 — the insurer pays $130,000 total because defense is supplementary, not inside the limit.
Duty to Defend
The insurer must defend any suit seeking covered damages — even a groundless or fraudulent one — and may settle as it sees fit. The duty to defend ends when the insurer pays the limit of liability through a settlement or judgment. After that, the insured funds his own defense, a strong argument for higher limits.
Who Is an Insured Under Part A
Part A's definition is broader than candidates expect. It covers "you" and any family member for the use of any auto or trailer; any person using the covered auto with permission; any person or organization legally responsible for an insured's acts while using the covered auto (vicarious liability); and any person or organization responsible for the named insured's or family member's use of a non-owned vehicle (other than that vehicle's owner). This is why an employer can become an additional insured when an employee drives the insured's covered auto on company business.
Out-of-State Coverage
The PAP's out-of-state provision automatically adjusts the insured's limits upward to meet a visited state's compulsory minimum or compulsory coverage (such as no-fault PIP) the insured did not buy. This keeps the insured legal while traveling and is a frequently tested nuance.
Part A Exclusions (Highlights)
Part A does not cover intentional injury, damage to property the insured owns or has in his care, injury to an employee (workers' compensation responds), use as a public or livery conveyance (carpool exception applies), regular business use of non-covered vehicles, racing on a track, or vehicles with fewer than four wheels.
Limit Selection in Practice
| Insured profile | Reasonable Part A limit | Rationale |
|---|---|---|
| New driver, minimal assets | State minimum to 50/100/50 | Affordability while building a record |
| Typical household, some assets | 100/300/100 | Common "100/300" baseline |
| Higher net worth | 250/500/100 plus umbrella | Protects assets from large judgments |
Practical note: liability limits should reflect the assets a judgment could reach, not the value of the car. Part A protects net worth, not the auto.
Excluded Uses — Where Part A Stops
Beyond the highlights above, several use-based exclusions decide close exam questions:
| Excluded use | Result | Common exception |
|---|---|---|
| Public or livery conveyance (taxi, rideshare-for-hire) | No Part A coverage | Share-the-expense car pool is still covered |
| Vehicle in the auto business (repair, parking, selling) | No coverage for that business use | Covered if the insured is the named insured |
| Regular use of a non-owned auto not on the policy | No coverage | Occasional/borrowed use is covered |
| Intentional injury by an insured | No coverage | None |
| Owned-but-not-insured auto | No coverage | Forces insuring all household autos |
The rideshare gap is increasingly tested: a driver logged into a ride-hailing app and carrying a paying passenger is in livery use and is excluded under a standard PAP unless a rideshare endorsement is attached.
Why Higher Limits Beat the Defense-Erosion Risk
Because the duty to defend ends once the insurer pays the limit through settlement or judgment, an insured with thin limits can find the company "buying out" the limit early and walking away, leaving the insured to fund the rest of a defense personally. Pairing adequate split or CSL limits with a personal umbrella is the producer's standard remedy. A frequent scenario: an at-fault insured with state-minimum limits faces a $400,000 verdict; the PAP pays its limit and defense, then the insured personally owes the shortfall — the practical reason limit selection should track net worth, not the car's value.
An auto policy has limits of 50/100/50. What is the maximum Part A will pay for bodily injury to one person?
An insured with a $100,000 Part A limit is sued. The insurer pays a $100,000 judgment and incurs $30,000 in defense costs. What is the insurer's total payout?