7.2 Exclusions and Part E Duties After an Accident
Key Takeaways
- Part D excludes wear and tear, mechanical/electrical breakdown, freezing, road tire damage, racing, and war or nuclear hazard.
- Custom/aftermarket equipment and electronic equipment need an endorsement; factory-installed equipment is covered.
- Part E - Duties After an Accident or Loss is a condition; failing the duties can void coverage if the insurer is prejudiced.
- Required duties include prompt notice, cooperation, proof of loss, submitting to exams, and protecting the vehicle from further loss.
- Notifying police is required for theft losses and hit-and-run UM claims.
Part D Exclusions
Part D pays for fortuitous (accidental, sudden) physical damage. It therefore excludes losses that are really maintenance, deliberate misuse, or catastrophic in nature.
| Exclusion | Reason |
|---|---|
| Wear and tear, freezing, mechanical or electrical breakdown | Maintenance, not sudden loss |
| Road damage to tires | Maintenance (covered only if part of a larger covered loss) |
| Aftermarket/custom electronic equipment | Needs endorsement; factory-installed is covered |
| Custom furnishings or equipment in a pickup or van | Needs endorsement |
| A non-owned auto used regularly | Not a covered auto |
| Racing or speed contests | High-risk excluded activity |
| War, nuclear hazard, radioactive contamination | Catastrophic exclusion |
| Government seizure / confiscation | Not an insurable peril |
Exam trap: factory-installed stereo/navigation equipment is covered. Aftermarket (added later) equipment is excluded without an endorsement. Tires damaged on the road are excluded unless they are damaged as part of a larger covered loss such as a fire or vandalism.
A further trap involves diminution in value - the loss of resale value a repaired car suffers even after perfect repairs. The PAP does not pay diminished value on a first-party Part D claim in most states. Likewise, Part D excludes loss to a vehicle used as a public or livery conveyance (rideshare or taxi service) unless a specific endorsement is added.
Part E - Duties After an Accident or Loss
Part E lists the conditions (duties) the insured must satisfy after a loss. These are promises the insured makes; failing them can void or reduce coverage when the breach prejudices the insurer's ability to investigate or defend.
General duties owed for any claim:
- Prompt notice to the insurer of how, when, and where the accident or loss happened, plus names and addresses of injured persons and witnesses.
- Cooperate with the insurer in the investigation, settlement, and defense.
- Forward any legal papers (summons, complaint) promptly.
- Submit to physical exams by physicians the insurer selects and to examinations under oath.
- Authorize the insurer to obtain medical reports and other records.
- Submit a proof of loss when required.
Additional duties for a Part D (physical damage) claim:
- Take reasonable steps to protect the covered auto from further loss (the insurer will pay reasonable expenses to do so).
- Notify the police if the auto is stolen.
- Permit the insurer to inspect and appraise the damaged property before repair.
Duties Specific to Uninsured Motorists Claims
If the insured wants to recover under Part C - Uninsured Motorists (UM) coverage, two extra duties apply:
- Notify the police promptly if a hit-and-run driver caused the accident.
- Send copies of legal papers to the insurer if the insured sues the uninsured driver.
These UM duties let the insurer investigate a phantom hit-and-run quickly and protect its recovery rights against any driver later identified. A missing police report on a hit-and-run is a frequent reason a UM claim is denied in exam fact patterns.
Why the Duties Matter
The Duties After Loss clause is a condition precedent to coverage. Courts generally require the insurer to show it was prejudiced by a late notice or non-cooperation before voiding a claim, but a serious breach - such as repairing the car before inspection or never reporting a theft to police - can defeat an otherwise valid claim.
| Duty breached | Typical consequence |
|---|---|
| Late notice (insurer prejudiced) | Claim denied |
| Repaired before inspection | Disputed value; possible denial |
| No police report on theft | Theft claim denied |
| Refused exam under oath | Coverage forfeited |
Proof of Loss and Appraisal
For a Part D claim the insurer may require a proof of loss - a sworn statement itemizing the damage and value. If the insured and insurer disagree on the amount (not on coverage), the policy's appraisal condition lets either party demand appraisal: each side hires an appraiser, the two select an umpire, and any two of the three set a binding amount. Appraisal resolves value disputes, never coverage disputes.
Finally, note the interaction with subrogation: when the insurer pays the insured's Part D loss caused by a third party, the insured must not impair the insurer's recovery rights - for example, by signing a release of the at-fault driver. Doing so is a breach of the duties that can reduce or void the payment.
Distinguishing Conditions from Exclusions
Candidates often confuse exclusions with conditions. An exclusion removes a peril or property from coverage at the outset (mechanical breakdown, racing, war). A condition (duty) is something the insured must do after a loss for an otherwise-covered claim to be paid (give notice, cooperate, allow inspection).
| Concept | When it applies | Effect |
|---|---|---|
| Exclusion | Built into the contract | Loss never covered |
| Condition / duty | After a loss occurs | Covered loss can be lost by breach |
A practical rule for the exam: if the question describes what the insured failed to do after the accident, you are in Part E duties; if it describes what kind of loss occurred, you are in Part D exclusions.
An insured's car is stolen from a parking lot. To preserve the Other Than Collision claim under Part D, which duty is specifically required?
Which of the following is EXCLUDED under Part D of the Personal Auto Policy?