7.2 Part D Exclusions and Part E Duties After an Accident

Part D Exclusions

Physical-damage coverage is broad but the PAP withdraws it for specific situations. Knowing the exclusion list is essential because exam questions usually describe a loss and ask whether Part D responds.

• Public or livery conveyance - the auto used to carry persons or property for a fee (the same exposure that drives ride-share endorsements). Share-the-expense car pools are not excluded.
• Wear and tear, freezing, mechanical or electrical breakdown, road damage to tires - maintenance and gradual losses, not accidents. Exception: these apply if they result from the total theft of the covered auto.
• Radar/laser detectors, electronic equipment not permanently installed (custom sound, navigation, and media gear get limited coverage; tapes/CDs/media excluded).
• Government destruction or confiscation, war, nuclear hazard.
• Loss to a non-owned auto used without a reasonable belief of permission.
• Custom furnishings/equipment in a pickup or van beyond what is scheduled.

A recurring trap: mechanical breakdown is excluded, but if a thief steals the car and wrecks the engine, the resulting damage is covered because it flows from a covered theft.

Diminishing Deductible and Loss Payable Clause

When a Loss Payable Clause names a lienholder, the insurer protects the lender's interest even if the insured's own coverage is voided by an act such as fraud or conversion; the insurer then has subrogation rights against the insured. The lienholder is paid up to its interest before the insured receives any balance.

Betterment / depreciation example. A 7-year-old vehicle needs a new transmission after a covered collision. The shop installs a new unit costing $3,500. Because the worn part is replaced with new, the insurer may apply betterment depreciation. If 40% betterment is applied to a $3,500 part:

Replacement part cost ........ $3,500
Betterment depreciation 40% .. -$1,400
Insurer's part payment ....... $2,100

The insured pays the $1,400 difference (plus any deductible) because they receive a vehicle worth more than before the loss - the ACV principle of indemnity at work.

Part E: Duties After an Accident or Loss

Part E lists the insured's duties, and breach can defeat an otherwise covered claim. The exam tests this checklist:

• Promptly notify the insurer of how, when, and where the accident happened, plus the names of injured persons and witnesses.
• Cooperate in the investigation, settlement, and defense.
• Send copies of legal papers (suits, demands) received.
• Submit to physical exams and examination under oath when reasonably required.
• For physical damage, take reasonable steps to protect the auto from further loss, permit inspection/appraisal, and notify police of a theft.

Worked Exclusion Scenario

An insured uses the covered auto to deliver pizzas for a fee and damages it in a collision. Part D's public/livery conveyance exclusion (and the related business-use limits) can deny the physical-damage claim, because carrying property for a fee falls outside personal-auto use. Change the facts to a personal errand and Part D responds after the deductible. The exam uses delivery and rideshare facts to test the livery exclusion's reach into Part D, mirroring the eligibility line that separates personal from commercial auto.

Part E - Duties After an Accident or Loss

Part E is the conditions section listing what an insured must do to preserve coverage. These are not coverages; they are post-loss duties, and failure to comply can bar a claim to the extent the insurer is prejudiced. General duties applicable to any claim:

• Prompt notice to the insurer or its agent of how, when, and where the accident or loss happened, including names and addresses of injured persons and witnesses.
• Cooperate with the insurer in the investigation, settlement, or defense of any claim or suit.
• Promptly send copies of any legal papers, notices, or summons received.
• Submit to physical exams by physicians the insurer selects, as often as reasonably required, and to examination under oath.
• Authorize the insurer to obtain medical reports and other pertinent records.

Additional Duties for Part D (Physical Damage) Claims

When the insured is seeking payment under Part D, two extra duties attach:

1. Take reasonable steps after a loss to protect the covered auto and its equipment from further loss. The insurer pays reasonable expenses incurred to do so (for example, towing a wrecked car to safe storage or tarping a broken window).
2. Notify the police promptly if the covered auto is stolen.
3. Permit the insurer to inspect and appraise the damaged property before its repair or disposal.

The theft-reporting and protect-from-further-loss duties are the most-tested Part E items because they are unique to first-party physical-damage claims. An insured who repairs or junks the wreck before the adjuster inspects it has breached the inspection duty and can have the claim denied or reduced.

Timing, Prejudice, and the Appraisal Condition

While Part E imposes duties, most states (and the PAP itself) require the insurer to show it was prejudiced by a late or incomplete report before it can deny on that ground alone - a key consumer-protection point. Notice that is late but causes no investigative harm generally does not void an otherwise covered claim.

Part E also incorporates an Appraisal provision used when the insurer and insured disagree on the amount of loss (not coverage). Either party demands appraisal; each selects a competent appraiser; the two appraisers select an umpire; and an agreement by any two of the three sets the amount. Each side pays its own appraiser and shares the umpire's cost equally.

Appraisal resolves valuation disputes; it never decides whether coverage applies.