6.2 Part A Liability and Supplementary Payments

What Part A Does

Part A — Liability Coverage is the heart of the auto policy. It promises that the insurer will pay damages for bodily injury (BI) or property damage (PD) for which any insured becomes legally responsible because of an auto accident. "Damages" includes prejudgment interest awarded against the insured. The insurer also assumes a duty to defend the insured against any suit asking for those damages, hiring and paying defense counsel.

The duty to defend is broad: the insurer must defend even claims that turn out to be groundless, false, or fraudulent. That duty, however, is not unlimited — the insurer's obligation to defend or settle ends when it has paid out the applicable limit of liability through settlements or judgments.

Split Limits vs. Combined Single Limit

Liability limits appear in one of two formats.

A split limit is written as three numbers, for example 100/300/50:

• $100,000 — maximum BI per person
• $300,000 — maximum BI per accident (all injured persons combined)
• $50,000 — maximum PD per accident

A Combined Single Limit (CSL) is a single dollar amount, such as $300,000, that applies to BI and PD together in one accident, giving the insured more flexibility because no sub-limit caps any single victim.

Worked Example — Split Limit

An insured with 100/300/50 causes a crash. Three people are hurt with proven damages of $120,000, $90,000, and $40,000, and a car is damaged for $60,000.

• Person 1: capped at the $100,000 per-person limit (loses $20,000)
• Person 2: $90,000 paid in full
• Person 3: $40,000 paid in full
• BI subtotal = $230,000, within the $300,000 per-accident cap
• PD: capped at the $50,000 per-accident limit (loses $10,000)

Total the insurer pays: $230,000 + $50,000 = $280,000. The insured personally owes the uncovered $30,000.

Worked Example — Combined Single Limit

Take the same accident but a $300,000 CSL. The total proven damages are $120,000 + $90,000 + $40,000 + $60,000 = $310,000. With a CSL there is no per-person or per-coverage sub-limit — the policy simply pays up to $300,000 across all BI and PD, so it pays $300,000 and the insured owes only $10,000.

Notice the CSL produced a larger payout ($300,000 vs. $280,000) because it removed the $100,000 per-person ceiling that stranded $20,000 of Person 1's claim. This is the classic exam point: a CSL is generally more favorable to a severely injured single claimant.

Supplementary Payments

Supplementary payments are paid IN ADDITION TO the limit of liability — they do not erode the coverage limit. Part A lists:

• All defense costs the insurer incurs, including attorney fees and court costs.
• Up to $250 per day for the insured's loss of earnings to attend hearings or a trial at the insurer's request.
• Premiums on appeal bonds and bonds to release attachments, up to the limit, and the premium on a required bail bond up to $250 for an accident-related violation.
• Post-judgment interest accruing after a judgment, until the insurer pays its share.
• Other reasonable expenses the insured incurs at the insurer's request.

Trap: Bail bond reimbursement is capped at $250 and loss-of-earnings at $250 per day — these specific dollar figures are favorite multiple-choice distractors.

Principal Part A Exclusions

Liability coverage does NOT apply when an insured:

1. Intentionally causes bodily injury or property damage.
2. Uses a vehicle to carry persons or property for a fee (the ride-share/livery exclusion; ordinary share-the-expense carpools are excepted).
3. Is employed in the auto business (garages, repair shops, sales) and the loss arises from that business.
4. Uses a vehicle without a reasonable belief of being entitled to do so.
5. Owns or operates a vehicle with fewer than four wheels or designed mainly for off-road use.

Property damage to property the insured owns, transports, or is in their care, custody, or control is also excluded — that is a first-party loss, not third-party liability.

The Out-of-State Coverage Provision

Part A also contains an out-of-state coverage feature in Part F. If an accident occurs in a state whose financial responsibility or compulsory insurance law requires higher liability limits than the policy shows, the PAP automatically increases its limits to meet that state's minimum. If the state mandates a no-fault or compulsory coverage the insured does not carry, the policy provides at least the required minimum for that loss.

This prevents an insured from being underinsured simply by driving across a state line. The provision raises limits only to the other state's minimum, never below the limits the insured already purchased.

Other-Insurance and Two-or-More Autos

When the same loss is covered by more than one policy, Part A's other-insurance clause governs. For a covered auto you own, this policy is primary. For a non-owned auto the insured is driving, this policy is excess over any other collectible insurance — the owner's policy pays first.

If two or more autos are insured under separate PAPs, the limits are not stacked for liability unless state law requires it; the policy on the vehicle involved responds as primary. Understanding the primary-versus-excess split is heavily tested, because it determines which insurer defends and pays first.