6.2 Part A Liability and Supplementary Payments
Key Takeaways
- Part A is mandatory third-party liability coverage for bodily injury and property damage the insured is legally liable for.
- Split limits (e.g., 100/300/50) cap per-person BI, per-accident BI, and per-accident PD separately; a CSL pools one limit for all BI and PD.
- Supplementary payments - defense costs, $250 bail bonds, appeal bonds, post-judgment interest, $200/day lost earnings - are paid in addition to the limit.
- The duty to defend even covers groundless suits but ends once the limit of liability is exhausted by settlement or judgment.
Part A - Liability Coverage
Part A is the heart of the PAP and the only coverage that states make mandatory. It is third-party coverage: it pays others when an insured is legally liable for bodily injury or property damage arising out of the ownership, maintenance, or use of an auto. The insurer's twin promises are to pay damages and to defend the insured against any covered suit.
Two damage categories are covered:
- Bodily Injury (BI): injury, sickness, disease, or death of others.
- Property Damage (PD): physical damage to or destruction of another party's property, including loss of use.
Reading the Limits
Part A limits are written two ways:
| Format | Example | Meaning |
|---|---|---|
| Split limits | 100/300/50 | $100,000 BI per person / $300,000 BI per accident / $50,000 PD per accident |
| Combined Single Limit (CSL) | $500,000 | One pooled limit for all BI and PD in any one accident |
Worked split-limit example. A 100/300/50 insured causes a crash injuring three people: claims are $90,000, $120,000, and $60,000, plus $40,000 in vehicle damage.
- Person 1: $90,000 (under the $100k per-person cap) — paid in full.
- Person 2: capped at $100,000 (per-person limit), so $20,000 is uncovered.
- Person 3: $60,000 (under cap) — paid in full.
- BI subtotal: $90k + $100k + $60k = $250,000, within the $300k per-accident cap.
- PD: $40,000, within the $50,000 PD limit — paid in full.
- Insurer pays $290,000; the insured personally owes the remaining $20,000.
Payments On Top of the Limit
Supplementary payments are paid in addition to the limit of liability — they do not erode it. The PAP lists:
- All defense costs the insurer incurs (attorney fees, investigation).
- Up to $250 for the cost of bail bonds required because of a covered accident.
- Premiums on appeal bonds and bonds to release attachments in a covered suit.
- Interest accruing after a judgment.
- Up to $200 per day for loss of earnings (not other income) to attend hearings/trials at the insurer's request.
- Other reasonable expenses incurred at the insurer's request.
Worked example. A $100,000-limit insured loses a suit: the court enters a $100,000 judgment, and the insurer spent $35,000 defending plus $250 on a bail bond. Total paid = $100,000 + $35,000 + $250 = $135,250, because defense and bail are supplementary.
When the Insurer Must Defend
The insurer must defend any covered suit — even a groundless, false, or fraudulent one. The duty to defend ends once the limit of liability is exhausted by a settlement or judgment; afterward the insured bears further defense cost.
Common Part A exclusions / traps:
- Intentional injury caused by the insured is excluded.
- Liability while the auto is used as a public livery/conveyance (e.g., taxi) is excluded — but ordinary car-sharing/share-the-expense carpools are not.
- Damage to property owned, used, or being transported by the insured (you cannot use Part A to pay for your own property).
- Using a vehicle without a reasonable belief of being entitled to do so.
- Vehicles with fewer than four wheels (e.g., motorcycles) and most business use of non-owned trucks.
Floating Up to Legal Minimums
The PAP contains an out-of-state coverage condition: if an accident occurs in a state requiring higher liability limits or a compulsory coverage (such as no-fault PIP) that the policy lacks, the PAP automatically increases to provide at least the minimum that state demands. The insured is never penalized for crossing state lines.
Other insurance. When more than one auto policy applies, Part A is primary for an owned auto and excess over any other collectible insurance for a non-owned auto the insured is driving. If two policies are both excess (or both primary), each pays its pro-rata share based on its proportion of the total applicable limits — a frequent calculation on the exam.
Why the Format Matters
A CSL is generally more protective than equivalent split limits because the single pool can fund a large single-claimant judgment without a per-person sub-limit. With 250/500/100 split limits, one catastrophically injured person is capped at $250,000; a $500,000 CSL would let that one person draw the full $500,000.
| Scenario | 250/500/100 split | $500,000 CSL |
|---|---|---|
| One person, $400,000 BI | Pays $250,000 (per-person cap) | Pays $400,000 |
| Two people, $200k each | Pays $400,000 | Pays $400,000 |
| BI $300k + PD $90k | Pays $390,000 | Pays $390,000 |
Always apply the per-person BI cap first, then check the per-accident BI cap, then handle PD against its own limit. Reversing that order is the most common student error on liability math.
A 100/300/50 insured injures two people ($150,000 and $80,000) and causes $30,000 in property damage in one accident. How much does Part A pay in total?
An insured with a $250,000 CSL incurs a $250,000 judgment plus $40,000 in defense costs and $250 for a bail bond. What does the insurer pay?
Split Limits vs. CSL and the Out-of-State Provision
Part A liability is written as split limits (e.g., 100/300/50 = $100,000 per person BI / $300,000 per accident BI / $50,000 PD) or a combined single limit (CSL) that any covered claim can draw on up to one number.
The out-of-state coverage provision automatically raises the insured's limits to meet a higher financial-responsibility or compulsory limit required by a state the insured drives into, so a Louisiana driver entering a state with stiffer minimums is automatically compliant. Worked: a 100/300/50 insured injuring two people at $150,000 and $80,000 pays $100,000 + $80,000 = $180,000 (the first claimant capped at the $100,000 per-person limit).