7.3 Part F General Provisions, Endorsements, and No-Fault Concepts

Part F: General Provisions

Part F contains the PAP's boilerplate conditions that govern the whole contract. High-yield items:

• Bankruptcy of the insured does not relieve the insurer of its obligations.
• Changes to the policy require the insurer's written consent (endorsement). If the insurer broadens coverage during the policy term without added premium, the broader terms apply automatically.
• Fraud / Concealment: the policy provides no coverage for any insured who makes fraudulent statements or engages in fraudulent conduct connected with a loss.
• Legal Action Against Us: no suit may be brought against the insurer until the insured has fully complied with policy terms (a Part E tie-in).

Termination, Territory, and Other Insurance

Trap: Mexico is outside the policy territory. And on a borrowed or rented car, your PAP pays only excess — the owner's policy is primary.

Common PAP Endorsements

• Miscellaneous Type Vehicle (PP 03 23): extends PAP to motorcycles, motor homes, golf carts, ATVs — vehicles otherwise excluded.
• Towing and Labor Costs (PP 03 03): roadside towing/labor at the breakdown site, a stated amount per disablement.
• Extended Non-Owned Coverage (PP 03 06 family): broadens liability for vehicles furnished/available for the insured's regular use (e.g., a company car).
• Coverage for Damage to Your Auto / Rental Reimbursement (PP 03 06): raises the small Transportation Expenses limit.
• Joint Ownership Coverage (PP 03 34): allows two or more individuals (e.g., unmarried partners) to share one PAP.

Know which endorsement closes which gap; this is a frequent matching question.

No-Fault Concepts and Personal Injury Protection (PIP)

Under a no-fault system, each driver's own insurer pays for that driver's injuries (medical, lost wages, essential services) regardless of who caused the accident, through Personal Injury Protection (PIP). The goals: speed payment of medical bills and reduce litigation over fault.

Tort thresholds restrict the right to sue for pain-and-suffering. Two types:

• Monetary (verbal converts to dollar) threshold: an injured party may sue only if medical expenses exceed a stated dollar amount (e.g., $2,000).
• Verbal threshold: suit is allowed only for serious injury described in words — death, dismemberment, significant disfigurement, or permanent disability.

PIP Coverages and a Coordination Example

PIP commonly pays, up to stated limits: medical expenses, a percentage of lost wages, essential-services / replacement-services costs, and a death/funeral benefit. PIP is generally primary and pays without proving fault.

Worked example: A no-fault state has a $10,000 PIP limit and an 80% lost-wages benefit. An insured incurs $6,500 in medical bills and loses $5,000 in wages.

1. Medical paid: $6,500
2. Wage benefit: 80% × $5,000 = $4,000
3. Total PIP demand: $6,500 + $4,000 = $10,500, but the PIP limit is $10,000 → PIP pays $10,000; the remaining $500 is the insured's out-of-pocket (or pursued via a liable third party if the tort threshold is met).

Distinguish: PIP = first-party, no-fault, broad (medical + wages + services). Medical Payments (Part B) = first-party medical only, also no-fault, but narrower and used in tort (at-fault) states. Liability (Part A) = third-party, fault-based.

Add-On, Choice, and Pure No-Fault Systems

No-fault is not one model — the exam separates three (plus add-on):

Because PIP and required limits are creatures of state statute, the producer must match the named insured's state mandates. Trap: "no-fault" does not mean no one is ever liable — serious-injury claims still pierce the threshold, and property-damage liability (Part A) remains fault-based even in no-fault states.

Two or More Autos, Stacking, and Subrogation

When the insured owns two or more vehicles on one PAP, UM/UIM limits may sometimes be stacked (combined across vehicles) depending on state law and policy language; many insurers use anti-stacking clauses to prevent it. The exam expects you to know that stacking increases available limits when permitted and that anti-stacking endorsements are common cost-control tools.

Subrogation under Part F: after the insurer pays a Part D loss caused by a third party, the insurer's Our Right to Recover Payment provision lets it step into the insured's shoes and pursue the at-fault party. The insured must do nothing to impair this right — signing a release with the other driver before the insurer subrogates can void the claim. PIP first-party payments may likewise be subrogated against a liable third party where the tort threshold is met. These provisions tie back to the indemnity principle: the insured is made whole once, and the ultimate cost falls on the responsible party.