6.2 Part A Liability and Supplementary Payments

Part A: Liability Coverage and Supplementary Payments

Part A is the heart of the PAP. The insurer promises to pay damages for bodily injury (BI) or property damage (PD) for which any covered person becomes legally responsible because of an auto accident. It also provides a duty to defend the insured in any suit seeking covered damages, even if the allegations are groundless, false, or fraudulent. The duty to defend ends when the company has paid out the applicable limit of liability through settlements or judgments.

Who is a 'covered person' for liability

Liability follows both the person and the auto:

• You and any family member for the ownership, maintenance, or use of any auto or trailer.
• Any person using your covered auto with permission (a permissive user).
• Any person or organization legally responsible for acts of a covered person while using a covered auto (vicarious liability).
• Any person or organization legally responsible for your or a family member's use of any vehicle (other than a covered auto) that you do not own - but only for that person's conduct, not the vehicle owner's.

Split limits vs. combined single limit

Liability limits are written one of two ways:

• Split limits, shown as three numbers such as 25/50/25 (in thousands): $25,000 BI per person, $50,000 BI per accident (all injured), and $25,000 PD per accident.
• Combined Single Limit (CSL) - one number, e.g., $300,000, available to pay any combination of BI and PD from one accident.

Worked split-limit example: A 100/300/50 policy. The insured injures four people (claims of $80,000, $90,000, $120,000, and $60,000) and causes $70,000 property damage. Per-person cap is $100,000, so the $120,000 claim is reduced to $100,000. Summed BI demand = $80,000 + $90,000 + $100,000 + $60,000 = $330,000, but the per-accident BI cap is $300,000, so total BI paid = $300,000. PD of $70,000 is capped at $50,000. The insurer pays $350,000; the insured personally owes the remaining $90,000.

Supplementary Payments (paid IN ADDITION to the limit)

Part A pays these on top of the liability limit, with no reduction of the limit available to claimants. This is a frequent exam point.

Key Part A exclusions

Liability does not apply to:

• Intentional bodily injury or property damage.
• Damage to property owned or being transported by the insured.
• Damage to property rented to, used by, or in the care of an insured (limited exception for residences/garages rented to others).
• Bodily injury to an employee of an insured injured in the course of employment (covered by workers' compensation instead).
• Use of a vehicle as a public or livery conveyance (does not apply to share-the-expense carpools).
• Using a vehicle without a reasonable belief of being entitled to do so.
• Vehicles with fewer than four wheels or designed mainly for off-road use (e.g., dirt bikes, ATVs).

'Other insurance' and how the limit responds

For liability arising from a covered auto you own, the PAP is primary. For a non-owned auto you drive (a borrowed or rented car), your PAP is excess over any other collectible insurance - typically the vehicle owner's policy pays first. When two policies are both excess (or both primary), each pays its pro-rata share based on the ratio of its limit to the total of all applicable limits. Note also that the single limit shown applies regardless of the number of covered persons, vehicles, claims, or autos involved; an insured cannot multiply the per-accident limit by stacking the count of covered persons in one crash.

Worked combined-single-limit example

Suppose the insured carries a $300,000 CSL instead of split limits. In one accident the insured causes $180,000 of bodily injury across two victims and $160,000 in property damage, totaling $340,000 of liability. Because a CSL is one shared pool for any mix of BI and PD, the insurer pays up to $300,000 total - here it satisfies the $180,000 BI in full and applies the remaining $120,000 to the PD claim, leaving the insured personally responsible for the uncovered $40,000 of property damage. A CSL is generally more flexible than split limits because it never caps a single victim's recovery below the full single limit.

Split Limits, CSL, and the Supplementary Payments Bonus

Part A liability can be written as split limits (e.g., 100/300/50 = $100,000 per person BI / $300,000 per accident BI / $50,000 PD) or as a combined single limit (CSL) that applies one figure to BI and PD together. The CSL is more flexible because it does not separately cap per-person BI.

Worked split-limit example: Limits 100/300/50. Three claimants are injured with BI claims of $80,000, $120,000, and $90,000. The $120,000 claimant is capped at the $100,000 per-person limit; the others are paid in full ($80,000 + $90,000). Total BI = $80,000 + $100,000 + $90,000 = $270,000, within the $300,000 per-accident cap.

Supplementary Payments are paid in addition to the limit and do not reduce it: defense costs, up to $250 for bail bonds, premiums on appeal/release-of-attachment bonds, post-judgment interest, and up to $200/day for lost earnings to attend trial at the insurer's request. Because defense is outside the limit, a long, expensive defense does not erode the money available to pay the claimant.