6.2 Part A Liability and Supplementary Payments

What Part A Covers

Part A - Liability Coverage is the mandatory heart of the PAP. It is third-party coverage: the insurer pays others when an insured becomes legally liable for an auto accident. Two categories of damages apply:

A single insuring agreement combines BI and PD and adds the insurer's duty to defend the insured against any covered suit, even one that is groundless or fraudulent.

Legal Liability Is the Trigger

Part A pays only when the insured is legally liable - that is, when negligence (or another basis of liability) makes the insured legally responsible for another party's damages. The insurer measures liability under the tort law of the state where the accident occurs, including any comparative negligence rule that reduces a claimant's recovery by their own percentage of fault.

Worked example. A jury finds the insured 80% at fault and the claimant 20% at fault for $100,000 in damages in a modified-comparative state. The claimant recovers $80,000, and Part A pays that amount subject to the policy limit. The 20% attributable to the claimant is not the insured's obligation.

How Limits Are Written

Split Limits

The traditional format is three numbers: BI per person / BI per accident / PD per accident. Read 100/300/50 as $100,000 maximum BI to one person, $300,000 maximum BI for everyone in one accident, and $50,000 maximum PD per accident.

Worked example. You are at fault; three people are injured; limits are 100/300/50.

No single person collects above $100,000, and total BI cannot exceed $300,000. PD has its own separate $50,000 and is not reduced by BI payouts.

Combined Single Limit (CSL)

A combined single limit (CSL) is one pool covering any blend of BI and PD with no per-person sub-limit. With a $500,000 CSL, a single catastrophically injured claimant could recover the full $500,000 - impossible under split limits where the per-person cap would apply.

Worked example. CSL = $300,000. One pedestrian suffers $250,000 BI and $20,000 PD to a storefront. Part A pays the full $270,000 from the one pool. Under a 100/300/50 split policy, that same pedestrian's BI would be capped at $100,000.

Supplementary Payments - Paid On Top of the Limit

The single most-tested Part A trap: supplementary payments are paid IN ADDITION to the limit of liability and do not reduce it. They include:

• All defense costs and attorney fees the insurer incurs.
• Premiums on bail bonds up to $250 for an accident-related arrest.
• Premiums on appeal bonds and bonds to release attachments.
• Interest accruing on a judgment after it is entered.
• Up to $250 per day for the insured's lost earnings to attend hearings or trial at the insurer's request, plus other reasonable expenses.

Because defense is supplementary, a $50,000 BI judgment with $40,000 in defense costs uses only $50,000 of the limit.

Who Is an Insured - and the Key Exclusions

Insureds under Part A include you and family members for the ownership, maintenance, or use of any auto, and any person using your covered auto with reasonable belief of permission (a permissive user).

Major exclusions tested heavily:

• Intentional bodily injury or property damage.
• Damage to property owned, used, or in the care of the insured (your own car, rented garage).
• Liability while using a vehicle without a reasonable belief of permission.
• Operating in organized racing or speed contests.
• Public or livery conveyance (carrying passengers for a fee), except ride-share rules vary by endorsement and state.

State Financial Responsibility and Minimum Limits

Every state sets a minimum Part A limit through compulsory insurance or financial responsibility laws. A common floor is 25/50/25 - $25,000 per person BI, $50,000 per accident BI, $25,000 PD - though many states require more.

Because medical and vehicle costs routinely exceed these floors, producers should counsel insureds to buy above the minimum. A 25/50/25 policy is easily exhausted by a single serious injury, leaving the insured personally liable for the excess judgment.

Other-Insurance and Out-of-State Coverage Conditions

Two Part A conditions are exam favorites. The other-insurance condition states that for a non-owned auto, the PAP is excess over any other collectible insurance, and when two policies apply on the same priority level, each pays its pro-rata share by limits.

The out-of-state coverage condition automatically raises the insured's limits to meet a compulsory or financial responsibility requirement of the state where the accident occurs if that requirement is higher. So a driver from a 25/50/25 state who crashes in a 50/100/50 state has limits read up to satisfy that state's mandate - the insured is never left below the local minimum.