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

Part F - General Provisions

Part F contains the PAP's general conditions that apply across all coverage parts.

Policy Territory

The PAP applies in the United States, its territories and possessions, Puerto Rico, and Canada - and during transport between their ports. Mexico is not in the policy territory; a separate Mexican auto policy is needed to drive there.

Cancellation and Nonrenewal

Exact day counts are set by state law; the structure above reflects the common pattern.

Other Part F Provisions

• Legal action against us: no suit until the insured complies with all policy terms.
• Our right to recover payment (subrogation): after paying, the insurer takes the insured's recovery rights against a responsible party; the insured must not impair them.
• Bankruptcy of the insured does not relieve the insurer of its obligations.
• Two or more auto policies: if more than one PAP applies, the insurer pays only its proportionate share.
• Changes: the policy can be amended only by endorsement issued by the insurer.

Common PAP Endorsements

No-Fault Concepts and PIP

In the traditional tort system, the injured party must prove the other driver was at fault and collect from that driver's liability insurer. A no-fault system flips this: each driver's own insurer pays that driver's injury costs regardless of fault through Personal Injury Protection (PIP), and in exchange the law restricts the right to sue for pain and suffering.

PIP is broader than Part B Medical Payments. PIP typically pays:

• Medical expenses
• Lost wages (often about 80% of income, subject to a monthly cap)
• Essential (replacement) services such as housekeeping or childcare
• Death and funeral benefits

MedPay, by contrast, pays medical bills only - no lost wages, no essential services.

Tort Thresholds

In a true no-fault state, you may sue for pain and suffering only if the injury crosses a threshold:

• Verbal threshold: defined serious-injury categories - death, significant disfigurement, bone fracture, permanent injury, loss of a body function, loss of a fetus.
• Monetary threshold: medical bills exceed a stated dollar figure (e.g., $2,500).

Worked Example

An insured is rear-ended: $8,000 medical plus $3,000 lost wages. In a no-fault state, PIP pays roughly $11,000 within weeks (subject to limits and the wage cap); in a tort state the insured waits for a fault determination before the at-fault insurer pays.

Exam anchor: about a dozen states are true no-fault (e.g., Florida, Michigan, New York); add-on states offer PIP without restricting lawsuits.

No-Fault and Choice States

State systems sort into three buckets the exam expects you to distinguish.

Choice (elective) no-fault states such as Pennsylvania, New Jersey, and Kentucky let the insured pick a traditional tort policy or a lower-cost no-fault policy in writing; the producer must document the election.

Michigan PIP Reform

Michigan historically required unlimited PIP medical. Effective for policies issued or renewed on or after July 1, 2020, drivers now choose a level: $50,000 (only if enrolled in Medicaid), $250,000, $500,000, or unlimited. This is a frequently tested current-issue item.

Subrogation Under No-Fault

Even in no-fault states, the insurer that pays PIP may pursue inter-company arbitration against an at-fault party so the injured person is not paid twice for the same loss. The recurring principle - shared with subrogation and UM/UIM - is to prevent double recovery while keeping the insured whole once.

PIP Wage-Loss Math

Most PIP statutes pay medical bills up to the limit but cap wage loss. A common structure pays 80% of gross income up to a monthly maximum.

Example: monthly income $5,000; PIP pays 80% = $4,000, but a $3,000 monthly cap limits the benefit to $3,000. Apply the percentage then the cap - never the raw wage.

Pulling Part F and No-Fault Together

Resolve almost any auto item by asking three questions: the party (first vs. third), the trigger (fault vs. no-fault), and the vehicle/insured status. Part F sets the contractual frame - territory, term, cancellation, subrogation - while no-fault statutes overlay PIP and tort thresholds where the state has adopted them.

Part F general provisions that decide disputes

Part F of the Personal Auto Policy holds the housekeeping provisions that nonetheless decide claims. The territory is the United States, its territories/possessions, Puerto Rico, and Canada - not Mexico, which is the most common Part F trap (a U.S. PAP needs a Mexican auto policy to drive south of the border). Other tested provisions: the two-year suit limitation, the fraud condition voiding coverage for material misrepresentation, bankruptcy of the insured does not relieve the insurer, and the rule that if a premium would change because of changed information, the insurer may adjust it.

Endorsements and the no-fault overlay

Common PAP endorsements include Miscellaneous Type Vehicle (motorcycles, motor homes, golf carts), Towing and Labor, Extended Non-Owned Coverage, and a Named Driver Exclusion that removes a specific high-risk household driver to keep the policy affordable.

The no-fault overlay matters where states require Personal Injury Protection (PIP) as a first-party medical/wage benefit: in true no-fault states a verbal or monetary threshold must be met before the injured party may sue, while add-on states like Maryland require PIP but preserve full tort rights with no threshold. Knowing whether a state is true no-fault, add-on, or pure tort tells you whether a lawsuit is restricted - a frequent cross-state exam question.