6.3 Personal Auto Policy (PAP): Definitions, Parts A, B, C & D and Michigan Collision Tiers

Personal Auto Policy (PAP): Definitions, Parts A, B, C & D and Michigan Collision Tiers

Quick Answer: The ISO Personal Auto Policy (PAP) is organized into a Definitions section, Part A (Liability), Part B (Medical Payments — superseded in Michigan by mandatory No-Fault PIP), Part C (Uninsured/Underinsured Motorists), Part D (Coverage for Damage to Your Auto), Part E (Duties After an Accident or Loss), and Part F (General Provisions). In Michigan, adjusters must combine national ISO PAP rules—such as the 14-day / 4-day Newly Acquired Auto reporting windows, $250 bail bond / $200 daily lost earnings supplementary payments, and deer-strike Comprehensive classification—with Michigan's three statutory collision tiers under MCL 500.3037: Limited Collision, Standard Collision, and Broad Form Collision.

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Core ISO Personal Auto Policy (PAP) Definitions

Every coverage grant and exclusion in the Personal Auto Policy depends on how terms in quotation marks are defined:

• "You" and "Your": Refers to the "named insured" shown in the Declarations and the spouse if a resident of the same household. If the spouse ceases to be a resident of the same household during the policy period (for instance, due to separation or divorce), the spouse continues to be treated as "you" under the policy, but only until the earliest of: (1) the end of 90 days following the spouse's change of residency, (2) the effective date of another policy listing the spouse as a named insured, or (3) the end of the policy period.
• "Family Member": A person related to "you" by blood, marriage, or adoption who is a resident of your household, including a ward or foster child.
• "Occupying": In, upon, getting in, on, out, or off.
• "Trailer": A vehicle designed to be pulled by a private passenger auto or a pickup or van, OR a farm wagon or farm implement while towed by a private passenger auto, pickup, or van.

The Four Categories of "Your Covered Auto"

Under the PAP Definitions, "your covered auto" means:

1. Any vehicle shown in the Declarations;
2. A "newly acquired auto";
3. Any "trailer" you own (note that an owned trailer is automatically a covered auto for Part A Liability without even being listed on the Declarations, whereas under Part D physical damage an unscheduled non-owned trailer is capped at $1,500);
4. Any auto or "trailer" you do NOT own while used as a temporary substitute for any other vehicle described in this definition which is out of normal use because of its breakdown, repair, servicing, loss, or destruction. (Note: Under Part D physical damage, a temporary substitute auto is defined as a "non-owned auto" rather than "your covered auto," so that the vehicle owner's insurance remains primary and the insured's Part D applies as excess.)

Newly Acquired Auto Reporting Rules (14-Day vs. 4-Day vs. Policy Period)

A "newly acquired auto" is a private passenger auto, or a pickup or van (up to 10,000 lbs. GVWR not used for commercial delivery of goods other than incidental to installing/repairing furnishings or farming/ranching) that "you" become the owner of during the policy period. The reporting deadline depends on the coverage part and whether the vehicle is a replacement or additional vehicle:

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Part A — Liability Coverage

Who Is an "Insured" Under Part A?

1. "You" or any "family member" for the ownership, maintenance, or use of any auto or "trailer";
2. Any person using "your covered auto" (permissive user with a reasonable belief of entitlement);
3. For "your covered auto," any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under Part A (e.g., an employer held vicariously liable when the named insured drives "your covered auto" on a work errand);
4. For any auto or "trailer" other than "your covered auto," any other person or organization but only with respect to legal responsibility for acts or omissions of "you" or any "family member" for whom coverage is afforded under Part A (only if that person or organization does not own or hire the auto or "trailer").

Part A Supplementary Payments (Paid IN ADDITION to the Limit of Liability)

In addition to the policy's Liability Limit, the insurer pays defense costs and the following Supplementary Payments:

• Up to $250 for the cost of bail bonds required because of an accident, including related traffic law violations, resulting in bodily injury or property damage covered under the policy;
• Premiums on appeal bonds and bonds to release attachments in any suit the insurer defends;
• Interest accruing after a judgment is entered in any suit the insurer defends;
• Up to $200 a day for loss of earnings (but not other income) because of attendance at hearings or trials at the insurer's request;
• Other reasonable expenses incurred at the insurer's request.

Key Part A Exclusions & Their Tested Exceptions

Out-of-State Coverage Clause: If an auto accident occurs in another U.S. state or Canadian province where the compulsory financial responsibility limits or mandatory no-fault coverages are higher than the limits shown on the insured's policy, Part A automatically adjusts to provide the higher minimum limits or compulsory coverage required by that jurisdiction.

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Part B (Medical Payments) & Part C (Uninsured / Underinsured Motorists)

• Part B — Medical Payments Coverage: Under the standard ISO PAP, Part B pays reasonable medical and funeral services incurred within 3 years from the date of the accident (without regard to fault) for "you" and any "family member" (while occupying a motor vehicle or struck as a pedestrian by a motor vehicle) and for any other person while "occupying" "your covered auto." In Michigan, compulsory No-Fault Personal Protection Insurance (PIP) replaces standard Part B on Michigan policies.
• Part C — Uninsured / Underinsured Motorists (UM/UIM):
  • Uninsured Motorists (UM) pays compensatory bodily injury damages an "insured" is legally entitled to recover from the owner or operator of an "uninsured motor vehicle": (1) a vehicle with no bodily injury liability policy; (2) a vehicle with liability limits below the state's statutory minimum; (3) a vehicle insured by an insurer that denies coverage or is insolvent; or (4) a hit-and-run vehicle whose owner or operator cannot be identified.
  • Michigan Hit-and-Run Physical Contact Requirement: Under Michigan auto policies, a hit-and-run UM claim requires actual direct physical contact between the unidentified hit-and-run vehicle (or an integral part of it) and the insured, the vehicle the insured is occupying, or "your covered auto." A "miss-and-run" phantom driver who causes an insured to swerve into a tree without making physical contact does not trigger Michigan UM coverage.
  • Underinsured Motorists (UIM) pays bodily injury damages when the at-fault driver has a valid liability policy, but their limit is lower than the insured's UIM limit and insufficient to cover the insured's serious bodily injury damages (paying up to the insured's UIM limit minus the amount paid by the at-fault driver's insurer).

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Part D — Coverage for Damage to Your Auto & The Three Michigan Collision Tiers (MCL 500.3037)

Collision vs. Other Than Collision (Comprehensive)

• "Collision": The upset of "your covered auto" or a "non-owned auto" or its impact with another vehicle or object.
• "Other Than Collision" (Comprehensive): Direct and accidental physical loss to "your covered auto" or a "non-owned auto" not caused by collision. The ISO PAP explicitly lists 10 perils that are Other Than Collision (Comprehensive):
  1. Missiles or falling objects;
  2. Fire;
  3. Theft or larceny;
  4. Explosion or earthquake;
  5. Windstorm;
  6. Hail, water, or flood;
  7. Malicious mischief or vandalism;
  8. Riot or civil commotion;
  9. Contact with bird or animal (Hitting a Michigan deer on the highway is an Other Than Collision / Comprehensive loss! By contrast, swerving to miss a deer and crashing into a guardrail or ditch is a Collision loss!);
  10. Breakage of glass (If glass is broken as part of a collision, the insured may elect to have the glass breakage treated as part of the Collision loss so they only pay one deductible).

Transportation Expenses & Part D Sublimits

• Transportation Expenses: Pays up to $20 per day, to a maximum of $600, for temporary transportation expenses incurred by the insured after the total theft of "your covered auto" (or loss-of-use damages for a "non-owned auto"). Coverage for a total theft begins 48 hours after the theft and ends when the vehicle is returned to use or the insurer pays for its loss (for other covered Part D losses on a "non-owned auto," coverage begins 24 hours after the auto is withdrawn from use).
• Part D Limit of Liability: Pays the lesser of: (1) the Actual Cash Value (ACV) of the stolen or damaged property, or (2) the amount necessary to repair or replace the property with other property of like kind and quality. Non-owned "trailers" are capped at $1,500, and custom aftermarket electronic equipment not permanently installed in a factory opening is capped at $1,000.

The Three Michigan Statutory Collision Coverage Tiers (MCL 500.3037)

Because Michigan's No-Fault law abolishes ordinary tort suits for moving-vehicle damage, MCL 500.3037 requires insurers to offer specialized Michigan Collision coverage options. Every Michigan adjuster candidate must know how all three tiers respond when the insured driver is 50% or less at fault (not substantially at fault) versus more than 50% at fault (substantially at fault):