7.2 Exclusions and Part E Duties After an Accident
Key Takeaways
- Part D excludes wear and tear, mechanical/electrical breakdown, freezing, tire road damage, aftermarket electronic equipment, and racing - factory-installed equipment IS covered.
- The PAP insures private passenger autos, pickups, and vans under 10,000 lbs GVW not used for delivery or public hire; motorcycles need a separate policy or PP 03 23.
- Part E is a condition listing duties after a loss: prompt notice, cooperation, forwarding legal papers, exams, and proof of loss.
- Physical-damage claims add duties to protect the auto, notify police of theft, and permit inspection before repair.
- The Appraisal condition settles disputes over the amount of loss; intentional material fraud voids the policy.
Part D Exclusions
The physical-damage section excludes losses that are not fortuitous or that require separate underwriting. Memorize these - the exam tests them heavily:
| Exclusion | Why excluded |
|---|---|
| Wear and tear, freezing, mechanical or electrical breakdown | Maintenance, not a sudden accidental loss |
| Road damage to tires (alone) | Maintenance; covered only as part of a larger covered loss |
| Aftermarket electronic equipment | Needs an endorsement; factory-installed equipment IS covered |
| Custom furnishings/equipment in a pickup or van | Requires an endorsement |
| Loss to a non-owned auto used regularly by the insured | Not a covered auto |
| War, nuclear hazard, radioactive contamination | Catastrophic exclusions |
| Racing or speed contests | High-risk activity |
| Loss due to confiscation by government / illegal use | Not a fortuitous loss |
| Destruction/seizure for transporting drugs | Public-policy exclusion |
Trap: factory-installed stereo and electronic equipment is covered; aftermarket (added) equipment is excluded without an endorsement. Examiners pair this with the "custom van/pickup furnishings" exclusion.
The General Exclusion: Eligible Vehicles
The PAP is designed for private passenger autos, pickups, and vans with a gross vehicle weight under 10,000 pounds that are not used to deliver goods or for public/livery hire (rideshare during a fare is excluded without endorsement). A vehicle with fewer than four wheels (motorcycle) is not eligible under a standard PAP - it needs a separate motorcycle policy or a Miscellaneous Type Vehicle endorsement (PP 03 23).
Part E - Duties After an Accident or Loss
Part E is a condition, not a coverage. It lists the obligations the insured must meet for any claim under the policy. Failure to comply can void coverage where the breach prejudices the insurer. The duties are:
- Prompt notice to the insurer (or agent) of how, when, and where the accident or loss happened, plus the names and addresses of injured persons and witnesses.
- Cooperate with the insurer in the investigation, settlement, or defense of any claim.
- Promptly send copies of any legal papers, notices, or summons received.
- Submit to physical exams (for injury claims) by physicians the insurer chooses, as often as reasonably required, and to examinations under oath.
- Authorize the insurer to obtain medical and other relevant records.
- Submit a proof of loss when required.
Additional Duties for Physical-Damage (Part D) Claims
| Duty | Detail |
|---|---|
| Protect the auto from further loss | Take reasonable steps; the insurer pays reasonable expenses to do so |
| Notify police | Required if the auto is stolen |
| Permit inspection/appraisal | Allow the insurer to inspect and appraise the damaged auto before repair |
Exam point: an insured who repairs or disposes of the damaged auto before the insurer inspects it has breached a Part E duty and may forfeit the physical-damage claim.
How the Appraisal Condition Resolves Disputes
When the insurer and insured disagree on the amount of a physical-damage loss (not on whether coverage applies), the Appraisal condition lets either party demand appraisal. Each side selects a competent appraiser; the two appraisers then select an umpire before evaluating.
The two appraisers state the amount of loss separately; if they disagree, they submit only the difference to the umpire. An award agreed to by any two of the three (the two appraisers, or one appraiser plus the umpire) binds the amount of loss.
Crucially, demanding appraisal does not waive any right - the insurer still retains its right to deny the claim on coverage grounds. Each party pays its own appraiser and shares the umpire and other appraisal expenses equally. Appraisal settles dollars, never coverage.
Fraud and Concealment
The policy is void if the insured intentionally conceals or misrepresents a material fact, engages in fraudulent conduct, or makes false statements relating to the loss. The exam distinguishes innocent misstatements (generally not voiding) from intentional, material fraud (voids coverage).
Worked Scenario: Breach of Duty
An insured's car is stolen on Monday. He does not notify police, waits three weeks to call the insurer, and meanwhile the recovered car is sold for salvage by a tow yard. Two Part E duties were breached: failure to notify police of theft and failure to protect the auto / permit inspection. Because the delay prejudiced the insurer's ability to investigate and inspect, the carrier may reduce or deny the OTC theft claim.
Notice Timeline Cheat Sheet
- Accident / loss: prompt notice - "as soon as practicable."
- Theft of auto: prompt notice plus police report.
- Legal papers / summons: forward promptly (failure can forfeit Part A defense).
Why Duties Are Conditions, Not Coverages
The distinction matters on the exam. A coverage describes what the insurer promises to pay; a condition describes what the insured must do to keep the promise enforceable. Part E duties are conditions precedent - the insurer's payment obligation is suspended until the insured substantially performs them. Courts generally void the claim only when the breach materially prejudices the insurer (lost evidence, missed inspection, blown statute of limitations), not for a trivial delay that causes no harm.
Practical agent guidance often tested: tell clients to (1) call police at the scene and get a report number, (2) photograph damage and the scene, (3) collect other-driver and witness contact details, (4) report to the insurer the same day, and (5) never authorize repairs until the adjuster inspects. Each step maps directly to a Part E duty and prevents an avoidable claim denial.
An insured adds a $1,200 aftermarket sound system to her covered auto. A fire destroys the system. Without any endorsement, how does Part D respond?
Under Part E, the insurer and insured agree the loss is covered but disagree on the dollar amount. Which condition resolves the dispute?