6.2 Part A Liability and Supplementary Payments

What Part A Pays

Part A — Liability Coverage is the heart of the PAP and the only mandatory coverage in most states. It is third-party coverage: it pays others when an insured is legally liable for bodily injury (BI) or property damage (PD) arising out of the ownership, maintenance, or use of an auto. The insurer also has the duty to defend the insured — and defense costs are paid in addition to the limit of liability.

The PAP's liability promise has two halves: the damages the insured is legally obligated to pay, and the defense of any suit asking for those damages, even if the suit is groundless, false, or fraudulent. The duty to defend ends once the insurer has paid out the applicable limit through a settlement or judgment.

Insureds Under Part A

Part A defines a broader set of insureds than the named-insured definition alone:

• "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 insured while that insured uses a covered auto (vicarious liability — e.g., an employer).
• For any auto other than your covered auto, any other person or organization legally responsible for the acts of you or a family member, but only for that person's use of an auto the insured does not own.

Trap: A permissive user gets Part A liability only while in your covered auto. The named insured and family members are insured in essentially any auto they drive (subject to the non-owned/regular-use exclusions).

Split Limits vs. Combined Single Limit

Liability limits are written one of two ways. Split limits show three numbers, e.g. 25/50/25 (in thousands): $25,000 per person BI, $50,000 per accident BI, and $25,000 per accident PD. A Combined Single Limit (CSL) is one number — say $300,000 — available for BI and PD combined in any mix.

Worked example — split limits

An insured carries 100/300/50. He causes an accident injuring three people — claims of $120,000, $80,000, and $60,000 — plus $70,000 in property damage.

Person 1 is cut to the $100,000 per-person cap; the BI subtotal of $240,000 stays under the $300,000 per-accident cap, so it pays in full. PD is capped at $50,000. The insured personally owes the uncovered $20,000 + $20,000 = $40,000.

Supplementary Payments

Supplementary Payments are paid in addition to the Part A limit of liability. They are the classic exam list — memorize them:

1. Up to $250 for the cost of bail bonds required because of an accident, including related traffic-law violations.
2. Premiums on appeal bonds and bonds to release attachments in a suit the insurer defends.
3. Interest accruing after a judgment until the insurer pays or deposits its limit.
4. Up to $200 a day for loss of earnings (not other income) for attendance at hearings or trials at the insurer's request.
5. Other reasonable expenses the insured incurs at the insurer's request.

Memory hooks: $250 bail bonds, $200/day lost earnings. These dollar figures are favorite test items. Because supplementary payments are outside the limit, a defense that costs $40,000 does not erode a $100,000 BI limit.

Key Part A Exclusions

Part A does not cover, among others:

• Intentional injury or damage caused by an insured.
• Damage to property owned, used, or being transported by the insured (use Part D or a homeowners policy instead).
• Liability assumed under a contract (with limited exceptions).
• Use of a vehicle as a public or livery conveyance (ride-share/taxi for hire) — note exceptions for share-the-expense car pools.
• Vehicles used in the auto business (selling, repairing, servicing, parking) — though the named insured and family members keep coverage for autos not in the business.
• A vehicle furnished or available for the insured's regular use that is not a covered auto (the "drive other car" gap — solved by a DOC endorsement or a named non-owner policy).
• Operating a vehicle with fewer than four wheels or designed mainly for off-road use.

Trap: The regular-use exclusion removes coverage for a non-owned car the insured routinely drives — such as a company car furnished for personal use — even though one-time borrowing of a friend's car is covered.

The Part A Insuring Agreement, Insureds, and Supplementary Payments

Part A - Liability is the heart of the Personal Auto Policy. Its insuring agreement promises to pay damages for bodily injury and property damage for which any insured becomes legally responsible because of an auto accident, and to settle or defend any resulting claim or suit, with defense ending when the limit is exhausted by payment of judgments or settlements. Liability may be written as a combined single limit or as split limits (per person / per accident bodily injury and per accident property damage), the dec-page distinction tested throughout.

The definition of insured under Part A is broad and layered. It includes you (the named insured) and any family member for the ownership, maintenance, or use of any auto or trailer; any person using your covered auto with permission; and any person or organization legally responsible for acts of a covered person while using a covered auto (extending coverage to an employer for an employee's use, for example). This layered definition is why a permissive user driving the insured's car is covered by the owner's policy, a frequent exam point about whose policy is primary.

Supplementary payments under Part A are paid in addition to the liability limit and parallel the CGL list: the cost of bail bonds up to a stated amount, premiums on appeal and attachment bonds, interest accruing after a judgment, up to a stated daily amount for loss of earnings to attend trial at the insurer's request, and other reasonable expenses incurred at the insurer's request. Because these are outside the limit, a full-limit judgment can cost the insurer more than the stated limit.

Worked scenario: a friend borrows the insured's car with permission and negligently injures a pedestrian. The friend is an insured under Part A of the owner's policy, which defends and pays up to the limit, with defense costs and post-judgment interest paid as supplementary payments on top of the limit. Identifying who qualifies as an insured and that supplementary payments fall outside the limit is the core Part A skill.

Key Takeaways

Part A pays bodily injury and property damage the insured is legally responsible for from an auto accident and provides defense, on either combined single or split limits. Insureds include the named insured and family for any auto, permissive users of the covered auto, and those legally responsible for a covered person's use. Supplementary payments (bail and appeal bond costs, post-judgment interest, trial-attendance earnings) are paid in addition to the limit. The regular-use exclusion bars a routinely driven non-owned car, while occasional borrowing is covered.