7.2 Exclusions and Part E: Duties After an Accident

Part D Exclusions

Physical damage coverage is broad, so the exam emphasizes what it does not cover. The first group of PAP Part D exclusions targets misuse and ordinary deterioration:

• Loss to a vehicle used as a public or livery conveyance (taxi, ride-share for hire) - note ride-share gaps require a specific endorsement or commercial policy.
• Wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires (unless the damage results from a covered theft or vandalism).
• Loss to a vehicle while subject to government destruction or confiscation.
• A non-owned auto used without a reasonable belief the insured is entitled to use it.

Property and Peril Exclusions

The second group excludes certain property and catastrophic perils:

• Radar/laser detectors, custom furnishings in pickups/vans (unless scheduled), and tapes, records, discs, or other electronic data media.
• War, nuclear hazard, and radioactive contamination.
• Damage due to a vehicle's destruction or confiscation by governmental authorities for involvement in illegal activities.
• Loss to awnings, cabanas, or equipment designed for the comfort of camper/motor-home occupants unless endorsed.

A practical note: the electronic-equipment exclusion is what makes the Audio, Visual and Data Electronic Equipment endorsement necessary for aftermarket sound or navigation systems.

Trap: "Driving Other Cars" and Furnished/Available Vehicles

A frequently missed exclusion: a vehicle (other than the covered auto) that is furnished or available for the regular use of the named insured or family members is excluded under Part D. This closes the gap a person might otherwise exploit by carrying coverage on one cheap car and constantly driving a company car.

Likewise, racing or speed contests void physical damage coverage. The exam will pair these with a fact pattern - read for the word "regular use" or "organized racing."

Remember the distinction between furnished/available for regular use (excluded) and an occasional or temporary substitute auto (covered). A borrowed neighbor's car for a single weekend errand is covered as a non-owned auto; an employer's car the insured drives daily is excluded unless an Extended Non-Owned endorsement is added.

Part E: Duties After an Accident or Loss

Part E is a conditions section. It lists the duties the insured must perform after a loss; failure to comply can void coverage. General duties applicable to all coverages:

1. Prompt notice to the insurer, including how, when, and where the accident happened, and the names/addresses of injured persons and witnesses.
2. Cooperate with the insurer in the investigation, settlement, or defense.
3. Promptly forward any legal papers (summons, demand) received.
4. Submit to physical exams by chosen physicians and to examinations under oath (EUO) as often as reasonably required.
5. Authorize the insurer to obtain medical and other records.

Additional Duties for Part D (Physical Damage) Claims

When a physical-damage loss occurs, the insured has extra duties so the insurer can verify and mitigate the loss:

If the insured and insurer disagree on the amount of a physical damage loss, the PAP Appraisal provision lets either party demand appraisal: each selects a competent appraiser, the two pick an umpire, and agreement by any two binds the amount (but not coverage). Each party pays its own appraiser and shares the umpire's cost. Crucially, demanding appraisal does not waive any policy rights, and the insurer may still deny coverage even after the amount is fixed.

The insurer also has options at claim time under Part D: it may pay for the loss in money, repair or replace the damaged property, or return stolen property and pay for any resulting damage. It may also keep all or part of the property at an agreed or appraised value - effectively buying the salvage.

Consequences of Breaching a Duty

The duties in Part E are conditions precedent to recovery. A late or missing notice that prejudices the insurer's investigation can be grounds to reduce or deny the claim, and refusal to submit to an examination under oath or to permit inspection is a material breach.

Courts generally require the insurer to show prejudice from a technical breach before voiding coverage, but the exam answer is straightforward: the insured who fails to cooperate, conceals facts, or commits fraud after a loss jeopardizes the claim. Theft losses are especially fraud-sensitive, which is why prompt police notification is a separate, explicit duty - skipping it is a classic distractor on the exam.

The Part E Duties List and Part D Exclusions

Part E - Duties After an Accident or Loss spells out what the insured must do, and the exam expects the list. The insured must give prompt notice to the insurer (how, when, and where the accident happened, plus the names of injured persons and witnesses), cooperate in the investigation, settlement, and defense, send copies of any legal papers received, submit to physical exams by the insurer's chosen physicians and to examination under oath, and authorize the insurer to obtain medical and other records.

For Part C (uninsured motorists) and Part D (physical damage) claims, the insured must also notify the police promptly if a covered auto is stolen or a hit-and-run is involved, permit inspection and appraisal of the damaged auto before repair, and take reasonable steps to protect the auto from further loss (the insurer pays reasonable protection expenses).

The Part D physical-damage coverage also carries exclusions that recur on the exam: loss to a vehicle used as a public or livery conveyance (ride-share for hire), loss from wear and tear, freezing, mechanical or electrical breakdown, road damage to tires, loss due to war, nuclear, or radioactive contamination, loss to electronic equipment not permanently installed (beyond the small sublimit), and loss to a non-owned auto used in the auto business. These mirror the logic seen elsewhere: exclude maintenance costs, business-use exposures, and catastrophic correlated perils.

Failing a Part E duty can defeat an otherwise covered claim, especially where the breach prejudices the insurer, which is why producers counsel insureds to report promptly and preserve the damaged vehicle.

Worked scenario: an insured's car is stolen, but the insured waits three weeks to report it and never files a police report. The insurer can contest the claim because prompt notice and prompt police notification are explicit Part E duties for theft, and the delay may prejudice the fraud-sensitive investigation. Knowing the duties list and the Part D exclusions is the core duties-and-exclusions skill.

Key Takeaways

Part E requires prompt notice, cooperation, forwarding legal papers, submission to physical exams and examination under oath, and for theft or hit-and-run, prompt police notification, plus permitting inspection and protecting the auto from further loss. Part D excludes public/livery use, wear and tear, freezing, mechanical breakdown, tire road damage, war and nuclear loss, non-permanent electronic equipment, and autos used in the auto business. Breaching a Part E duty that prejudices the insurer can reduce or defeat the claim.