7.2 Exclusions and Part E - Duties After an Accident

Why Part D Exclusions Exist

Part D's insuring agreement is broad (especially OTC's open-perils basis), so exclusions carve out losses that are not fortuitous, are better covered elsewhere, or would make the premium unaffordable. On the exam, many "the policy will NOT pay" questions are really Part D exclusion questions.

Key Part D Exclusions

Diminishing-value note: the PAP pays to repair or replace; it does not pay the diminution in value of a properly repaired vehicle. That is a frequent claimant complaint and a tested point.

Stacking the Exclusions Across the Whole Policy

Exam questions often blend Part D exclusions with the broader PAP exclusions, so know which part each one lives in.

• Intentional loss - excluded everywhere; deliberate damage is not fortuitous.
• Racing / speed contest - any pre-arranged or organized racing is excluded under all parts.
• Vehicles with fewer than four wheels - motorcycles, mopeds, and ATVs are not "your covered auto."
• Vehicle furnished or available for regular use - a non-owned car routinely available to you (e.g., a company car) is not covered as a temporary substitute.
• Using a vehicle without a reasonable belief of being entitled to do so - knocks out the joyrider/unauthorized driver.

Business-Use Line

Allowed: commuting and occasional business errands in a private passenger auto. Excluded: delivering goods or passengers for a fee, ride-share while the app is on and a passenger is engaged, and regular commercial use - these need a commercial auto policy or a ride-share endorsement.

Exam trap: "public or livery conveyance" appears in BOTH the liability and physical-damage exclusions. A car used to deliver pizzas for pay has no Part D coverage during the delivery.

Reading an Exclusion as a Coverage Question

When a question asks what the policy will NOT pay, work the facts through three filters: (1) Is the vehicle a covered auto? (2) Is the use excluded - livery, racing, or business-for-hire? (3) Is the cause of loss excluded - wear and tear, mechanical breakdown, freezing, war, or government confiscation? If the answer to any filter triggers an exclusion, the claim fails even though the insuring agreement looked broad. Candidates lose points by reading only the insuring agreement and stopping there.

Part E - Duties After an Accident or Loss

Part E is a condition, not a coverage - it lists what the insured must do to trigger coverage. Failure to comply can let the insurer deny an otherwise valid claim if the breach prejudices the insurer. The duties:

Additional Duties for Part D (Physical Damage) Claims

When the claim involves damage to the auto, the insured must also:

1. Take reasonable steps to protect the auto from further loss - the insurer pays reasonable expenses to do so (e.g., towing a wrecked car to a safe lot).
2. Promptly notify the police if the auto is stolen.
3. Permit the insurer to inspect and appraise the damaged auto before its repair or disposal.

The Appraisal Condition

If the insurer and insured disagree on the amount of a physical-damage loss (not coverage), either party may demand appraisal. Each selects a competent appraiser; the two appraisers pick an umpire. An agreement by any two of the three (the two appraisers, or one appraiser and the umpire) sets the loss amount. Each party pays its own appraiser and shares the umpire's cost equally. Appraisal resolves value disputes only - it never decides whether coverage applies.

Because Part E duties are conditions precedent, an insurer that is genuinely prejudiced by a late or absent notice, a refused inspection, or a missing proof of loss may reduce or deny the claim. Courts increasingly require the insurer to show actual prejudice, but the safest exam answer is that the insured must satisfy these duties to preserve coverage. Cooperation also includes attending an examination under oath and authorizing release of medical and repair records when the insurer reasonably requests them.