7.2 Exclusions and Part E: Duties After an Accident or Loss

Part D Physical Damage Exclusions

The physical damage coverage of the PAP is broad, but a defined list of exclusions removes losses that are either maintenance issues (the owner's responsibility), business exposures (priced differently), or moral/morale hazards. Memorize these as exam fodder — they appear as 'covered or not covered?' fact patterns.

Trap: Tire blowout damage from road hazards is excluded, but if a tire is slashed by a vandal the loss is covered as OTC vandalism. The cause of loss — maintenance vs. covered peril — controls.

The Pollution and Diminution Concepts

Two finer points are tested. First, diminution in value — the loss of resale value after a repaired vehicle carries an accident history — is not covered; the policy's limit is repair or ACV, not the market stigma. Second, when total loss is paid the insurer takes the salvage (the wrecked vehicle) and may pursue subrogation against an at-fault third party for the amount paid, recovering on the insured's behalf.

Also remember the "other insurance" condition: for a non-owned auto, the PAP's physical damage is excess over any other collectible coverage; for an owned auto, multiple policies share pro rata by their limits.

When the insurer pays a total loss it owns the salvage and may sell it to offset the claim. If the insured later recovers from a responsible third party, the insurer's subrogation interest is reimbursed first out of that recovery. These conditions keep the indemnity contract from paying the insured twice for one loss.

Part D Physical Damage Limit and Settlement

Under Part D, the insurer pays the lesser of the actual cash value of the stolen or damaged property or the amount needed to repair or replace it with like kind and quality, minus the applicable deductible, never exceeding any stated limit. Coverage is divided into collision (impact with another vehicle or object, or overturn) and other than collision (comprehensive) — fire, theft, glass breakage, falling objects, contact with an animal, flood, and vandalism. Each carries its own deductible.

The PAP also provides a small transportation expense allowance and reimbursement for loss of use when a covered auto is stolen, subject to per-day and total caps.

Duties After Loss and the Cooperation Requirement

After an accident or loss, Part E imposes duties whose breach can defeat a claim: prompt notice, cooperation in investigation and defense, forwarding legal papers, submitting to physical exams and examinations under oath, and authorizing medical and other records. For a physical-damage or theft loss, the insured must additionally protect the auto from further damage, notify the police of a theft, and permit inspection and appraisal before repairs. These duties parallel the property and liability conditions and are tested as the reason an otherwise-covered claim is denied.

Part E: Duties After an Accident or Loss

Part E is a conditions section: it lists what the insured must do after a loss to keep the coverage promise enforceable. These are conditions precedent — the insurer's duty to pay can be suspended if the insured materially breaches them and the breach prejudices the insurer's ability to investigate or defend.

General duties (all coverages)

1. Prompt notice to the insurer or its agent of how, when, and where the accident or loss happened, including names and addresses of injured persons and witnesses.
2. Cooperate with the investigation, settlement, or defense of any claim or suit.
3. Forward promptly any legal papers (summons, complaint) received in connection with the accident.
4. Submit, as often as reasonably required, to physical exams (for Med Pay/UM) and to examination under oath.
5. Authorize the insurer to obtain medical and other relevant records.
6. Submit a proof of loss when required.

Additional Duties for Physical Damage (Part D) and UM

When a Part D physical damage loss occurs, the insured has extra obligations:

• Take reasonable steps after a loss to protect the covered auto and its equipment from further loss — the insurer pays reasonable protection expenses, but additional damage from neglect is the insured's loss.
• Notify the police promptly if the covered auto is stolen.
• Permit the insurer to inspect and appraise the damaged property before its repair or disposal.

For Uninsured/Underinsured Motorists claims, the insured must also promptly notify police of a hit-and-run and, if suing the uninsured driver, send the insurer copies of the legal papers.

Why it matters: An insured who repairs a wrecked car before the adjuster inspects it, or who delays notice so long that evidence is lost, can have the claim denied for breach of conditions even though the loss itself was covered.