6.2 Part A Liability and Supplementary Payments

Part A: Liability Coverage

Part A Liability is the heart of the PAP. It pays damages an insured becomes legally liable to pay for bodily injury (BI) or property damage (PD) caused by an auto accident. It also provides a duty to defend the insured against covered suits, even if the suit is groundless.

Liability is third-party coverage: it protects the people the insured injures or whose property the insured damages, not the insured's own injuries or vehicle.

Split Limits vs. Combined Single Limit

Limits are shown two ways:

• Split limits appear as three numbers, e.g., 100/300/50 meaning $100,000 per person for BI, $300,000 per accident for BI, and $50,000 per accident for PD.
• A Combined Single Limit (CSL), e.g., $300,000, is one pool for all BI and PD in an accident.

Worked example (split 100/300/50): Three people are injured with claims of $120,000, $90,000, and $40,000, plus $60,000 in property damage. The first claimant is capped at $100,000 (per-person limit). BI paid is $100,000 + $90,000 + $40,000 = $230,000, within the $300,000 per-accident cap. PD is capped at $50,000, not $60,000. The insured personally owes the $20,000 and $10,000 shortfalls.

Supplementary Payments

Supplementary Payments are paid in addition to the Part A limit of liability, so they do not erode the limit. The insurer pays them only in connection with a covered claim it is defending. They include:

• All defense costs and attorney fees the insurer incurs.
• Up to $250 for bail bonds required because of a covered accident.
• Premiums on appeal bonds and bonds to release attachments.
• Interest accruing after a judgment.
• Up to $200 per day for lost earnings while the insured attends hearings or trials at the insurer's request.
• Reasonable expenses the insured incurs at the insurer's request.

Supplementary Payments at a Glance

Supplementary payments are paid in addition to the Part A limit, so they never erode coverage available to claimants.

Key Exclusions

Part A does not cover:

• Intentional injury or damage caused by an insured.
• Damage to property owned, used, or being transported by the insured (your own car/cargo).
• Liability while using a vehicle as a public or livery conveyance.
• Liability arising from business use of a vehicle (other than a private passenger auto, pickup, or van) and from the auto business (repair, sales, parking).
• Use of a vehicle without a reasonable belief of being entitled to do so.

Limits, Out-of-State Coverage, and Exam Traps

Part A of the ISO Personal Auto Policy (PP 00 01 09 18) is third-party liability, paying sums the insured is legally responsible to pay for bodily injury and property damage arising out of the ownership, maintenance, or use of a covered auto. The insurer also has the duty to defend, even groundless suits, and that duty ends once the applicable limit is exhausted by judgment or settlement.

A frequently tested feature is the out-of-state coverage condition: if the insured drives into a state requiring higher minimum limits or a compulsory coverage (such as no-fault PIP), the PAP automatically provides at least the minimum required limits and coverages of that state. This protects the insured from being underinsured when traveling.

Worked split-limit example: An insured with 100/300/50 limits causes an accident injuring three people ($120,000, $90,000, $70,000) and damaging $60,000 of property. Part A pays $100,000 to the first claimant (per-person cap), $90,000 and $70,000 to the others, but the three BI payments total $260,000 — under the $300,000 per-accident cap, so all are paid in full except the first claimant's $20,000 excess. Property damage pays $50,000 of the $60,000, leaving $10,000 uninsured.

Key exclusions include intentional injury, liability assumed under contract beyond the policy, using a vehicle without reasonable belief of entitlement, and vehicles owned by the insured but not declared on the policy (the "owned-but-not-insured" trap).

Combined Single Limit, Other-Insurance, and Worked CSL Example

Liability limits are written two ways. Split limits state three numbers — per-person BI / per-accident BI / per-accident PD (e.g., 100/300/50). A Combined Single Limit (CSL) states one pooled amount for all BI and PD in an accident, giving more flexibility when one type of loss dominates. The other-insurance condition makes the PAP primary for the covered auto and excess over any other collectible insurance for a non-owned auto the insured is driving.

Worked CSL example: An insured with a $300,000 CSL causes an accident with $250,000 of bodily injury to two people and $80,000 of property damage — $330,000 total. The CSL pays the full $300,000 allocated however needed across BI and PD, leaving $30,000 uninsured. Under a split 100/300/50 policy the same facts would cap property damage at $50,000 (not $80,000) regardless of unused BI limits — showing why a CSL can respond better to a property-heavy loss.

The exam frequently asks candidates to compare the two limit structures against the same accident facts and to apply the primary-vs-excess other-insurance rule for owned versus non-owned autos.

• Split limits express per-person BI, per-accident BI, and per-accident PD separately.
• A Combined Single Limit pools all BI and PD into one per-accident figure.
• Supplementary Payments do not reduce the liability limit.
• Intentional acts and damage to the insured's own property are excluded.