7.2 Exclusions and Part E - Duties After an Accident

Part D Exclusions

Part D withholds coverage for losses that are predictable, intentional, or commercial in nature. The most heavily tested Part D exclusions are:

• Public or livery conveyance - using the auto to carry persons or property for a fee (e.g., taxi/limousine). Note ride-share carriage often needs a transportation-network endorsement to restore coverage.
• Wear and tear, freezing, mechanical or electrical breakdown, and road damage to tires - unless caused by total theft of the auto. These are maintenance losses, not fortuitous accidents.
• Radioactive contamination, war, nuclear hazard, and discharge of any nuclear weapon.
• Loss to electronic equipment reproducing sound/pictures/data and tapes/records/discs, with limited carve-backs for permanently installed factory equipment.
• Loss to a non-owned auto used without a reasonable belief of permission.
• Custom furnishings/equipment in a pickup or van beyond the form's small built-in limit unless scheduled.
• Government destruction or confiscation, and loss to trailers/campers not shown in the declarations.

Trap: Theft Carve-Back

Wear, tear, and mechanical breakdown are excluded - except when the entire auto is stolen. So if a thief steals the car and burns out the engine, the resulting mechanical damage is covered because it flows from a covered theft.

Reading Exclusions in Layers

Exclusions are read against the insuring agreement: first confirm the loss is within Part D (a Collision or OTC peril to a covered auto), then test each exclusion, then look for a carve-back that restores coverage. The livery exclusion illustrates the layering - carrying passengers for a fee is excluded, but a share-the-expense car pool is expressly not considered livery, so commuters splitting gas remain covered. Likewise, electronic-equipment exclusions carve back factory-installed audio/visual gear permanently mounted by the manufacturer. Train yourself to ask "is there a carve-back?" before denying a scenario on the exam.

Part E - Duties After an Accident or Loss

Part E lists the conditions the insured must satisfy for the insurer to be obligated to pay. Failure to comply can be grounds for denial. There are general duties and coverage-specific duties.

General Duties (All Coverages)

1. Prompt notice to the insurer (or agent) of how, when, and where the accident or loss happened, plus names/addresses of injured persons and witnesses.
2. Cooperate with the insurer in investigation, settlement, and defense.
3. Forward promptly any legal papers (summons, complaint) received.
4. Submit, as often as reasonably required, to physical exams by physicians the insurer selects (at the insurer's expense) and to examinations under oath (EUO).
5. Authorize the insurer to obtain medical and other relevant records.

Additional Duties for Part D (Physical Damage) and Part C (UM)

• Take reasonable steps to protect the auto from further loss (mitigation); the insurer pays reasonable expenses incurred to do so.
• Notify the police promptly if the auto is stolen.
• Permit the insurer to inspect and appraise the damage before its repair or disposal.
• For UM/UIM, additionally notify the police promptly in a hit-and-run and (where required) send copies of legal papers if suing the uninsured motorist.

Appraisal and Proof of Loss

If the insured and insurer disagree on the amount of a Part D loss, either party may demand appraisal. Each selects a competent, independent appraiser; the two appraisers select an umpire. An agreement by any two of the three (the two appraisers, or either appraiser plus the umpire) sets the amount of loss. Each party pays its own appraiser and shares the umpire's cost equally. Appraisal settles amount, not coverage - the insurer still retains the right to deny the claim.

Worked Appraisal Outcome

Insured claims $9,000; insurer offers $6,000. Insured's appraiser values $8,500; insurer's appraiser values $6,500; the umpire values $7,200. The umpire ($7,200) agrees with neither, so the two appraisers must reach agreement - if the insurer's appraiser ($6,500) and the umpire ($7,200) agree to $7,000, that two-of-three agreement binds. The insured receives $7,000 minus the deductible.

Proof of loss may be required in a sworn statement; cooperation and timely documentation are conditions precedent to recovery.

Why Duties Matter on the Exam

The insurer's promise to pay is conditioned on the insured performing these duties. An insured who repairs the vehicle before the insurer can inspect it, or who fails to report a theft to the police, gives the carrier a defense to the claim. Examiners frame this as "the insured did X - can the insurer deny?" The answer turns on whether the breached duty actually prejudiced the insurer's ability to investigate. Tie each duty to its purpose: notice enables investigation, inspection prevents inflated repair claims, and the police report deters staged thefts.

Subrogation and Duties Interplay

After Part D pays, the insurer is subrogated to the insured's recovery rights against the at-fault party. The insured must not settle separately with or release that party, because doing so impairs subrogation and can reduce or void the insurer's payment. This duty to preserve recovery rights is a Part F provision but is enforced through the cooperation conditions of Part E.