6.2 Part A Liability and Supplementary Payments

The Liability Insuring Agreement

Part A is the heart of the PAP. The insurer promises to pay damages for bodily injury (BI) or property damage (PD) for which any insured becomes legally responsible because of an auto accident arising out of the ownership, maintenance, or use of an auto. Just as important, the insurer assumes a duty to defend the insured against any suit asking for such damages, hiring and paying defense counsel even if the suit is groundless, false, or fraudulent.

The word "insured" under Part A is broad. It includes "you" and family members for the ownership, maintenance, or use of any auto or trailer; any person using your covered auto with permission; and any person or organization legally responsible for acts of a covered insured (for example, an employer when an employee drives a covered auto on the job).

Single Limits Versus Split Limits

The limit of liability is the most the insurer pays, and it appears two ways on the Declarations.

A Combined Single Limit (CSL) is one dollar amount covering BI and PD together, per accident. With a $300,000 CSL, the insurer pays up to $300,000 total for all injuries and property damage in one accident, regardless of how many people are hurt.

Split limits are written as three numbers, for example 100/300/50 (in thousands):

Worked Split-Limit Example

An insured with 100/300/50 limits causes an accident injuring three people, with adjudicated damages of $150,000, $90,000, and $70,000, plus $60,000 in property damage.

• Person 1: claim $150,000, but the per-person cap is $100,000, so the insurer pays $100,000.
• Person 2: $90,000, under the cap, so $90,000 is paid.
• Person 3: $70,000, under the cap, so $70,000 is paid.
• BI subtotal: $100,000 + $90,000 + $70,000 = $260,000, within the $300,000 per-accident cap, so all of it is paid.
• Property damage: $60,000 claim against a $50,000 cap, so the insurer pays $50,000.

Total the insurer pays: $310,000. The insured owes the uncovered $50,000 for Person 1 plus $10,000 of property damage out of pocket.

Trap: Compare each victim to the per-person limit first, then test the running BI total against the per-accident limit. A CSL would have avoided the per-person shortfall in this example.

Supplementary Payments

Supplementary Payments are paid in addition to the limit of liability, not subtracted from it. The standard PP 00 01 list:

1. Up to $250 for the cost of bail bonds required because of an accident covered by the policy.
2. Premiums on appeal bonds and bonds to release attachments in any suit the insurer defends.
3. Interest accruing after a judgment (post-judgment interest) until the insurer pays or tenders its limit.
4. Up to $200 per day for lost earnings while attending hearings or trials at the insurer's request.
5. Other reasonable expenses the insured incurs at the insurer's request.
6. All defense costs and attorney fees the insurer incurs.

Heavily tested: the $250 bail-bond cap and the $200-per-day lost-earnings cap are favorite distractor traps. Note these are paid on top of, not within, the liability limit.

When the Duty to Defend Ends

The insurer's obligation to defend or settle ends once it has paid the applicable limit of liability through a settlement or judgment. After the limit is exhausted, the insured must arrange and pay for any further defense. This is why higher limits, and an umbrella policy, matter to a litigation-exposed insured.

Key Part A Exclusions

Part A does not cover, among others:

• Intentional bodily injury or property damage caused by an insured.
• Liability arising from a vehicle owned by or furnished for the regular use of the named insured or family member that is not a covered auto (closes the gap that would otherwise let someone insure one car and drive an uninsured second car).
• Public or livery conveyance (carrying persons or property for a fee), with an exception for share-the-expense car pools.
• Business use of vehicles other than private passenger autos, pickups, or vans.
• Racing or speed contests on a track.
• Property the insured owns, transports, or has in their care, custody, or control.
• Liability assumed under a contract, except as the law allows.

Out-of-State Coverage and Financial Responsibility

Part F's Out-of-State Coverage clause is tested alongside Part A. If an accident happens in a state whose financial responsibility law requires higher limits than the policy carries, the PAP is automatically read up to provide those higher limits. If the state has a compulsory or no-fault law requiring a benefit the policy does not provide, the policy is deemed to provide the required minimum. This portable, self-adjusting feature means an insured driving across state lines always meets the destination state's minimums, but the insurer never pays more than once for the same element of loss.

How Part A Interacts With Limits Selection

Agents must counsel insureds on the practical difference between CSL and split limits. A CSL offers maximum flexibility because the single pool can absorb a catastrophic single-victim claim that a per-person split limit would cap. Split limits are usually cheaper but expose the insured when one severely injured claimant exceeds the per-person number. Because the insured remains personally liable above the limit, recommending limits above state minimums and an umbrella for higher exposures is a core suitability obligation.