3.2 Part A — Liability Coverage

What Part A Promises

Part A — Liability Coverage pays damages an insured becomes legally obligated to pay because of bodily injury (BI) or property damage (PD) arising out of the ownership, maintenance, or use of a covered or non-owned auto. The insurer also provides a legal defense and selects counsel; defense ends once the applicable limit has been exhausted by payment of judgments or settlements.

Who Is an 'Insured' for Part A

The vicarious-liability rule is why a parent is covered when held responsible for a permissive teen driver, and why an employer is covered when an employee runs a personal errand in a covered auto.

Split Limits vs Combined Single Limit

A split limit of 100/300/50 means $100,000 BI per person / $300,000 BI per accident / $50,000 PD per accident. The per-person cap applies first to each injured party, then the per-accident BI cap applies to the total, then PD is capped separately.

A Combined Single Limit (CSL) of, say, $300,000 is a single pool covering all BI and PD from one accident in any combination — more flexible, generally costlier.

Supplementary Payments (paid IN ADDITION to the limit)

These do not erode the liability limit:

• All defense costs, even for groundless, false, or fraudulent suits.
• Premiums on appeal bonds and bonds to release attachments, up to the limit.
• Premiums on bail bonds up to $250 for a covered accident.
• Post-judgment interest accruing after a judgment until the insurer pays or tenders its limit.
• Up to $200 per day for the insured's lost earnings while attending hearings or trials at the insurer's request.
• Other reasonable expenses incurred at the insurer's request.

Key Part A Exclusions

1. Intentional bodily injury or property damage.
2. Property owned by or being transported by that insured.
3. Property rented to, used by, or in the care of that insured (limited exception for a residence/garage).
4. Bodily injury to an employee of an insured in the course of employment (workers' compensation territory).
5. Public or livery conveyance — taxi, ride-share, food delivery without an endorsement (carpooling for shared expense is NOT livery).
6. Business use of a vehicle other than a private passenger auto, pickup, or van.
7. Racing or speed contests on a prepared track.
8. Owned-auto exclusion — an owned auto not insured on this policy (you cannot insure one car and drive an uninsured second car).
9. Regular-use non-owned auto — a vehicle furnished or available for the regular use of an insured, such as a company car.
10. Nuclear, war, or radioactive contamination.

Out-of-State Coverage

When an insured drives into another state or Canadian province whose compulsory limits are higher than the policy's, Part A automatically increases to that jurisdiction's required minimum, and provides any required no-fault or similar benefits for non-residents. The policy reads UP, never down — your home limits never shrink when you cross a state line.

Defense Inside vs Supplementary Outside the Limit

A classic exam distinction is that the limit caps only the damages, while the duty to defend and the supplementary payments sit outside the limit. Imagine an insured with a 100/300/50 policy who is sued for $250,000 in bodily injury. The insurer might spend $40,000 defending the suit, post a $250 bail bond, and reimburse $200/day for the insured's court attendance — none of that reduces the $100,000 per-person ceiling available to pay the claimant. But the moment the insurer pays its limit in settlement or judgment, its duty to defend ends; it cannot be forced to keep litigating after tendering policy limits.

Candidates routinely miss that post-judgment interest is supplementary, while pre-judgment interest is part of the damages subject to the limit.

Worked Example: Permissive Use and Vicarious Liability

A named insured lends her covered auto to a neighbor who runs a red light and injures a pedestrian. The neighbor is an 'insured' for Part A because he used your covered auto with the owner's reasonable belief of permission, so the owner's Part A defends and pays for the neighbor's negligence up to the limit. Separately, if the neighbor's own employer is sued because the neighbor was on a work errand, that employer can also tap the owner's Part A under the legally responsible grant — but only for the neighbor's conduct, not for the employer's independent negligence.

Compare the owned-auto exclusion: if that same owner also owns a motorcycle she did not list on the policy and she crashes it, Part A will not respond, because the policy excludes any owned vehicle she failed to insure. The lesson the exam drives home is that Part A reaches broadly to permissive users and vicariously liable parties, yet slams shut on owned-but-uninsured vehicles and on the regular-use non-owned auto such as a company car a family member drives daily.