5.2 Part A: Liability Coverage

What Part A Covers

Part A — Liability Coverage is the heart of the PAP and the coverage states make mandatory. It is third-party coverage: it pays others when an insured is legally liable for an auto accident. Two damage categories apply:

Part A combines both into a single insuring agreement and adds the insurer's duty to defend the insured against covered suits.

How Limits Are Written

Split Limits

The classic format is three numbers — BI per person / BI per accident / PD per accident. Read 100/300/100 as:

• $100,000 maximum BI to any one person
• $300,000 maximum BI for all persons in one accident
• $100,000 maximum PD in one accident

Worked example. You cause an accident, are at fault, and four people are injured. Limits are 100/300/100.

No one person can collect more than $100,000, and all BI together is capped at $300,000. PD has its own separate $100,000 limit and is not reduced by BI payments.

Combined Single Limit (CSL)

A CSL — say $500,000 — is one pool covering any mix of BI and PD with no per-person sub-limit. With a $500,000 CSL, a single badly injured claimant could collect the full $500,000.

Supplementary Payments — Paid in Addition

Part A also pays certain costs on top of the limit of liability:

Defense example: limit $100,000; settlement $100,000; defense costs $30,000 — the insurer pays $130,000 total because defense is supplementary.

Duty to Defend

The insurer has the duty to defend any suit seeking covered damages — even a groundless or fraudulent suit — and may settle a claim as it sees fit. Crucially, the duty to defend ends when the insurer has paid the limit of liability through a settlement or judgment. After that, the insured pays his own defense.

State Minimum Limits

Exam point: state minimums are a floor, not a recommendation. A single severe-injury claim can exceed $100,000, so producers should counsel limits well above the minimum.

Part A Exclusions (Highlights)

Part A does not cover intentional injury, damage to property the insured owns or is in the insured's care, bodily injury to an employee (workers' compensation responds), vehicles used as a public or livery conveyance (with a share-the-expense carpool exception), regular business use of non-covered vehicles, racing on a track, and vehicles with fewer than four wheels.

Who Is an Insured Under Part A

Part A's definition of insured is broader than many candidates expect. It includes "you" and any family member for the ownership, maintenance, or use of any auto or trailer; any person using your covered auto with permission; any person or organization legally responsible for acts of an insured while using your covered auto (vicarious liability); and any person or organization legally responsible for the named insured's or a family member's use of a non-owned vehicle (other than the owner of that vehicle).

This is why an employer can be an additional insured when an employee uses the insured's covered auto on company business — and why the policy must coordinate carefully with commercial coverage.

How Part A Pays a Third Party

Part A does not pay the insured directly; it pays the injured third party (or defends and indemnifies the insured against that party's claim). A typical claim sequence: the third party demands damages, the insurer investigates, accepts the duty to defend, negotiates a settlement within the limit, and pays the claimant. If the case proceeds to trial and a verdict exceeds the limit, the insurer pays its limit and any covered supplementary payments, and the insured is personally exposed for the excess — a powerful argument for buying higher limits or a personal umbrella policy.

Out-of-State Coverage and Financial Responsibility

The PAP contains an out-of-state coverage provision: when an insured drives into a state that requires higher liability limits or a compulsory coverage the insured did not buy (such as no-fault PIP), the policy automatically adjusts to provide at least the minimum required by that state. This keeps the insured legal while traveling and is a tested nuance — the policy effectively reads in the other state's compulsory minimums so the insured is never short on the road.

Limit Selection in Practice

Practical note: liability limits should reflect the assets a judgment could reach, not the value of the car. A driver with a paid-off old vehicle but a home and savings still needs substantial Part A limits, because Part A protects net worth, not the auto.