6.2 Part A Liability and Supplementary Payments
Key Takeaways
- Part A Liability pays sums an insured becomes legally responsible for because of bodily injury (BI) or property damage (PD) caused by an auto accident, and the insurer also provides a legal defense.
- Limits may be written split (for example 100/300/50, meaning $100,000 per person BI, $300,000 per accident BI, $50,000 PD) or as a single combined single limit (CSL).
- Supplementary Payments are paid in addition to the limit of liability and include defense costs, up to $250 per day for loss of earnings to attend trial, and bail bonds up to $250.
- Key Part A exclusions include intentional injury, vehicles used to carry persons or property for a fee (the ride-share/livery exclusion), and using a vehicle without a reasonable belief of permission.
- Liability coverage is primary for an owned covered auto and excess when an insured drives a non-owned auto.
What Part A Liability Covers
Part A - Liability Coverage is the heart of the Personal Auto Policy. It pays damages an insured becomes legally responsible to pay because of bodily injury (BI) or property damage (PD) arising out of the ownership, maintenance, or use of an auto. "Bodily injury" means physical harm, sickness, disease, or death; "property damage" means physical injury to, destruction of, or loss of use of tangible property.
Beyond paying the third party, the insurer also has the duty to defend the insured in any suit seeking covered damages, and it may settle any claim it considers appropriate. The defense duty is broad: the insurer must defend even groundless or fraudulent suits, as long as the allegation falls within coverage.
Split Limits Versus Combined Single Limit
Liability limits are written in one of two formats.
Split limits show three numbers, such as 100/300/50:
| Figure | Meaning | Caps |
|---|---|---|
| 100 | BI per person | $100,000 maximum for any one injured person |
| 300 | BI per accident | $300,000 maximum for all bodily injury in one accident |
| 50 | PD per accident | $50,000 maximum for property damage in one accident |
A combined single limit (CSL) uses one number that applies to all BI and PD combined in a single accident.
Worked example - split limits: An insured with 100/300/50 causes an accident injuring three people: $90,000, $120,000, and $60,000 in damages (total $270,000), plus $70,000 in property damage. The first claimant is paid $90,000 (under the $100,000 per-person cap). The second is capped at $100,000 (per-person limit), not $120,000. The third is paid $60,000. BI paid totals $250,000, within the $300,000 per-accident limit. Property damage is capped at $50,000, so $20,000 of the $70,000 PD is uninsured.
CSL Worked Example
Worked example - combined single limit: The same insured instead carries a $300,000 CSL. The total claim is $270,000 BI plus $70,000 PD = $340,000. The CSL pays up to $300,000 across all BI and PD combined, so it pays $300,000 and leaves $40,000 uninsured. Crucially, it imposes no separate per-person sublimit, so the $120,000 claimant could be paid in full from the single pool.
The key contrast: split limits create internal caps (per person, per accident, and a separate PD limit), while a CSL is one flexible pool. A CSL generally gives the insured more usable protection for a serious single-victim claim, but it costs more premium.
Supplementary Payments
Supplementary Payments are paid in addition to the limit of liability - they do not erode the policy limit. The PAP lists seven:
| Payment | Detail |
|---|---|
| Defense costs | All legal defense expenses the insurer incurs |
| Bail bonds | Up to $250 for a bond required because of a covered accident |
| Appeal bonds | Premium on appeal bonds in a suit the insurer defends |
| Bonds to release attachments | Premium on bonds to release property attachments |
| Loss of earnings | Up to $250 per day for the insured's lost wages to attend hearings or trial at the insurer's request |
| Other reasonable expenses | At the insurer's request |
| Post-judgment interest | Interest accruing after a judgment in a suit the insurer defends |
Trap: Supplementary Payments are on top of the limit. A 100/300/50 policy that pays a $100,000 BI judgment can still pay defense costs, a $250 bail bond, and $250-per-day wage loss without touching that $100,000.
Major Part A Exclusions
The exam tests the liability exclusions heavily. Key exclusions include:
- Intentional injury - harm the insured expected or intended.
- Property owned or being transported by the insured, and property rented to or in the insured's care (covered instead by other policies).
- Public or livery conveyance - carrying persons or property for a fee (the classic taxi/ride-share exclusion); ordinary share-the-expense car pools are not excluded.
- Business use of a vehicle not a private passenger auto, pickup, or van.
- Using a vehicle without a reasonable belief of permission - the unauthorized-use exclusion.
- Owned-but-not-insured autos and vehicles available for the insured's regular use (the drive-other-car gap).
Ride-share note: Standard Part A excludes carrying passengers for a fee, which is why drivers for app-based networks need a ride-share endorsement or commercial coverage during the period a passenger is in the car.
Primary Versus Excess and Other Insurance
For an owned covered auto, Part A is primary. When an insured drives a non-owned auto (such as a borrowed or rented car), the PAP is excess over any other collectible liability insurance on that vehicle.
Worked example: Maria (named insured) borrows a friend's car and causes $80,000 in liability damages. The friend's own auto policy carries 50/100/25. The friend's policy is primary and pays its $50,000 per-person limit; Maria's PAP then pays as excess, covering the remaining $30,000 up to her own per-person limit. Maria's policy does not pay first simply because she was driving.
An insured with 100/300/50 split limits injures two people in one accident with damages of $130,000 and $90,000. How much does Part A pay for bodily injury?
Which statement about Supplementary Payments under PAP Part A is correct?