7.2 Exclusions and Part E Duties After an Accident
Key Takeaways
- Part D excludes wear and tear, freezing, mechanical/electrical breakdown, road damage to tires, and loss from radioactive contamination or war.
- Damage from racing, use as a public/livery conveyance, and intentional acts is excluded; custom equipment and electronic equipment have sublimits.
- Part E (Duties After an Accident or Loss) is a condition precedent: failure to comply can void coverage if the insurer is prejudiced.
- Core duties: prompt notice, cooperate, send legal papers, submit to examination under oath and physical exams, authorize records, and protect/permit inspection of damaged property.
- For theft, the insured must notify police promptly; for physical damage, the insured must take reasonable steps to protect the auto from further loss.
Part D exclusions: what physical damage will not pay
Part D pays for direct and accidental loss, so predictable, maintenance, or intentional losses are excluded. Knowing these keeps a candidate from picking a sympathetic but wrong answer.
| Excluded cause | Why it is excluded |
|---|---|
| Wear and tear, freezing, mechanical or electrical breakdown | Maintenance items, not accidental loss |
| Road damage to tires | Routine, predictable; only covered if part of a larger covered loss |
| Use as a public or livery conveyance | Higher exposure not contemplated by personal rating (rideshare needs an endorsement) |
| Racing or speed contest | Intentional high-risk use |
| Loss from war, nuclear or radioactive contamination | Catastrophic/uninsurable exposure |
| Intentional damage by the insured | Public policy bars rewarding the wrongdoer |
Trap: a flat or blown tire by itself is not paid, but if the auto rolls over (Collision), the tire damage in that same accident is part of the covered loss.
Equipment sublimits and the electronic-equipment limit
Part D limits exotic or aftermarket property:
- Custom furnishings or equipment on a pickup or van and non-factory electronic equipment (custom sound systems, antennas) are limited - older editions cap at $1,000 unless a higher amount is endorsed.
- Electronic equipment permanently installed but not part of the factory audio system has a stated sublimit.
- Tapes, records, discs, and other media are typically excluded entirely.
The exam expects you to recognize that a $4,000 custom stereo is not fully covered without an endorsement, even though the auto itself is insured.
An insured's engine fails after the timing belt wears out and breaks while driving. The repair is $3,500. Why does Part D deny the claim?
Part E - Duties After an Accident or Loss
Part E is the conditions section that tells the insured what to do once a loss occurs. These duties are conditions precedent: an insurer that is prejudiced by the insured's failure to comply can reduce or deny the claim. They apply across the policy (liability, med pay, UM, and physical damage).
The general duties owed by a person seeking coverage are:
- Prompt notice to the insurer of how, when, and where the accident or loss happened, plus names and addresses of injured persons and witnesses.
- Cooperate with the insurer in the investigation, settlement, and defense of any claim.
- Send copies of legal papers (summons, complaint) promptly if sued.
- Submit, as often as reasonably required, to physical exams by chosen physicians and to examination under oath (EUO).
- Authorize the insurer to obtain medical reports and other pertinent records.
- Submit a proof of loss when required.
Additional duties for first-party and physical damage claims
When the insured seeks coverage under Part D (physical damage), Part C (uninsured motorist), or Part B (medical payments), extra duties attach:
- Take reasonable steps after a loss to protect the auto and its equipment from further loss - the insurer pays reasonable expenses to do so.
- Promptly notify the police if the auto is stolen.
- Permit the insurer to inspect and appraise the damaged property before its repair or disposal.
Trap: an insured who repairs or junks the wrecked auto before the adjuster inspects it has breached a Part E duty and may forfeit the physical damage payment if the insurer is prejudiced. Likewise, failing to report a theft to police can defeat a Part D theft claim.
Why duties matter on the exam
Many scenario questions hinge on a behavioral fact: the insured waited two months to report, repaired the car before inspection, refused an EUO, or hid the police report. The correct answer usually points to a Part E breach that lets the insurer contest the claim.
| Insured action | Part E consequence |
|---|---|
| Late notice that hampers investigation | Possible denial if insurer is prejudiced |
| Repairs auto before adjuster inspects | Breach of duty to permit inspection |
| No police report on theft | Breach of theft-notification duty |
| Refuses examination under oath | Breach of cooperation duty |
| Forwards suit papers immediately | Duty satisfied; coverage preserved |
Cooperation, examination under oath, and the prejudice standard
The cooperation duty is broad: the insured must help the insurer investigate, settle, and defend. Voluntarily admitting fault at the scene, settling a third-party claim without consent, or refusing to attend a deposition can all breach it.
The examination under oath (EUO) is a formal, recorded questioning conducted by the insurer or its attorney. An insured who refuses to sit for an EUO, or refuses to authorize release of medical and repair records, typically forfeits the disputed coverage.
Most courts and many states require the insurer to show it was prejudiced by the breach before denying. Minor, harmless delays rarely void coverage; delays that destroy evidence or block inspection usually do. On the exam, look for whether the insurer's investigation was actually harmed.
Sorting an exclusion from a duty
Candidates confuse two different denial routes. An exclusion removes a peril or property from coverage in the first place (wear and tear, racing, livery use, custom-equipment overage). A duties breach concedes the loss might be covered but lets the insurer contest it because the insured failed to act.
| Fact in the question | Best label |
|---|---|
| Engine fails from a worn belt | Exclusion (mechanical breakdown) |
| $4,000 custom stereo destroyed | Sublimit (custom equipment) |
| Auto used for paid ridesharing | Exclusion (livery use) |
| Insured junked the wreck before inspection | Duties breach (Part E) |
| Insured never reported the theft to police | Duties breach (Part E) |
Read the call of the question: "Why is the claim denied?" usually points to an exclusion, while "What did the insured do wrong?" points to a Part E duty.
After a theft, an insured waits three weeks, never files a police report, and then submits a Part D claim. What is the strongest basis for the insurer to contest the claim?