7.1 Part D: Coverage for Damage to Your Auto

Part D of the ISO Personal Auto Policy

Part D of the ISO Personal Auto Policy (PAP, current edition PP 00 01 09 18) is the physical damage section — it pays to repair or replace the insured's own vehicle, regardless of fault. This is first-party property coverage, in contrast to Parts A and B, which respond to third-party and injury claims. Part D is purely optional; a state may compel liability (Part A) but never requires physical damage. Lienholders, however, contractually require it through a loss payable clause.

Part D is built on two coverage triggers that the exam tests relentlessly: Collision and Other Than Collision (OTC), the latter historically called comprehensive.

Collision vs. Other Than Collision

Collision is defined as the upset (rollover) of your covered auto or its impact with another vehicle or object. Other Than Collision is defined by exception — it is any direct and accidental loss that is NOT collision. The PAP lists OTC examples so candidates can sort losses correctly.

Exam trap: striking a deer is OTC, but swerving to avoid a deer and hitting a tree is Collision. The classification matters because OTC and Collision usually carry separate deductibles, and OTC is generally the cheaper of the two.

The Limit of Liability — ACV vs. Repair Cost

Part D's Limit of Liability caps recovery at the lesser of: (1) the Actual Cash Value (ACV) of the stolen or damaged property, or (2) the amount necessary to repair or replace the property with other property of like kind and quality. The PAP pays neither the agreed value nor replacement cost on a standard form — it pays ACV, defined as replacement cost minus depreciation.

This "lesser of" wording prevents the insured from profiting. If a 9-year-old sedan with an $6,000 ACV suffers $9,500 in repair estimates, the insurer treats it as a total loss and pays $6,000 (less deductible), not the repair bill. The insurer may then take the salvage.

Worked Numeric: ACV Settlement With Deductible

A covered auto is stolen. Replacement cost of an equivalent vehicle is $24,000; the adjuster applies 30% depreciation; the OTC deductible is $500.

• ACV = $24,000 × (1 − 0.30) = $16,800
• Less OTC deductible $500
• Insurer pays $16,300

Now a collision example: the same vehicle (ACV $16,800) is in a fender-bender; repair estimate is $3,200; Collision deductible is $1,000.

• Repair $3,200 is less than ACV $16,800, so the loss is the lesser figure ($3,200)
• Less Collision deductible $1,000
• Insurer pays $2,200

The deductible applies per occurrence, separately to each coverage. A single storm that breaks glass (OTC) and is followed days later by a crash (Collision) triggers two deductibles.

Transportation Expenses and Towing

Part D includes a built-in Transportation Expenses provision (rental reimbursement and loss-of-use) that pays a per-day/per-occurrence sublimit — commonly $30 per day / $900 maximum in the base form, which the insured can raise by endorsement. For theft, payment begins 48 hours after the theft is reported and ends when the auto is returned to use or the insurer pays for the loss.

Towing and labor is not automatic; it is added by the Towing and Labor Costs Coverage endorsement (PP 03 03), paying a small per-disablement limit (e.g., $25–$100). Labor must be performed at the place of disablement.

Betterment, Diminished Value, and Aftermarket Parts

Physical-damage settlements raise three tested issues. Betterment arises when repairs leave the auto in better condition than before (a new part replacing a worn one); some insurers apply a betterment deduction, though many waive it on collision repairs. Diminished value — the resale loss a repaired vehicle suffers even after proper repair — is generally not payable under the PAP's "repair or replace" standard unless state law or endorsement provides it. Insurers may also specify like-kind-and-quality (aftermarket) parts, which several states regulate by requiring disclosure.

Loss to a Leased or Financed Auto

A lender or lessor listed as loss payee is paid jointly; GAP coverage (Auto Loan/Lease endorsement) is needed to cover the difference between the ACV the PAP pays and the larger loan/lease balance after a total loss, because the PAP itself pays only ACV.

Worked OTC vs. Collision Classification

Classifying the cause correctly determines which deductible applies — collision deductibles are usually higher than OTC, and many states mandate full-glass coverage with no deductible.