7.3 Part F — General Provisions, Endorsements, and No-Fault Concepts

Part F — General Provisions

Part F of the PAP contains the policy-wide conditions that apply to every coverage part. These are the rules examiners use to test cancellation, territory, suits, and the bankruptcy of the insured.

• Bankruptcy of the insured does not relieve the insurer of its obligations.
• Changes to the policy require the insurer's written consent (endorsement); a broadened-coverage rule automatically extends new editions' broader coverage without additional premium during the policy period.
• Fraud voids coverage for an insured who conceals or misrepresents a material fact or engages in fraudulent conduct relating to the policy.
• Legal action against the insurer is barred unless the insured has fully complied with policy terms; for liability, the amount owed must first be determined by judgment or written agreement.
• Subrogation transfers the insured's recovery rights to the insurer after payment; the insured must not impair those rights.
• Policy period and territory: coverage applies in the United States, its territories and possessions, Puerto Rico, and Canada — not Mexico (a Mexican auto policy is needed there).

Termination provisions

Part F also governs cancellation, nonrenewal, and automatic termination:

Common PAP endorsements

Producers tailor the PAP with endorsements. The most-tested ones:

• Miscellaneous Type Vehicle Endorsement (PP 03 23): extends the PAP to motorcycles, motor homes, golf carts, and similar vehicles, including an optional passenger-hazard exclusion.
• Extended Non-Owned Coverage (PP 03 06): broadens liability for a named individual who regularly uses a non-owned auto (such as a company car).
• Towing and Labor Costs (PP 03 03): adds roadside towing and on-site labor, with selectable per-disablement limits (for example $25, $50, or $75).
• Joint Ownership Coverage (PP 03 34): allows two or more unrelated individuals (or relatives not living together) to be named insureds.
• Coverage for Audio, Visual and Data Electronic Equipment (PP 03 13): schedules custom electronics above the built-in allowance.

No-fault concepts and Personal Injury Protection

A no-fault auto system requires each driver's own insurer to pay that driver's economic losses — medical bills, lost wages, and rehabilitation — regardless of who caused the accident, through Personal Injury Protection (PIP). The goals are faster payment and fewer lawsuits over minor injuries.

No-fault statutes limit the right to sue for pain and suffering (noneconomic damages) unless the injury crosses a threshold:

• A monetary (dollar) threshold lets the injured party sue only once medical costs exceed a set dollar amount.
• A verbal (descriptive) threshold allows suit only for serious injuries defined in words — death, dismemberment, significant disfigurement, or permanent disability.

PIP covers economic loss only; it does not pay pain-and-suffering damages. In a pure no-fault state, the injured collect PIP from their own carrier and cannot sue below the threshold.

Choice no-fault and producer cautions

Many states use choice (add-on) no-fault, where the policyholder selects a no-fault (restricted-lawsuit) option for a lower premium or retains the full right to sue at a higher premium. Add-on no-fault states provide PIP-style first-party benefits without any restriction on lawsuits.

Key exam distinctions: liability (Part A) pays third parties for the insured's fault; PIP/no-fault pays the insured's own economic losses regardless of fault; and medical payments (Part B) is a small, fault-neutral first-party coverage available in tort states that do not mandate PIP. A producer must know whether the operating state is a tort, add-on, or true no-fault jurisdiction before quoting, because the required first-party coverages differ.

Territory, Two-or-More Policies, and Legal Action

Part F sets the policy territory as the United States, its territories/possessions, Puerto Rico, and Canada — notably excluding Mexico, which requires a separate Mexican auto policy or endorsement. If two or more PAPs issued by the insurer apply, the insurer pays no more than the highest applicable limit (anti-stacking). The legal-action condition bars suit against the insurer until the insured has fully complied with policy terms, and bars suit under Part A until the obligation to pay is finally determined by judgment or written agreement.

No-Fault, PIP, and the Tort Threshold

In no-fault states, Personal Injury Protection (PIP) pays the insured's own medical expenses, lost wages, and essential services regardless of fault, in exchange for limits on the right to sue. States use either a monetary threshold (the claimant may sue for pain and suffering only once medical bills exceed a dollar figure) or a verbal threshold (suit allowed only for serious injury — death, dismemberment, significant disfigurement, or permanent injury). Vermont is not a no-fault state — it follows a traditional tort/at-fault system — so PIP is not mandatory there.