6.2 Part A Liability and Supplementary Payments

6.2 Part A Liability and Supplementary Payments

Part A - Liability Coverage is the heart of the PAP and the part states mandate. It pays damages for bodily injury (BI) and property damage (PD) for which an insured becomes legally responsible because of an auto accident. It also includes the insurer's duty to defend and a layer of supplementary payments that sit on top of the limit. The insuring agreement reads broadly: the company will settle or defend, and the duty to defend ends when the company has paid the applicable limit of liability.

Split Limits vs. Combined Single Limit

Liability limits are written two ways, and the exam loves a worked split-limit problem.

Split limits appear as three numbers, e.g. 25/50/25 (in thousands):

• 25 = maximum BI per person
• 50 = maximum BI per accident (all persons)
• 25 = maximum PD per accident

Combined Single Limit (CSL) is one number (e.g., $100,000) covering BI and PD combined per accident, allocated however the loss falls.

Worked example: An insured with 25/50/25 injures three people ($30,000, $20,000, $10,000) and causes $40,000 in property damage. BI: person one is capped at $25,000 (not $30,000); persons two and three are paid in full ($20,000 + $10,000). BI subtotal = $55,000, but the per-accident BI cap is $50,000, so the insurer pays only $50,000 of BI. PD of $40,000 exceeds the $25,000 PD cap, so PD pays $25,000. Total paid = $75,000; the insured owes the $5,000 first-person shortfall plus $15,000 PD shortfall out of pocket.

Supplementary Payments — Paid IN ADDITION to the Limit

These amounts do not erode the liability limit:

Note the two tested dollar figures: $250 bail bond and $200/day lost wages. Because these are supplementary, a $25,000 per-person limit can pay $25,000 in damages plus thousands in defense and interest beyond it.

Key Part A Exclusions

Liability does NOT apply when an insured:

• Intentionally causes injury or damage.
• Damages property the insured owns, transports, or has in their care, custody, or control (your own car is covered by Part D, not Part A).
• Uses a vehicle as a public or livery conveyance (ride-share for hire without endorsement).
• Is employed in the auto business (selling, repairing, servicing, parking) — though the named insured's own covered auto stays insured.
• Uses a vehicle without a reasonable belief of being entitled to do so.
• Owns or operates a vehicle with fewer than four wheels (motorcycle) or a vehicle furnished/available for regular use that is not a covered auto.

Out-of-State Coverage and the Single Limit Reconciliation

The PAP automatically increases your liability limit to meet a higher financial-responsibility requirement in another state where the accident occurs (the out-of-state coverage provision). If a state requires a compulsory no-fault or higher minimum, Part A supplies that minimum. The insurer will not pay duplicate amounts under more than one coverage. This provision is why a driver insured at home-state minimums is still compliant when crossing into a higher-minimum state.

Limit of Liability and the 'Single Limit' Clause

The Part A Limit of Liability provision states the per-person/per-accident amounts shown are the most the insurer will pay regardless of the number of insureds, claims, vehicles, or persons in the accident. This anti-stacking language defeats attempts to add limits across two covered autos for one accident. When split limits apply, the per-person BI limit caps each claimant first, then the per-accident BI limit caps the total — a two-stage test the exam re-uses constantly.

A further trap: an injured family member's claim against the named insured does not let them collect twice (once as an insured, once as a claimant). The single-limit clause and the other insurance provision (PAP pays its share pro rata for a covered auto, but is excess over coverage on a non-owned auto) prevent double recovery and decide which policy is primary.

Part A - The Liability Promise

Part A (Liability Coverage) of the Personal Auto Policy (PAP) pays damages for bodily injury and property damage for which any insured is legally responsible because of an auto accident, and provides a duty to defend with defense costs outside the limit. A single limit (e.g., $100,000 CSL) pays one combined amount; a split limit (e.g., 25/50/10) caps BI per person / BI per accident / PD per accident.

Who Is an Insured Under Part A

Supplementary Payments

In addition to the limit, Part A pays supplementary amounts: bail bonds up to $250, premiums on appeal/attachment bonds, post-judgment interest, loss of earnings up to $200/day to attend trial at the insurer's request, and other reasonable expenses. These do not reduce the liability limit.

Worked Split-Limit Example

A PAP carries 25/50/10. The insured causes an accident injuring two people ($30,000 and $15,000 of BI) and damaging a vehicle for $12,000. The insurer pays:

• Injured person 1: capped at $25,000 per person (not the full $30,000)
• Injured person 2: $15,000 (within per-person cap)
• Total BI = $40,000, within the $50,000 per-accident cap
• Property damage: capped at $10,000 (not $12,000)

The insured personally owes the uncovered $5,000 (person 1) plus $2,000 (property) = $7,000. This computation - applying each of the three split limits in turn - is among the most heavily tested PAP problems.