6.2 Part A Liability and Supplementary Payments

Part A: Liability Coverage

Part A is the heart of the auto policy and is the coverage most states require by law. It promises that the insurer will pay damages for bodily injury (BI) or property damage (PD) for which any covered person becomes legally responsible because of an auto accident. "Damages" include prejudgment interest awarded against the insured. The insurer also has the duty to defend any suit asking for such damages, even if the suit is groundless, false, or fraudulent, and it may settle any claim or suit as it considers appropriate.

Who is a "covered person" under Part A

The Part A definition of "covered person" is broader than the policy's general insured definition:

• You or any family member for the ownership, maintenance, or use of any auto or trailer (owned or not).
• Any person using your covered auto with permission.
• For your covered auto's use, any person or organization that may be legally responsible (for example, an employer of a permitted driver) - but only for that vehicle's use.
• For any auto or trailer other than your covered auto, any person or organization legally responsible for your or a family member's acts - but not the owner of that other vehicle, except for share-the-expense car pools.

Single limit vs. split limits

Liability limits are stated one of two ways. A combined single limit (CSL) is one dollar amount covering BI and PD combined per accident, such as $300,000 CSL. Split limits are shown as three numbers, for example $100,000 / $300,000 / $50,000:

• $100,000 = maximum BI per person
• $300,000 = maximum BI for all persons per accident
• $50,000 = maximum PD per accident

Worked example: a 100/300/50 insured is at fault in a crash injuring three people - claims of $80,000, $120,000, and $60,000 - plus $40,000 in property damage. The insurer pays $80,000 for the first claimant, $100,000 each for the other two (capped at the $100,000 per-person limit), but the BI total is then capped at the $300,000 per-accident limit, so total BI paid is $280,000, not $300,000. PD of $40,000 is fully paid (under the $50,000 cap).

CSL worked example

Now rework the same loss under a $300,000 CSL. The single $300,000 limit applies to BI and PD combined per accident. Total demanded is $80,000 + $120,000 + $60,000 BI ($260,000) + $40,000 PD = $300,000. Because the CSL has no per-person sub-limit, the full $120,000 individual BI claim is payable, and the whole $300,000 is paid. This illustrates why a CSL of the same total is generally more flexible and more protective for severe single-claimant injuries than equivalent split limits.

Key Part A exclusions

Exam-tested exclusions include:

• Intentional bodily injury or property damage.
• Property owned or being transported by the covered person.
• Property rented to, used by, or in the care of the covered person (with an exception for a residence or private garage).
• Liability arising from a vehicle used as a public or livery conveyance (a taxi exclusion; share-the-expense car pools are not excluded).
• Use of a vehicle without a reasonable belief of being entitled to use it.
• Vehicles with fewer than four wheels or designed mainly for off-road use (with limited exceptions).
• Using a vehicle in the auto business (repair, servicing, parking) - though limited coverage applies for your covered auto.
• Workers compensation-type obligations and injury to an employee of the covered person in the course of employment.

Supplementary Payments

Supplementary Payments are paid in addition to the Part A limit of liability - they do not erode the limit. The PAP lists:

• Up to $250 for the cost of bail bonds required because of an accident, including related traffic-law violations.
• The cost of bonds to release attachments in a suit the insurer defends.
• Up to $200 per day for the insured's loss of earnings (not other income) for attending hearings or trials at the insurer's request.
• Interest accruing after a judgment (post-judgment interest) in a suit the insurer defends.
• Other reasonable expenses incurred at the insurer's request.

Trap: bail bond reimbursement is capped at $250 and loss of earnings at $200/day - these specific caps are commonly tested. The duty to defend (and the costs of defense) ends when the insurer has paid out the applicable limit of liability.

Out-of-state coverage and severability

Part A includes an out-of-state coverage provision: if an accident happens in a state or province with a compulsory or financial-responsibility law requiring higher limits than the policy carries, the policy automatically provides the higher required limits. If that jurisdiction has a compulsory no-fault law, the policy provides the minimum required benefits. The policy also applies separately to each covered person (a severability concept), but this does not raise the stated limit of liability - the most the insurer pays for any one accident remains the declared limit no matter how many insureds are involved.

Coverage Territory and the Single Most Tested Exclusion

Part A applies in the United States, its territories and possessions, Canada, and while a covered auto is being transported between their ports. The benefit to remember is that supplementary payments and the duty to defend exist in addition to the liability limit, so legal-defense spending does not erode the money available to pay a judgment.

The recurring exclusion to memorize: Part A does not cover liability assumed under a contract, intentional injury, or — critically — bodily injury to an employee of the insured arising in the course of employment (that belongs to workers compensation), nor liability while the auto is used to carry persons or property for a fee (livery), with a share-the-expense carpool exception.