Auto Injury and Damage Payments

Part A Liability Coverage Basics

Part A of the standard Personal Auto Policy provides liability coverage for bodily injury and property damage. Auto liability insurance is third party coverage that pays damages for which an insured becomes legally responsible because of an auto accident. This means the coverage pays claims for which an insured is legally responsible; it is not coverage for the named insured's own injuries caused by the named insured.

Bodily injury liability covers physical harm, sickness, disease, and death resulting from a covered accident. Damages for bodily injury can include medical expenses, lost wages, pain and suffering, and funeral costs of third parties who were hurt due to your negligence.

Property damage liability can cover damage to another person's tangible property, including loss of its use. This coverage applies to damaged vehicles, buildings, utility poles, fences, and personal belongings inside another vehicle. However, it is subject to exclusions for property owned, transported, rented, used, or cared for by the insured who is seeking coverage.

For example, if you accidentally back into a neighbor's parked sedan, Part A may pay for the bumper repair and reasonable loss-of-use costs, such as a rental car for a reasonable repair period, subject to the policy limit. It does not pay for the dent on your own vehicle.

Who Qualifies as an Insured

Under Part A, the named insured shown on the declarations page is an insured for the ownership, maintenance, or use of any auto or trailer, subject to policy exclusions. The spouse of the named insured is also covered if residing in the same household. In addition, a family member related to the named insured by blood, marriage, or adoption and residing in the named insured's household is generally an insured for auto liability, subject to policy exclusions.

Any person using your covered auto with permission is generally an insured under Part A, subject to policy exclusions. Part A generally excludes coverage for a person using a vehicle without a reasonable belief that the person is entitled to do so. However, the standard policy makes an exception for a family member using your covered auto that you own.

A person or organization may also be an insured for legal responsibility for the acts or omissions of someone covered under Part A. The standard policy imposes additional conditions when the vehicle involved is not your covered auto. For instance, an employer may have coverage under an employee's personal auto policy for liability arising from the employee's covered use of the employee's own auto on company business. Even so, the employer should not rely on that personal policy as its primary business auto protection.

Split Limits Versus Combined Single Limits

Auto liability coverage may be written on either a split limits basis or a combined single limit basis. Split limits express liability coverage with three separate dollar amounts, such as 25/50/25 or 100/300/100. In contrast, a combined single limit provides one overall maximum dollar amount of liability coverage per accident, applying to bodily injury and property damage liability claims combined.

Under split limits, the first number represents the maximum bodily injury liability coverage for any one person in a single accident. The second number is the maximum payable for bodily injury to all persons combined in one accident, subject to that per person limit. The third number represents the maximum property damage liability coverage for all property damaged in a single accident. If one injured person incurs damages exceeding the per person limit, the excess cannot be paid from the remaining per accident limit.

Consider a policy written with 50/100/25 split limits. The insurer pays no more than 50000 dollars for bodily injury to any one person, no more than 100000 dollars total for all bodily injuries combined in one accident, and no more than 25000 dollars for all third party property damage caused in that accident. Under a combined single limit of 300000 dollars, damages can be paid entirely for bodily injury, entirely for property damage, or in any proportion up to the total limit. A combined single limit avoids the per person restriction found in split limit policies.

Financial Responsibility and Out-of-State Coverage

State law sets auto financial responsibility requirements and minimum liability limits. States may also allow different ways to demonstrate financial responsibility, such as purchasing insurance or posting a bond.

If a covered auto accident occurs in another US state or Canadian province, the standard Personal Auto Policy may adjust coverage to meet that jurisdiction's applicable insurance requirements; its coverage territory does not include Mexico. If a covered accident occurs in a state or Canadian province other than the one where your covered auto is principally garaged, the standard policy provides higher limits specified by that jurisdiction's financial responsibility law when those limits exceed the policy's stated limits.

Similarly, if another state or Canadian province requires nonresident drivers to maintain specified types and minimum amounts of auto insurance, the policy provides the coverage required by that law. The standard policy's out-of-state provision may meet applicable insurance requirements in another US state or Canadian province, but you must still meet local driving requirements and should not assume the policy covers driving in Mexico.

Supplementary Payments and Key Exclusions

Part A provides supplementary payments in addition to the stated policy limits. These supplementary payments do not reduce the policy limits of liability available to pay claims. As a supplementary payment, the insurer pays expenses it incurs in defending a covered liability claim or suit. The insurer has the right to investigate and settle any liability claim or suit as it considers appropriate, but its duty to defend ends once the applicable liability limits have been exhausted by payment of judgments or settlements.

Supplementary payments include premiums on appeal bonds and bonds to release attachments in any suit the insurer defends, and these payments do not reduce the limit of liability. They pay the cost of bail bonds required because of an accident or traffic violation resulting from an accident, up to a specified policy limit. They cover reasonable expenses incurred by the insured at the insurer's request, including actual loss of earnings up to a stated daily limit. Finally, supplementary payments cover interest accruing after judgment in a suit the insurer defends; prejudgment interest awarded against the insured is part of the damages and is paid within the liability limit. The duty to pay postjudgment interest ends when the insurer offers to pay the covered part of the judgment up to its liability limit.

Several key exclusions apply to Part A liability. Intentional injury or damage caused by an insured is excluded. The policy generally excludes liability arising from use of a vehicle as a public or livery conveyance, but makes an exception for a share-the-expense carpool. Part A generally excludes bodily injury to an insured's employee arising out of and in the course of employment, but the standard policy excepts a domestic employee who is not entitled to workers compensation benefits.

Coverage is generally excluded for liability arising from vehicles with fewer than four wheels, subject to policy exceptions such as use in a medical emergency or an endorsement that changes coverage. Part A also excludes liability arising from an auto owned by or furnished or available for the named insured's regular use if it is not your covered auto. However, the policy can provide automatic coverage for a newly acquired auto under its stated terms.