A couple of months ago, I posted Part 1 of this article which was a quiz involving the ISO PAP. I thought I would wait until someone cared enough to ask for the answers and that finally came. Below are the three claims in the quiz and I’ve included the relevant insured categories and exclusions from the ISO policy.

Categories of Liability Insureds:

“Insured” as used in this Part means:

  1. You or any “family member” for the ownership, maintenance or use of any auto or “trailer”.
  2. Any person using “your covered auto”.
  3. For “your covered auto”, any person or organization but only with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part.
  4. For any auto or “trailer”, other than “your covered auto”, any other person or organization but only with respect to legal responsibility for acts or omissions of you or any “family member” for whom coverage is afforded under this Part. This Provision (B.4.) applies only if the person or organization does not own or hire the auto or “trailer”.

Exclusions:

B.  We do not provide Liability Coverage for the ownership, maintenance or use of:

2.  Any vehicle, other than “your covered auto”, which is:

a.  Owned by you; or

b.  Furnished or available for your regular use.

3.  Any vehicle, other than “your covered auto”, which is:

a.  Owned by any “family member”; or

b.  Furnished or available for the regular use of any “family member”.

However, this Exclusion (B.3.) does not apply to you while you are maintaining or “occupy-ing” any vehicle which is:

a.  Owned by a “family member”; or

b.  Furnished or available for the regular use of a “family member”.

The Quiz and Answers:

Bubba owns a car insured in his name with the State Insurance Company. His wife, Bubbles, owns a car insured in her name with the National Insurance Company. Their adult daughter, Bubbette, and her six children live with Bubba and Bubbles, and Bubbette owns a car insured in her name with the ARP Insurance Company.

Using the ISO policy, determine who is covered for liability by what policy in the following claim scenarios AND why or why not are they covered (i.e., in each scenario, are the parties insureds under the policy and, if so, does a liability exclusion apply?):

Claim #1:  One afternoon, Bubba drove Bubble’s car to the liquor store, ran a stop sign, and had an at-fault accident.

Bubble’s PAP does cover Bubbles.
Bubbles falls into insured category #1  above and no listed exclusions apply.

Bubble’s PAP does cover Bubba.
Bubba falls into insured category #1 (and #2) above and no listed exclusions apply.

Bubba’s PAP does not cover Bubba.
Bubba falls into insured category #1 but Exclusion B.2.a. applies because Bubble’s car is owned by “you” under Bubba’s PAP.

Bubba’s PAP does not cover Bubbles.
Bubbles falls into insured category #1 but Exclusion B.2.a. applies because Bubble’s car is owned by “you” under Bubba’s PAP.

Claim #2:  That evening, Bubba drove Bubbette’s car to a local tavern and had another at-fault accident while returning home at dawn the next morning.

Bubbette’s PAP does cover Bubbette.
Bubbette falls into insured category #1 and no listed exclusions apply.

Bubbettes’s PAP does cover Bubba.
Bubba falls into insured category #2 (he might also fit insured category #1 but only if this is considered Bubbette’s household).

Bubba’s PAP does cover Bubba.
Bubba falls into insured category #1 and the exception to Exclusion B.3. applies.

Bubba’s PAP does not cover Bubbette.
Bubbette falls into insured category #1 but Exclusion B.2.a. applies.

Claim #3:  Upon his arrival at home, Bubba and Bubbles separate and Bubbles moves in with her mother that afternoon. That evening, Bubba asked Bubbles if he could borrow her now-repaired car again to take his new girlfriend to visit her mother and had yet another at-fault accident.

Bubble’s PAP does cover Bubbles.
Bubbles falls into insured categories #1 and #3, and no listed exclusions apply.

Bubble’s PAP does cover Bubba.
Bubba falls into insured category #2 (not #1 because he’s not a “you” anymore), and no listed exclusions apply.

Bubba’s PAP does cover Bubba.
Bubba falls into insured category #1 and Exclusion B.2.a. does not apply because, unlike Claim #1, the auto is no longer owned by “you”).

Bubba’s PAP does not cover Bubbles.
Bubbles is simply not an insured under Bubba’s policy…she is no longer a category #1 insured (not a “you” under Bubba’s policy) and she can’t be a category #4 insured because she owns the auto.

Isn’t the ISO PAP such a simple little policy? Now imagine three policies, none being ISO, with varying definitions of who is an insured and differently worded exclusions. Anyone think auto insurance is a commodity?

 

Update:

My book “When Words Collide: Resolving Insurance Coverage and Claims Disputes” is now available. It can be ordered at Amazon.com.

Here is the latest video review:

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Bill Wilson

Founder at InsuranceCommentary.com
One of the premier insurance educators in America on form, coverage, and technical issues; Founder and director of the Big “I” Virtual University; Retired Assoc. VP of Education and Research from Independent Insurance Agents & Brokers of America. Reprint Request Information