Part A: Liability Coverage

In the insuring agreement, the insurance company agrees to pay for certain damages you are legally responsible for as a result of an accident. The damages are usually stated in split limit form.

The split limit form is listed in numerical format. It looks like this: 300/500/300. The first number is the amount of bodily injury coverage for each person. The second number is the maximum total bodily injury coverage per accident. The third number is the property damage liability coverage. The numbers are stated in one thousand dollar increments. Thus, with 300/500/300, the coverage would be $300,000 per person for bodily injury coverage, $500,000 per accident for bodily injury coverage, and $300,000 property damage for liability coverage.

The insurance company also agrees to defend you to the extent of your liability coverage amounts. This duty ends when the liability limits are reached by payment of a judgment or settlement. The duty to defend only extends to claims covered by the policy.

There are four groups that are insured under the liability section of the Personal Auto Policy (“PAP”). These groups include:

  • You (i.e., the person named in the insurance policy as the insured) and any family member who resides with you,
  • Any person using the your insured vehicle with your permission,
  • Any person or organization legally responsible for your use of your car on behalf of that organization, and
  • Any person or organization legally responsible for your or your family members’ use of any vehicle other than the vehicle you have insured.

Assuming that you are married and your spouse is not listed as an insured person on the policy, the first category includes your spouse if she lives with you. If you separate from your spouse, your spouse is covered for 90 days or until she obtains her own insurance.

The first category also includes others who live with you. This includes those related to you by blood, marriage, or adoption. Foster children are included.

The second category includes anyone who has permission to use your car. This can include anyone who can show that they had a reasonable belief that they could use your car, even if they did not actually have your permission.

The third category usually applies to employers for whom you use your car. It provides coverage to your employer.

The fourth category applies to situations in which you drive other people’s cars. This does not cover situations in which you drive your employer’s car.

The insuring agreement can also provide for certain supplementary payments. These payments include:

  • Up to $250 for bail bond costs,
  • Premiums on appeal bonds and other bonds,
  • Interest on judgments,
  • Up to 2400 a day for the loss of earnings, and
  • Other reasonable expenses.

The Personal Auto Policy (“PAP”) includes a lengthy list of exclusions. These exclusions include:

  • Intentional injury or damage,
  • Property owned or transported,
  • Property rented, used or in your care,
  • Bodily injury to your employees,
  • Use of your car as a public conveyance for the general public (i.e., a taxi),
  • Use of your car in working for the automotive industry or with cars (such as car sales),
  • Other non-farming and non-ranching business vehicles,
  • Use of your car by a person without reasonable belief that they have your permission to use your car,
  • Use of a vehicle with less than four wheels or that is to be used primarily off-road,
  • Use of a car that is furnished or made available to you on a regular basis,
  • Use of a car regularly used by a non-spouse family member,
  • Use of a car used in racing in a designated racing facility.

In addition to the liability coverage set out in the insuring agreement, the insurance policy will cover additional amounts in some situations. One is where you have an accident in a different state that has higher liability limits set out in a financial liability law. In that case, your insurance policy will pay the higher liability limits of the state in which you have the accident.