CHANGES TOTHE ISO PAP
CHANGES TOInsurance Services Offices (ISO) has introduced a number of significant changes to its Personal Automobile Program. The changes are to be implemented nationwide (with certain state exceptions), and several states have already approved the revisions. In those states, the effective date of the changes is June 1, 1998. The changes affect several forms and definitions including those for covered persons and covered autos.
The Personal Auto Program's basic policy form, PP 00 01, has been revised. This form now has an 06 98 edition date. Besides the changes to the PP 00 01, a number of other forms have also been revised. Further, the Insurance Services Office has also introduced and withdrawn several PAP forms.
The changes to the Personal Auto Program include instances of coverage becoming broader or narrower. ISO also has made some revisions which are meant to make the coverage intent clearer to insureds, agents and companies. Following is a brief discussion of the changes. Remember that this discussion should not take the place of a detailed study of the new and revised forms.
Personal Auto Policy--PP 00 01 06 98
First, let's take a look at the changes to the Personal Auto policy. This latest edition, 06 98, is to take the place of the current 06 94 policy edition.
Definitions
You and Your
Elsa Stayput has a personal auto policy which lists her as the named insured. Her husband, Never Stayput, is not listed on the policy declarations page. Of course, Never also is a named insured, as long as he lives at the same address as Elsa. Unfortunately, Elsa and Never are having relationship problems and have filed for divorce. Never moves to an apartment.
In earlier editions of the Personal Auto policy, this move would change Never's status as a covered person since he no longer lives in the named insured's home. This situation has changed under the 06 98 edition of the PAP. The revised definition of "you" and "your" now refers to a husband or wife who leaves the named insured's household. Nonresident spouses are temporarily considered named insureds for 90 days after changing residency or until he or she gets his or her own policy or the policy period ends, whichever occurs first. This change should alleviate short-term gaps in coverage due to changes in a covered person's relationship-related changes. Note that companies may have to add their own notification requirement in order to establish when a spouse has left the household. Further, it looks like the 90-day period could restart if the nonresident spouse returns to the household. If such a spouse returns for an overnight stay, does the 90 days begin again?
Owned Autos
The Personal Auto policy definition of an "owned auto" currently includes private passenger autos that a covered person leases (under a written agreement) for at least a six-month period. Now this extension includes leased pickups and vans. This change means that any policy reference to "owned autos" now applies to leased vans and pickups. Therefore, both coverage and exclusion references which allude to "owned autos" will apply to a wider range of vehicles.
Covered Autos
Your Covered Auto
The definition of "your covered auto" now refers to vehicles that are described on the policy declarations page and "newly acquired autos." The old extensive provision J.2. wording has been eliminated. This change makes the "covered auto" definition much easier to read and understand.
Newly Acquired Autos
The definition of "newly acquired auto" is introduced as item k. This definition is easily the longest that appears in the Personal Automobile policy and it contains two parts. Part one states that "newly acquired autos" include private passenger autos, pickups and vans that are not covered by another insurance policy. Note that any pickup or van must weigh less than 10,000 pounds and may not be used for delivery unless the delivery is incidental to installing, maintaining or repairing furnishings or equipment. Pickups and vans that are used in ranching or farming are still eligible as newly acquired autos.
Part two of the definition of "newly acquired autos" concerns itself with the coverage that is provided by the policy. The definition explains the following:
* If the insured doesn't request coverage for a new auto within the time frames specified in the definition, the coverage is provided on the date it is requested.
* For all coverages (excluding Damage To Your Auto) a newly acquired additional auto gets the broadest coverage written in the policy if coverage for the auto is requested within 14 days of the vehicle purchase date. There's no need to ever request coverage for a new auto that replaces one that is listed on the policy.
* For either collision or other than collision when either collision or other than collision appears on the policy Declarations, a newly acquired additional auto gets the broadest coverage written on the policy if coverage for the auto is requested within 14 days of the vehicle purchase date. If collision or other than collision does not appear on the policy Declarations, a newly acquired additional auto is protected if coverage for the auto is requested within four days of the vehicle purchase date. However, a $500 deductible applies.
Part A--Liability Coverage
Insuring Agreement
The insuring agreement has been revised in order to clarify when the insurer's duty to defend ends. The insurance company's obligation to settle or defend an insured ends when the Part A--Liability limit of insurance has been exhausted by either a payment of judgments or settlements.
Supplementary Payments
Item 4 has been changed. The daily limit for loss of earnings has been substantially increased from $50 to $200. This change is long overdue as it properly reflects losses incurred by covered persons who are required to attend hearings or trials that are related to a loss covered by the Personal Auto policy.
Exclusions
Several exclusions have been modified in order to make their intent clearer to policyholders. Item 7 now states that Exclusion A.2. doesn't apply to private passenger autos, vans or pickups or trailers used or maintained by an "insured." This exclusion no longer makes a distinction between owned and nonowned pickups and vans.
Item 8 excludes coverage for losses involving vehicles that are used without an insured's permission. This exclusion has been reworded so that it can be read with greater understanding. The exclusion now states that it does not apply to a family member while using a covered auto belonging to the insured.
Item 9a. This exclusion's obsolete reference to American Nuclear Insurers has been updated to refer to the Nuclear Energy Liability Insurance Association. (Author's note: It's unfortunate that ISO missed a chance to eliminate some more confusion. The first part of the exclusion is labeled 9a. and b. The second part, which defines what is meant by "nuclear energy liability policy," is also labeled a, b [and c]).
Under Section B of Exclusions, item 1 has been changed. It adds "nonowned golf carts" to its exceptions. This results in the Personal Auto policy's offering liability protection for nonowned golf carts that are used on an occasional basis, but not for nonowned golf carts that are available for an insured's regular use.
Limit of Liability
The limit of liability for Part A--Liability Coverage is now offered on a split limits basis. The wording of this section has been reworded in order to address the bodily injury (per person and per accident) and property damage split limit structure. Important note: the policy wording has retained the following statement:
"This is the most we will pay regardless of the number of:
1. 'Insureds';
2. Claims made;
3. Vehicles or premiums shown in the Declarations; or
4. Vehicles involved in the auto accident."
However, this statement appears in the same paragraph that deals with property damage, so it may be interpreted as not being an additional limitation which also applies to bodily injury. It is difficult to determine whether this change was intentional.
The reference concerning how the policy conforms to state laws requiring split limits has been deleted.
Part B--Medical Payments
Exclusions
Item 7 excludes coverage for losses involving vehicles that are used without an insured's permission. This exclusion has been reworded so that it can be read with greater understanding. The exclusion now states that it does not apply to a family member while using a covered auto belonging to the insured.
Part C--Uninsured Motorists Coverage
Exclusions
Item B.3 excludes coverage for losses involving vehicles that are used without an insured's permission. This exclusion has been reworded so that it can be read with greater understanding. The exclusion now states that it does not apply to a family member while using a covered auto belonging to the insured.
Limit of Liability
The limit of liability for Part C--Uninsured Motorists Coverage is now offered on a split limits basis. The wording of this section has been modified in order to address the uninsured motorists coverage per person and per-accident split limit structure. This section's meaning is clarified since it now specifies that the limit placed on damages that are paid under this coverage part includes care, loss of services or death which arises out of "bodily injury" incurred during a covered loss.
Other Insurance
This provision under Part C--Uninsured Motorists Coverage has been clarified. The additional wording makes it clearer that coverage will be shared among any other policy or coverage provision that provides "similar" coverage.
Part D--Damage to Your Auto
Transportation Expenses
The basic coverage provided by the policy for temporary transportation expenses has been increased to $20 per day with a $600 maximum. This coverage provision also refers to "expenses" instead of "loss of use expenses," until later when the provision limits payment for any loss of use to $20 per day. This particular change might make more sense if the term "loss of use" was defined. In absence of a defined term, it is not clear to this writer why the distinction was made by ISO.
Exclusions
This section of Part D--Damage to Your Auto has been drastically revised for the sake of clarity and to make sure that the coverage provided by the basic policy matches up to what may be offered via optional endorsements. Since so much rewriting and renumbering is involved, let's review each exclusion.
Exclusion 1 is unchanged from the PP 00 01 06 94 edition.
Exclusion 2 is unchanged from the PP 00 01 06 94 edition.
Exclusion 3 is unchanged from the PP 00 01 06 94 edition.
Exclusion 4 has been rewritten and reformatted into Exclusions 4, 5and 6.
Discussion of change: Exclusion 4 in the 06 94 edition of the Personal Auto policy was among its most confusing parts. The exclusion was rewritten into three separate exclusions. The revised Exclusion 4 excludes losses under Part D to equipment such as radios, stereos, tape decks or compact disk players. However, two exceptions are made for equipment that merely reproduces sound, including their accessories. The first exception is for such equipment that is permanently installed. The second exception is for portable equipment if the equipment is a component of a permanent housing unit, is powered by the covered car's electrical system and the equipment is either in or upon a covered auto when a loss occurs.
New Exclusion 5 excludes coverage for electronic equipment that is capable of sending or receiving data signals, including their accessories. The two exceptions under this exclusion are for equipment that is part of an auto's operating system and telephones which are permanently installed, but such telephones must be powered by the covered auto's electrical system.
New Exclusion 6 excludes coverage for tapes, records and similar media that are used with equipment excluded by revised Exclusions 4and 5.
Exclusion 5 has been renumbered to Exclusion 7 but otherwise is unchanged from the PP 00 01 06 94 edition.
Exclusion 6 has been incorporated into Exclusion 8 and has been substantially modified. (See Exclusion 8, Discussion of change.)
Exclusion 7 has been renumbered to Exclusion 9 but is otherwise unchanged from the PP 00 01 06 94 edition.
Exclusion 8 has been substantially modified.
Discussion of change: The revised Exclusion 8 basically incorporates Exclusions 6 and 8 of the 06 94 edition of the Personal Auto policy. The result is that the revised exclusion denies coverage to camper bodies, trailers and motor homes which aren't shown on the policy declarations page. The exclusion extends to living facilities and cooking, plumbing, or refrigerating equipment. Exceptions are made for trailers or camper bodies, including facilities and equipment, which are either nonowned or are newly acquired. Persons must report such newly acquired property to the insurance carrier within 14 days of becoming the property owner. Important note, the coverage for newly acquired equipment was reduced from 30 to 14 days.
Exclusion 9 has been renumbered to Exclusion 10 but otherwise is unchanged from the PP 00 01 06 94 edition.
Important note: It is clear that the Personal Auto policy is not intended to cover equipment that is designed to defeat equipment used by law enforcement officials to control speeding motorists. However, a loophole may be present for equipment such as radar or laser "jamming" devices. Such equipment may not either detect or locate laser or radar equipment; so it might technically qualify for coverage.
Exclusion 10 has been renumbered to Exclusion 11 and has been modified.
Discussion of change: This exclusion was reworded for greater clarity and to delete the reference to cooking and sleeping facilities (which are addressed elsewhere). An exception has been added for caps, covers or bedliners which are in or upon covered pickups. This exception updates the PAP to recognize the increasing popularity of such added equipment.
Exclusion 11 has been renumbered to Exclusion 12 but is otherwise unchanged from the PP 00 01 06 94 edition.
Exclusion 12 has been deleted.
Exclusion 13 is unchanged from the PP 00 01 06 94 edition.
Exclusion 14 is unchanged from the PP 00 01 06 94 edition.
Limit of Liability
Part A of this provision has been revised to introduce a $1,000 sublimit for sound reproducing equipment and accessories that are permanently installed in a covered auto. This coverage is for such equipment that is installed in locations that aren't used by the auto manufacturer.
Examples:
A CD player that is permanently installed in the rear floorboard of a minivan
A trunk that contains two obnoxiously large bass speakers for a cassette deck
Part F--General Provisions
Termination, Part B. Nonrenewal
This provision has added wording that clarifies the nonrenewal notice provided to policies having policy terms that are six months or longer, but less than one year.
Other Personal Auto Policy Forms
Now let's take a look at the other form changes made to the Personal Auto Policy Program.
PP 00 06 06 94--Amendatory Endorsement
This form has been withdrawn from use since its purpose was to modify an older version of the PP 00 01 Personal Auto policy into the 06 94 edition.
PP 00 07 06 98--Transition Endorsement
This is a new form. Its purpose is to convert the 06 94 edition of the PP 00 01 Personal Auto policy into the 06 98 edition.
PP 03 02 06 98--Optional Limits Transportation Expenses Coverage
This is a revision of the form previously named "Increased Limits Transportation Expenses Coverage." It has been changed to delete reference to merely increasing coverage to a $30 per day, $900 maximum. The daily and maximum limits, as well as a vehicle description and required premium may now be entered on the form, which now contains a complete schedule, or on the policy Declarations, along with the appropriate premium.
PP 03 07 06 98--Trailer/Camper Body Coverage (Maximum Limit of Liability)
This is a revision of the form previously named Covered Property Coverage (Maximum Limit of Liability). This updated form has a complete schedule and has additional and revised wording. The revised endorsement includes a clearer explanation of the property that is covered and excluded.
PP 03 09 06 98--Single Liability Limits
This form has been changed in order to endorse single limits of liability to the Personal Auto policy since the basic PAP now offers coverage on a split liability limits basis.
PP 03 11 06 98--Underinsured Motorists Coverage
This form is used to add coverage for losses caused by motorists whose auto insurance is less than the level of insurance provided by the insured's policy. The updated form has a complete schedule and additional and revised wording. The revisions include clarifications of the insuring agreement, exclusions, limit of liability and other insurance provisions.
PP 03 13 06 98--Coverage for Excess Sound Reproducing Equipment, Audio, Visual and Data Electronic Equipment And Tapes, Records, Discs And Other Media
This is a revision of the form previously named Coverage for Audio, Visual and Data Electronic Equipment And Tapes, Records, Discs And Other Media. This form has been substantially revised. It reflects the changes made to the basic policy under Part D--Damage to Your Auto. This endorsement may be used to provide additional coverage for eligible sound producing equipment.
PP 03 18 06 98--Customizing Equipment Coverage
This revised form still provides coverage for loss to custom equipment. It reflects the changes made to Exclusion 11 under Part D--Damage to Your Auto.
PP 03 20 06 98--Snowmobile Endorsement
This revised form, like its predecessor, may be used to provide coverage to snowmobiles owned by the named insured. The newest form includes a larger schedule that offers coverage on a split limits basis and clearer instructions on entering information. The form also has changed the notification period on newly acquired snowmobiles from 30 days to 14 days.
PP 03 21 06 98--Limited Mexico Coverage
The title of this endorsement has been changed from "Mexico Coverage" to "Limited Mexico Coverage." This simple change reduces any interpretation that the form provides complete coverage for autos being temporarily operated in Mexico. The other changes to this form involve the basic definition change to "your covered auto" and "newly acquired autos." (Please refer to Part I, Definitions, of this article). Further, the revised endorsement includes clarifications to its Coverage, Additional Exclusions and Other Insurance provisions.
PP 03 22 06 98--Named Nonowner Coverage
The endorsement's schedule has been changed to show split limits of liability, and the Definitions section shows the change of notification required for newly acquired automobiles (from 30 to 14 days). The Limit of Liability provisions have been changed to clarify how the maximum payment under the form applies. The change is explained in detail under Part A--Liability, Limit of Liability, of this article.
PP 03 23 06 98--Miscellaneous Type Vehicle Endorsement
This form has been revised in order to be consistent with the 06 98 edition of the PP 00 01, Personal Auto policy. The endorsement's schedule has been changed to show split limits of liability and the Definitions section shows the change to "your covered auto" which includes the reference to "newly acquired autos." This section also contains a revised "newly acquired auto" definition. The latter change is critical since this endorsement's "newly acquired auto" definition replaces the one found in Form PP 00 01. It has to since the endorsement includes a reference to miscellaneous type vehicles.
The Part A--Liability Coverage, Limit of Liability provision has been changed to clarify how the maximum payment under the form applies. The change is explained in detail under Part A--Liability, Limit of Liability, of this article. The Part D--Coverage for Damage To Your Auto Limit of Liability provision has been changed to clarify how the physical damage portion of the endorsement applies. The Part D--Coverage for Damage to Your Auto Insuring Agreement, "nonowned auto" definition and exclusions have also been revised for greater clarity and to be consistent with the other PAP program changes.
PP 03 28 06 98--Miscellaneous Type Vehicle Amendment (Motor Homes)
This endorsement's schedule has been changed to show split limits of liability. The form has also replaced its references to "covered property" with the term "facilities or equipment."
PP 03 33 06 98--Certificate Of Insurance--Trusts
This is a new form introduced by ISO in order to properly endorse a trust that may have a joint interest with a named insured. The protection provided to a described trust extends only under the liability insurance. The form includes a schedule and it offers coverage on a split limit of liability basis.
PP 03 34 06 98--Joint Ownership Coverage
This form has been revised in order to be consistent with the 06 98 edition of for PP 00 01, Personal Auto policy. The endorsement's schedule has been changed to show split limits of liability and the Definitions section shows the change to "your covered auto" which includes the reference to "newly acquired autos."
PP 04 01 06 98--Single Uninsured Motorists Limits
This form has been changed in order to endorse single limits of liability for uninsured motorist coverage to the personal auto policy since the basic PAP now offers this coverage on a split liability limits basis.
PP 04 02 06 98--Single Underinsured Motorists Limits
This form has been changed in order to endorse single limits of liability for underinsured motorist coverage to the personal auto policy since the underinsured motorist coverage endorsement follows the updated PP 00 01 PAP, offering this coverage on a split liability limits basis.
PP 04 01 06 98--Split Uninsured Motorists Limits
This form has been withdrawn from use since its purpose was to modify the 06 94 edition of the PP 00 01 personal auto policy to provide uninsured motorists coverage on a split liability limits basis. *
The author
Bruce Hicks, CPCU, CLU, is an editor, Technical and Educational Products Division, for The Rough Notes Company, Inc. He has been in the insurance industry since 1981, serving as a personal lines underwriter for several regional and national companies. He also has worked in corporate underwriting with experience in product research and development, auditing, product filings and compliance.
©COPYRIGHT: The Rough Notes Magazine, 1998