General Discussion
June 15, 2016
Summary: ISO has printed many countrywide endorsements that can be used to modify the personal auto policy (PAP). Endorsements are meant to modify a standard coverage form to the extent that meets the requirements and wishes of both the insured and the insurer. Endorsements can expand the coverage offered by the standard form or delete some coverage; they can change the meaning of words and phrases that appear on the standard form; and they can offer coverages that supplement the basic coverages that appear on the standard form.
This article reviews some of the endorsements that are used to modify the personal auto policy (2005 edition). Some of the endorsements are described briefly while others are detailed with more information. Several endorsements (extended nonowned coverage, for example) are discussed more fully as separate articles following this introductory material.
Topics covered:
Suspension of Insurance
An insured might use the suspension of insurance endorsement when, for example, he or she is too ill to drive for some time, when serving overseas in the military, or when a vehicle will not be driven for an extended period of time. Coverage must be suspended for at least thirty days in order to receive a refund.
ISO rules state that coverage cannot be suspended for the minimum required insurance coverages for a motor vehicle registered in the state, nor for a risk for which a financial responsibility filing is in effect. If a vehicle carries physical damage coverage, only collision may be suspended. Endorsement PP 02 02 is used to reinstate coverage.
A common situation is that a person employed by the federal government—a rural mail carrier, for example—will use his or her own vehicle in the course of employment. The PAP states that an "insured" includes any "person or organization … with respect to legal responsibility for acts or omissions of a person for whom coverage is afforded under this Part" [A]. Attaching this endorsement eliminates coverage for the federal government; the federal government self-insures. Likewise, any other person driving the covered auto on government business has no liability coverage, but only if Section 2679 of Title 28, the U.S. Code as amended, requires the Attorney General to provide a defense.
Optional Limits Transportation Expenses Coverage
The transportation expenses coverage provided under part D of the personal auto policy is for $20 per day, to a maximum of $600, for temporary transportation expenses incurred by the named insured in the event of a loss covered under coverage D to a covered auto. This endorsement increases those amounts to the limits shown in the schedule of the endorsement.
Towing and Labor Costs Coverage
The insurer agrees through the use of PP 03 03 to pay for towing and labor costs incurred each time the covered auto or any nonowned auto is disabled. The disablement can be for any reason and the amount paid under PP 03 03 is the amount scheduled on the endorsement. The insurer declares that it will only pay for labor performed at the place of disablement; repair work at the garage after the car has been towed there is not covered by PP 03 03.
Exclusion 5 in Part D of the PAP applies to loss to tapes, records, disks, or other media used with the electronic equipment described in exclusion 4. This endorsement allows coverage for tapes, records, or other devices used with sound reproduction equipment. The coverage applies only if these articles are the property of the named insured or that of a family member, and are in the covered auto at the time of loss. The limit of liability for all losses as a result of any one occurrence shall not exceed $200.
This endorsement states that loss or damage shall be paid under the PAP as interest may appear to the named insured and the loss payee shown in the declarations. The insurance with respect to the interest of the loss payee shall not become invalid because of the fraudulent acts or omissions of the named insured, unless the loss results from the named insured's conversion, secretion, or embezzlement of the covered auto. Also, the insurer promises to give any advance notice of cancellation to the loss payee as it gives to the named insured.
Vehicles Furnished or Available for Regular Use
This endorsement was retitled with the 2005 edition of the PAP. Previously, it was simply the "extended nonowned coverage for named individual." The addition of "vehicles furnished or available for regular use" distinguishes it from the new endorsement that can be used to cover the liability exposure of a vehicle used as a livery conveyance.
For more information, see Extended Nonowned Coverage.
Exclusion 7, under part D of the PAP, is deleted through the use of this endorsement. PP 03 07 provides coverage for direct and accidental loss to a trailer or camper body described in the endorsement and to facilities or equipment designed to be used with the described trailer or camper body; the facilities and equipment, such as cooking, dining, or sleeping equipment, have to be in or attached to the trailer or camper body. PP 03 07 does not apply to loss to clothing or luggage, business or office equipment, or to articles that are sales samples or that are used in exhibitions.
The limit of liability provision in part D of the PAP is replaced through the use of this endorsement. PP 03 08 limits liability for a loss to an auto scheduled on the endorsement to the lesser of the amount shown in the schedule of PP 03 08, the actual cash value (ACV) of the stolen or damaged property, or the amount necessary to repair or replace the property with other property of like kind and quality. This endorsement keeps the language about adjusting the actual cash value loss for depreciation and physical condition and about not paying for betterment that appears on the PAP, but the language referring to "the amount shown in the schedule" allows the insurer to pay an amount for a loss to a covered auto that may be even less than actual cash value.
The coverage is sometimes referred to as "stated amount"; the endorsement, however, makes it clear that this is not the case. Although the endorsement might be used for older vehicles in mint condition, it probably should not be used for antique or classic cars having considerable value.
This endorsement modifies paragraph A of the limit of liability provision in the personal auto policy. The limit for liability coverage is scheduled through the use of PP 03 09 on an each accident basis. This scheduled limit is the maximum limit of liability for all damages resulting from any one auto accident, and is the most the insurer will pay regardless of the number of insureds, claims made, or vehicles involved in the auto accident.
The 2005 PAP, under coverage D damage to your auto, provides $1,000 of coverage for electronic equipment that reproduces, receives or transmits audio, visual or data signals, and which is not installed in a location normally used by the auto manufacturer to install such equipment. Additional coverage beyond the $1,000 may be purchased by attaching this endorsement. Equipment could include CD players, navigational systems, telephones, or any other device used to transmit or receive audio, visual, or data signals.
If an insured wishes to cover the tapes, records, disks or other media used with the equipment, this endorsement provides $200 worth of coverage. The insured may also use this endorsement to provide $200 worth of coverage for media used with the factory-installed equipment. A common misconception is that CDs, tapes, etc. are covered under the homeowners policy; if used with factory-installed or other permanently-installed equipment they are not covered. It is only when the tapes, CDs, etc., are used with equipment (such as a portable CD or DVD player) that is capable of being operated both by a vehicle's power source and another power source that a homeowners policy provides some coverage.
This endorsement replaces exclusion 10, part D of the PAP. This exclusion precludes coverage for loss to any custom equipment in or upon the named insured's covered auto or any nonowned auto (as defined). The exclusion then goes on to declare that it does not apply to custom equipment in or upon the named insured's covered auto up to the limit for excess custom equipment coverage shown as applicable to that vehicle in the schedule or in the declarations. The exclusion also does not apply to custom equipment in or upon any nonowned auto up to the highest limit for excess custom equipment coverage shown in the schedule or in the declarations.
The most that will be paid under PP 03 18 for loss to any custom equipment in or upon the covered auto is increased from $1,500 to the limit for excess custom equipment coverage shown as applicable to that vehicle in the schedule or in the declarations; the same goes for nonowned autos. This coverage does not apply to furnishings or equipment excluded from coverage under exclusions 4, 5, 7, or 9 of part D of the PAP.
This endorsements declares that any liability and any required no-fault coverages afforded by the PAP for the named insured's leased auto also apply to the lessor named in this endorsement as an additional insured. The endorsement will pay damages for which the lessor becomes legally responsible only if the damages arise out of acts or omissions of the named insured or any family member. A leased auto is defined as an auto shown in the endorsement that the named insured leases for a continuous period of at least six months under a written agreement that requires the named insured to provide primary insurance for the lessor.
This endorsement gives the insured several warnings up front. First, auto accidents in Mexico are subject to the laws of Mexico, not the laws of the United States; under Mexican law, auto accidents are considered a criminal offense as well as a civil matter. Second, the coverage provided by the endorsement does not meet Mexican auto insurance requirements. Third, the named insured is required to purchase liability insurance through a licensed Mexican insurance company for the provisions of PP 03 21 to apply. (Insurance is usually available at the U.S.-Mexican border.)
Endorsement PP 03 21 offers liability, med pay, uninsured motorists, damage to your auto, and no-fault coverages (depending on which coverages the insured has under his or her personal auto policy) for accidents and losses that occur in Mexico within 25 miles of the U.S. border. The coverages only apply while an insured is in Mexico on a trip of 10 days or less. The insurer promises to defend the insured under liability coverage only if the original suit for damages is brought in the United States, and if the suit does not involve a Mexican citizen or resident. Additionally, the insurer will not pay for auto repairs to the named insured's covered auto if the repairs are made in Mexico unless the covered auto cannot be driven in its damaged condition.
The insurance provided by PP 03 21 is excess over any other collectible insurance.
See Named Nonowner Coverage for more information.
As a point of information, this endorsement, which revised the insuring agreement of part D of the PAP, has been withdrawn for use with the 2005 PAP.
This endorsement starts off with a warning to the insured to the effect that the coverage provided by the endorsement does not provide liability, medical payments, or physical damage coverage while the motor home is rented or leased to any organization or any person other than the named insured. Another warning is the PP 03 28 does not cover any physical damage loss incurred by the named insured if the motor home is fraudulently acquired by any person or organization while the motor home is in their care.
Regardless of the listed warnings of exclusions, PP 03 28 does provide motor home rental coverage to a degree for liability, med pay, and physical damage to the vehicle.
PP 03 34, joint ownership coverage, is an endorsement meant to address the issue of coverage for individuals who are not married but who reside together and have joint ownership of a vehicle(s). The personal auto policy states that "you" and "your" refer to the named insured and the spouse if a resident of the same household. PP 03 34 modifies this so that "you" and "your" refer to two or more individuals, "other than husband and wife", residing in the same household, or non-resident relatives who jointly own a private passenger auto, pickup, or van; the emphasis here is on the joint ownership of the covered auto, regardless of the relationship that exists between the joint owners.
This endorsement adds a definition and an exclusion to the personal auto policy. The added definition concerns "non-resident relatives"; this term means two or more persons related by blood, marriage, or adoption (including a ward or foster child) who reside in separate households. An example of this would be a father and daughter who live in separate households, but who jointly own an auto for whatever reason. The exclusion is added to part A, the liability coverage, of the PAP and states that liability coverage is not provided for the ownership, maintenance, or use of any vehicle, other than "your covered auto", by any non-resident relative or family member of a non-resident relative; this simply reinforces the fact that the insurer, based on both premium considerations and unforeseen risk exposures, does not want to insure any auto that is not included within the definition of "your covered auto". However, the 2005 endorsement allows the insured to "buy back" coverage for the excluded nonowned auto liability exposure. In the example of the father and daughter, above, suppose the daughter was married. The daughter, by means of the PP 03 34, is covered as an insured for her use of any auto. Her husband is also an insured, but only for his use of the covered auto. When coverage for the nonowned auto exposure is indicated on the endorsement, however, the husband will also be covered for his use of any auto.
The PP 03 34 includes a schedule for the description of the jointly owned vehicle(s) and a schedule listing the coverages, limits of liability, and premiums applying to each described vehicle.
The auto loan/lease coverage endorsement, PP 03 35, is an endorsement meant to address a potential gap in coverage that many insureds might face. In fact, the endorsement is sometimes referred to as "gap coverage." For example, if an insured was leasing a vehicle and suffered a total loss to the auto through a collision, that insured would be liable to the leasing company for any amount equal to the difference between the amount due under the lease and the actual cash value of the auto at the time of the loss (the limit of liability under part D of the PAP). PP 03 35 states that, in the event of such a total loss, the insurer will pay any unpaid amount due on the lease for the covered auto less certain specified items.
Another case where this endorsement would be used involves a total loss similar to the example above, but this time involving a new car that the insured has bought through the use of time payments. In this situation, if the amount due under the finance agreement is greater than the ACV of the auto at the time of loss, the insured has the obligation to pay that amount. PP 03 35 offers the insured coverage for such an amount, less, as in the lease situation above, the amount paid under part D of the PAP, any overdue loan payments, or costs for extended warranties. When a lease is involved, the list of specified items also includes any overdue lease payments at the time of loss, financial penalties imposed under the lease for excessive use or abnormal wear and tear, security deposits not refunded by a lessor, or life or health insurance purchased with the lease, and carry-over balances from previous leases.
Endorsement PP 03 35 basically stands as a tool by which the insured can protect himself from a financial loss that he might not realize could face him in the event of the total loss of an auto that is leased or financed. The outstanding indebtedness of the insured is paid and the leasing or financing company is satisfied through the use of this particular endorsement.
This endorsement also includes a schedule to describe the covered auto(s) and to list the premiums that are charged for collision coverage and other than collision coverage.
This endorsement states that the insurer will pay for loss to the covered auto if the loss occurs in Mexico. However, it also states that the insurer will not pay for auto repairs made in Mexico unless the covered auto cannot be driven in its damaged condition.
PP 03 56 warns that auto accidents in Mexico are subject to the laws of Mexico and under those laws, auto accidents are considered a criminal offense as well as a civil matter. Furthermore, PP 03 56 states that the endorsement does not provide liability insurance when the covered auto is in Mexico.
This endorsement adds an exclusion to the physical damage coverage section (part D) of the PAP; the endorsement is not approved in all jurisdictions. PP 13 01 states that the insurer will not pay for loss to the covered auto or any nonowned auto due to diminution in value.
The reasoning behind this endorsement is this: an insured, after being involved in auto accident, claims that his auto is not worth what it was prior to the accident even if repaired promptly and professionally. The auto has suffered a loss in value because of the accident and that is a "loss" that is covered under the insuring agreement; besides, such coverage would put the insured in the position he was prior to the loss and that is the purpose of the insurance policy. The insurer is using this endorsement to make the point that part D coverage is for "direct and accidental loss" and that means only actual physical damage to the covered auto and not a loss in value. Since some courts may agree with the insured's interpretation of the meaning of "loss", and since the PAP had no exclusion that addressed the issue, PP 13 01 was written; a diminution in value loss is now specifically excluded.
The endorsement defines "diminution in value" as "the actual or perceived loss in market or resale value which results from a direct and accidental loss". Therefore, whether the insured merely believes his car has lost value or has a licensed body shop make a written statement that the covered auto has suffered a certain loss in value due to an accident, PP 13 01 excludes such a loss from coverage.
This endorsement was a new one that accompanied the 2005 PAP. It provides coverage for extra expenses incurred by the insured when a covered physical damage loss, or mechanical or electrical breakdown, occurs more than 100 miles away from the insured's home, and the covered vehicle is withdrawn from use at least twenty-four hours. The endorsement provides up to $600 for transportation expenses (not defined) and lodging and meals.
Endorsement PP 03 02 optional limits transportation expenses coverage adds higher limits of transportation expenses coverage to the $20 per day/$600 maximum policy limit; PP 03 03 towing and labor costs provides limits of $25, $50, or $75; endorsement PP 13 02 gives an extra layer of protection by including lodging and meals expenses when a covered loss occurs away from home. For example, if the insured vehicle's engine seizes up over 100 miles from the insured's home, necessitating towing, a rental car, meals, and an overnight stay in a motel, coverage D transportation expenses coverage will not respond because it appears that no covered loss occurred (of course, it could be determined later that a rock damaged the oil pan, but in the meantime the insured is still without transportation). If the insured has PP 03 03 and PP 13 02, towing to a garage and the overnight expenses as well as rental reimbursement should be covered.
This endorsement also was new with the 2005 PAP revision. Previously, PP 03 33 certificate of insurance – trusts was issued, which stated that vehicles owned jointly by the named insured and spouse and a trust were covered under Part A – Liability coverage. However, in most instances vehicles are not jointly owned because title has been transferred to the trust. This endorsement amends the definitions so that a "private passenger type auto, pickup or van shall be deemed to be owned by a person if title is transferred to the trust shown in the Schedule or in the Declarations." If the trustee is other than the named insured, that individual must be shown in the endorsement schedule. Should the policy terminate, the trustee will receive notice.
This endorsement, also new with the 2005 edition of the PAP, provides coverage for a regularly furnished vehicle that is used as a livery or public conveyance. Current endorsement PP 03 06 01 05 does not delete the exclusion of coverage under the PAP for a regularly furnished auto while it is being used as a livery or public conveyance; the PP 13 05 01 05 fills this gap.
For more information, see Extended Nonowned Coverage.
This endorsement amends the liability coverage part of the PAP by excluding liability coverage for the ownership, maintenance or use of the named insured's covered auto while enrolled in a personal vehicle sharing program under the terms of a written agreement, and while being used in connection with such personal vehicle sharing program by anyone other than the named insured or any family member. Medical payments and uninsured motorists and underinsured motorists coverages are treated in a similar manner.
Coverage for damage to the named insured's covered auto is also excluded under the vehicle sharing program. Loss to or loss of use of a nonowned auto used by the named insured or any family member is excluded in connection with a personal vehicle sharing program if the provisions of such a personal vehicle sharing program preclude the recovery of such loss or loss of use from you or that family member, or if otherwise precluded by any state law.
This endorsement begins by defining transportation network platform. This term means an online-enabled application or digital network used to connect passengers with drivers using vehicles for the purpose of providing prearranged transportation services for compensation.
PP 23 40 also revises the exclusions pertaining to using the vehicle as a public or livery conveyance. The exclusions are revised to add the following clause: "This includes but is not limited to any period of time a vehicle is being used by any insured who is logged into a transportation network platform as a driver, whether or not a passenger is occupying the vehicle."
The revised exclusionary wording applies to the liability, med pay, and coverage for damage to the named insured's auto coverages. The exclusions do not apply to a share-the-expense car pool.
This endorsement defines transportation network platform just as it appears in PP 23 40. Then, the endorsement revises the public or livery conveyance exclusions to allow coverage for the ownership or operation of a vehicle that is being used by an insured who is logged into a transportation network platform described in the endorsement's schedule or in the declarations as a driver, and while a passenger is not occupying the vehicle. The vehicle has to be described in the schedule of the endorsement or in the declarations and a specific premium charge indicates that coverage is provided for such vehicle.
This endorsement is similar to PP 23 41 with the exception of the following phrase that is added to the exception clause: "that driver has not accepted a request through the transportation network platform to transport a passenger."
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