What Is Covered Under Auto Liability Insurance?

Part A of the PAP provides bodily injury and property damage liability protection to any insured who is legally responsible for an automobile accident. As with other liability policies, the insurer agrees to pay defense costs until the limit of liability has been exhausted by payment of judgments or settlements.

The auto liability insurance limits are selected by the applicant and apply to each covered accident. The latest version of the PAP is written with split limits, but it can be endorsed to provide single limit coverage. With split limits, there are three separate dollar amounts, such as $20,000/$40,000/ $15,000, that apply to each accident. The first limit is the maximum amount that will be paid to any one person for bodily injury; the second limit is the aggregate that will be paid for all bodily injury claims; and the third limit applies to aggregate property damage claims.

With a single limit, there is one amount that applies in the aggregate to all bodily injury and auto insurance liability claims arising from an accident. The limits available often range from $50,000 to $500,000 or more. John Smith’s PAP provides split limits under Part A of $500,000/$1,000,000/$50,000. In an auto accident, John injures two people in another car. One is awarded damages of $750,000 and the other is awarded damages of $300,000. Their car, worth $60,000, is totally demolished. The insurer will pay only $500,000 of the $750,000 award because that is the per person policy limit for bodily injury. The policy will pay the full $300,000 to the other person. In addition, the policy will only pay $50,000 for the damage to the car because that is the policy’s property damage limit.

The auto insurance policy specifies that the insurer's limit of liability shown in the declarations is the most the company will pay regardless of the number of insureds, claims made, vehicles or premiums shown in the declarations, or vehicles involved in any accident. For example, if a son has an accident while driving a family car, the son and both parents might be sued. The policy limits only apply once, not three times. An identical provision applies to Part B and Part C of the PAP. In addition, the policy specifies that no one is entitled to receive duplicate payments for the same elements of loss under more than one of Part A, Part B, and Part C of the policy. For example, an injured passenger who sued an insured could not receive a liability payment under Part A for specific medical expenses and medical payments  under Part B for the same medical expenses.

The auto policy also contains a provision that adjusts the limits of liability insurance to those required in a state where an accident occurs if it is a state other than the one where the insured vehicle is principally garaged. Any other required coverage, such as no-fault benefits, are also provided for out-ofstate accidents.

The PAP also provides certain supplementary payments for expenses arising from an accident covered by the policy. These payments, like defense costs, are in addition to the stated liabilitylimits. They are

• · up to $250 for bail bonds
• · premiums on appeal bonds and bonds to release attachments
• · interest occurring after a judgment
• · up to $200 per day for loss of earnings because of attendance at hearings or trials
• · other reasonable expenses incurred at the insurer’s request

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