Personal Auto Policy Practice Test (Part 2 of 2)

Correct answer: B. Other Than Collision, because hitting an animal is listed as an other than collision loss

The PAP defines collision as the upset of the vehicle or its impact with another vehicle or object, but it then lists losses considered other than collision, including contact with a bird or animal, missiles or falling objects, fire, theft, windstorm, hail, flood, vandalism and glass breakage. Hitting a deer is therefore an Other Than Collision loss, even though it involves an impact.

Reference: ISO PP 00 01 09 18, Part D Insuring Agreement B

Correct answer: D. She may elect to have the glass breakage treated as part of the collision loss

Breakage of glass is listed as an Other Than Collision loss, but the policy adds that if glass breakage is caused by a collision, the insured may elect to have it considered a collision loss. Electing Collision here lets Jasmine apply the single $250 Collision deductible to the fender and windshield together, instead of a separate $500 deductible on the glass.

Reference: ISO PP 00 01 09 18, Part D Insuring Agreement B.10

Correct answer: A. $300

For a total theft, transportation expenses are payable only from 48 hours after the theft until the car is returned to use or the loss is paid, leaving 10 payable days. The 2018 edition pays up to $30 a day, to a $900 maximum, with no deductible: 10 x $30 = $300. $360 ignores the 48-hour waiting period, and $450 uses the rental rate instead of the $30 cap. The older PP 00 01 01 05 paid $20 a day.

Reference: ISO PP 00 01 09 18, Part D Transportation Expenses A and B.1

Correct answer: C. No, because a vehicle furnished for her regular use is not a "non-owned auto"

Part D covers a "non-owned auto," meaning a private passenger auto, pickup, van or trailer not owned by or furnished or available for the regular use of the named insured or a family member, while in their custody or operation. A car furnished for Nadia's regular use falls outside that definition. An occasionally borrowed car would qualify, with coverage excess over the owner's insurance.

Reference: ISO PP 00 01 09 18, Part D Insuring Agreement C ("non-owned auto")

Correct answer: A. All four tires slashed by a vandal in a parking lot

Part D excludes damage due and confined to wear and tear, freezing, mechanical or electrical breakdown or failure, and road damage to tires, unless the damage results from a total theft of the auto. Slashed tires are caused by vandalism (malicious mischief), a listed Other Than Collision peril, so that loss is covered. A pothole rupture confined to the tire is road damage and is excluded.

Reference: ISO PP 00 01 09 18, Part D Exclusions 2

Correct answer: B. $1,000

Electronic equipment that reproduces, receives or transmits audio, visual or data signals is excluded unless it is permanently installed in the auto. When it is permanently installed in a location the manufacturer did not use for such equipment, the most Part D pays is $1,000. The $1,500 figure is the separate custom equipment limit. Higher electronics limits are available through the Excess Electronic Equipment endorsement, PP 03 13.

Reference: ISO PP 00 01 09 18, Part D Exclusion 4 and Limit of Liability A.b

Correct answer: B. Up to $1,500

The 2018 edition excludes custom equipment, but the exclusion does not apply to the first $1,500 of custom equipment in or upon the covered auto or a non-owned auto, and $1,500 is the limit of liability for it. Custom equipment means non-original items such as custom wheels, paint, murals, special carpeting or bedliners. The $1,000 figure is the cap for electronics installed outside factory locations.

Reference: ISO PP 00 01 09 18, Part D Insuring Agreement D, Exclusion 10 and Limit of Liability A.c

Correct answer: D. Either party may demand appraisal; each selects an appraiser, and the two appraisers select an umpire

If the parties disagree on the amount of loss, either may demand appraisal. Each selects a competent and impartial appraiser, and the two appraisers select an umpire. The appraisers state actual cash value and amount of loss separately, differences go to the umpire, and a decision agreed to by any two is binding. Each side pays its own appraiser and shares the other appraisal and umpire costs equally.

Reference: ISO PP 00 01 09 18, Part D Appraisal

Correct answer: C. It prevents the garage, a bailee for hire, from using the customer's policy to escape its own responsibility

The PAP states that the insurance shall not directly or indirectly benefit any carrier or other bailee for hire. The insurer can pay its own insured for covered damage and then pursue the garage through subrogation, and the garage cannot rely on the customer's coverage to avoid paying. The provision does not suspend coverage or force the insured to sue the bailee first.

Reference: ISO PP 00 01 09 18, Part D No Benefit to Bailee

Correct answer: A. No, because the policy excludes vehicles inside a racing facility for organized driver skill training

The 2018 edition excludes loss to a covered auto located inside a facility designed for racing for the purpose of participating in, practicing or preparing for any prearranged or organized racing or speed contest, or driver skill training or driver skill event. The older PP 00 01 01 05 wording mentioned only racing or speed contests, which is why the training-course argument is tempting.

Reference: ISO PP 00 01 09 18, Part D Exclusion 12

Correct answer: D. The policy requires her to submit to recorded statements as often as the insurer reasonably requires

Part E requires a person seeking any coverage to cooperate and to submit, as often as the insurer reasonably requires, to physical exams by insurer-selected physicians, examination under oath, and recorded statements, which the 2018 edition added. The insurer has no duty to provide coverage only if a failure to comply with these duties is prejudicial to it.

Reference: ISO PP 00 01 09 18, Part E Duties After an Accident or Loss B.3

Correct answer: A. An accident while driving in Mexico

The policy territory is the United States of America, its territories or possessions, Puerto Rico, and Canada. Coverage also applies to the covered auto while it is being transported between their ports. Mexico is not part of the territory, so a driver going there needs separate coverage arranged before the trip.

Reference: ISO PP 00 01 09 18, Part F Policy Period and Territory B

Correct answer: C. No, because after 60 days cancellation is allowed only for listed reasons, and claim frequency is not one

During the first 60 days of a new policy, the insurer may cancel with at least 10 days' notice. After 60 days, or on a renewal, it may cancel only for nonpayment of premium, suspension or revocation of the license of a resident or customary driver, or material misrepresentation. State laws may add further requirements, but claim frequency is not a permitted midterm reason.

Reference: ISO PP 00 01 09 18, Part F Termination A

Correct answer: D. No, because Part D subrogation is waived against a person who reasonably believes they may use the auto

Under Our Right to Recover Payment, the insurer is subrogated to the rights of the person it paid. However, that right does not apply under Part D against any person using "your covered auto" with a reasonable belief that he or she is entitled to do so. Marco had permission, so the insurer cannot pursue him for the Collision payment. Subrogation against other responsible parties remains available.

Reference: ISO PP 00 01 09 18, Part F Our Right to Recover Payment A

Correct answer: B. Total loss, because $8,500 plus $4,000 exceeds the $12,000 ACV

Under the total loss formula, add the repair estimate and the salvage value and compare the sum to ACV: $8,500 + $4,000 = $12,500, which exceeds $12,000, so paying ACV and selling the salvage costs less than repairing. Other states use a fixed percentage threshold (such as 75% or 80% of ACV), so the method depends on state law and insurer practice.

Reference: Matthiesen, Wickert & Lehrer, Automobile First-Party Total Loss and Salvage Title Laws in All 50 States

Correct answer: A. $7,700

When the owner keeps the salvage, the insurer pays the actual cash value minus the deductible and minus the salvage value it gives up by not taking the vehicle: $10,000 - $500 - $1,800 = $7,700. $9,500 would be the payment if the insurer took the salvage. State title laws may require the retained vehicle to carry a salvage brand, and some states restrict owner retention.

Reference: Matthiesen, Wickert & Lehrer, Automobile First-Party Total Loss and Salvage Title Laws in All 50 States

Correct answer: C. The pre-loss market value of comparable vehicles, adjusted for mileage, options and condition

ACV reflects what the vehicle was worth just before the loss. Adjusters compare similar vehicles sold in the local market, valuation guides or databases, and adjust for mileage, equipment and condition. The PAP states that an adjustment for depreciation and physical condition will be made in determining ACV in a total loss. A loan balance above ACV is the gap that loan/lease coverage addresses.

Reference: ISO PP 00 01 09 18, Part D Limit of Liability B; MWL total loss guide

Correct answer: A. It may deduct betterment, the amount by which the new part leaves Ray better off than before the loss

The PAP states that if a repair or replacement results in better than like kind or quality, the insurer will not pay for the amount of the betterment. Replacing a nearly worn-out battery or tire with a new one improves the car, so the insured typically pays a share reflecting the wear already used up. The wear and tear exclusion does not apply, because collision, not wear alone, destroyed the battery.

Reference: ISO PP 00 01 09 18, Part D Limit of Liability C

Correct answer: C. Parts produced by or for the vehicle's original manufacturer

OEM stands for original equipment manufacturer: parts produced by or for the automaker. Aftermarket (non-OEM) parts are made by independent companies, and recycled parts come from salvage vehicles. Rules on non-OEM parts vary by state, and many states require their use to be disclosed in the written estimate. The PAP itself limits payment to repair or replacement with property of like kind and quality.

Reference: Matthiesen, Wickert & Lehrer, The Use of Aftermarket (Non-OEM) Crash Parts: A 50-State Guide

Correct answer: B. Inherent diminished value, typically pursued as a third-party claim against the at-fault driver's insurer

Diminished value is the difference between a car's pre-accident value and its market value after repair; inherent diminished value is the loss from accident-history stigma even after a flawless repair. First-party collision coverage generally does not pay it, but in most states the at-fault driver's liability insurer must make the claimant whole, which can include diminished value. Rules vary by state.

Reference: Triple-I, What is diminished value?

Correct answer: D. Optional Limits Transportation Expenses Coverage (PP 03 02)

Basic transportation expenses in the 2018 PAP pay up to $30 a day and $900 in total. Endorsement PP 03 02 lets the insured choose higher daily and maximum limits, such as $50 a day up to $1,500. Towing and labor pays for towing and on-site labor for a disabled auto, named non-owner coverage is for people who do not own an auto, and loan/lease coverage addresses the gap after a total loss.

Reference: ISO PP 03 02 Optional Limits Transportation Expenses Coverage, as summarized by FC&S

Correct answer: A. Auto loan/lease coverage, often called gap coverage

Auto loan/lease coverage, ISO endorsement PP 03 35, pays the unpaid amount due on the loan or lease after a total loss, less the Part D payment. It does not pay overdue payments, excess-use charges, warranty or other add-on costs, or late fees. Stated amount coverage typically pays the lesser of the stated amount, ACV or repair cost, so it does not close the gap.

Reference: ISO PP 03 35 Auto Loan/Lease Coverage, as summarized by RNC-Pro

Correct answer: C. $28,000

Under pure comparative negligence, a claimant's recovery is reduced by his own percentage of fault, however large: $40,000 x 70% = $28,000. Under pure contributory negligence, used in only a few jurisdictions, any fault by Andre would bar recovery, producing $0. Modified comparative systems bar recovery once the claimant's fault reaches 50% or 51%, depending on the state.

Reference: FindLaw, What Is Comparative Negligence?

Correct answer: A. It permits a tort suit for pain and suffering only when the injury meets a statutory definition of serious injury

No-fault laws restrict lawsuits for pain and suffering. A verbal (descriptive) threshold allows a suit only when the injury meets the state statute's description of a serious injury. A monetary threshold, by contrast, allows a suit once medical expenses reach a set dollar amount. PIP itself pays medical expenses, lost wages and similar losses regardless of who caused the accident.

Reference: Triple-I, Background on: No-fault auto insurance

Correct answer: B. The arbitration is between the signatory companies, and the insureds are not parties to it

Intercompany arbitration lets insurers and self-insureds resolve subrogation disputes, such as auto physical damage recoveries, without litigation. Arbitration Forums states that the insured is not a party; only the interests of the signatory companies are involved, and companies remain free to handle their own insureds' claims, such as refunding a deductible, as they see fit. Individuals cannot file.

Reference: Arbitration Forums, Inc., Frequently Asked Questions