Chapter 5 – General Provisions, Definitions, and Exclusions Narrative/Applications

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Chapter 5 – General Provisions, Definitions, and Exclusions Narrative/Applications
2014-02-24 13:02:05
Chapter – General Provisions Definitions Exclusions Narrative Applications

Chapter 5 – General Provisions, Definitions, and Exclusions Narrative/Applications
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  1. Describe the coverage provided under borrowed (other) automobile.
    Other Automobile

    - The policy also covers other automobiles not owned by the insured,

    o But driven by the insured

    o Or the insured’s spouse who lives with her,

    o   Subject to certain conditions.

    - The word “borrowed” does not appear in the policy wording.

    - It is used here to try to convey the type of automobile for which the policy would provide coverage.

    - The coverage provided by the policy is the same as for temporary substitute automobiles except that no physical damage coverage applies.

    - Any automobile of the private passenger

    o Or station wagon type,

    o Other than the described automobile, is covered while personally driven by the insured

    o   Or by the insured’s spouse who lives in the same dwelling,

    o Provided that the described automobile is of the private passenger or station wagon type;

    o The insured is an individual,

    o Or the insureds are spouses of each other;

    o The automobile is not being driven by the insured or the insured’s spouse in connection with a garage business;

    o The automobile is not owned or regularly or frequently used by the insured

    o Or by any person or persons residing in the same dwelling premises as the insured;

    o The automobile is not owned,

    o Hired,

    o Or leased by an employer of the insured

    o Or by an employer of any person or persons residing in the same dwelling premises as the insured;

    o And the automobile is not used for carrying passengers for compensation

    o Or hire or for commercial delivery.
  2. Explain the coverage provided for 2 or more vehicles that are :

    a) Insured under one policy.

    b) Insured under separate policies.

    c) An automobile with a trailer attached.
    a) Insured under one policy. 

    2 or more Automobiles – Insured by the Same Policy

    - When 2 or more automobiles are insured by the same policy, each automobile is considered as though it were insured by a separate policy.

    - This avoids confusion about limits

    o And coverage that could arise when 2 of the insured automobiles are involved in accidents.

    - When an insured is using or operating a non-owned automobile, such as a temporary substitute

    o Or borrowed automobile,

    o The insurer is only liable for an amount up to the highest limit applicable to any one automobile described under the policy.

    b) Insured under separate policies.

     2 or More Automobiles – Insured by Separate Policies 

    - An insured who owns 2 or more automobiles can have separate policies issued by different insurers for each automobile.

    - If an accident occurs while a temporary substitute automobile or borrowed automobile is being used, the loss is pro-rated between the insurers.

    - The limit of liability for all insurers combined will be equal to the highest limit provided by any one policy.

    - This clause ensures that a loss is shared fairly between competing insurers with different Third Party Liability limits.

    c) An automobile with a trailer attached.                                            

    - An automobile with a trailer attached is considered one vehicle under Third Party Liability coverage and Accident Benefits.

    - Thus, if an insured has $1 million of the Third Party Liability coverage, only $1 million would be available to cover both the automobile

    o   And the trailer.

    - The automobile and trailer are considered separate vehicles under physical damage coverage.

    - This allows the insured to purchase different coverages for each vehicle.

    - For instance, an insured might purchase collision coverage for the automobile but not for the trailer.

    - Any deductible under physical damage coverage would be paid separately for each vehicle the insured.

    - A loss could also involve 2 or more vehicles owned by different persons

    o And attached each other,

    o Such as an automobile towing a borrowed trailer.

    - In such cases, the insurer of each vehicle will compensate its insured for losses according to the terms of the optional physical damage coverage

    o Or recover individually from the party responsible for the damage.
  3. You are a broker and you are in the process of selling an MSPF 1 to a potential client for his 8-passenger minivan. Your client has some concerns and a few questions. Provide detailed answers to each of your client’s questions below. 

    a) My entire family is planning a road trip through parts of Canada, the U.S.A., and Mexico. What kind of coverage will this policy provide us with?

    b) If I buy a new car, will it be covered under this policy?

    c) I have a camping trailer that we will be pulling during the road trip. Do I need to insure it?

    d) Is coverage provided if we use the vehicle for a business offering sightseeing adventures? We will only be charging tourists $5.00 for the trip.
    a) Territory

    - Coverage will be provided when travelling through Canada and the U.S.A but not to Mexico.

    - This provision specifies that the policy applies only while the automobile is being operated,

    o Used,

    o Stored,

    o Or parked within Canada,

    o The U.S.A.,

    o Or upon a vessel plying between ports of those countries.

    - There is no coverage if an automobile is used or stored in Mexico.

    - Automobile insurance must be purchased from a Mexican insurer before crossing the border.

    b) Newly Acquired Automobile 

    - The new vehicle will be covered.

    - When an insured purchases an additional or replacement automobile, coverage is automatically extended to it,

    o Subject to certain conditions.

    - The insured must notify the insurer within 14 days of taking possession of the newly acquired automobile.

    - This gives her time to have the change to her policy properly recorded.

    - However, if an insured has other valid insurance on the newly acquired automobile

    o Or if the same insurer does not insure all automobiles owned by her,

    o Coverage does not extend to the newly acquired automobile.

    - Also, the insured must not be engaged in the business of selling automobiles.

    - Note that the 14 days of coverage are automatic but not free.

    - Once notified, the insurer will issue an endorsement charging a premium from the date the insured took possession of the new automobile.

    - If an insured has insurance for more than 1 automobile, only coverages that are on all insured automobiles extend to the new automobile.

    - Thus, if an insured already has 2 automobiles insured, 1 with collision and the other without, there would be no collision on a newly acquired automobile.

    - Similarly, if the existing insured automobiles have different deductibles, then the higher deductible applies to the newly acquired automobile.

    c) Trailers

    - The trailer will be covered.

    - The MSPF 1 gives unlimited permission to the insured to pull trailers;

    o It does not differentiate between owned or non-owned trailers.

    - Third Party Liability coverage and Accident Benefits will apply to any trailer used in connection with the automobile.

    - If the insured requires physical damage coverage on an owned trailer, then she must list it as a described automobile in the policy and purchase appropriate coverage.

    - Liability coverage will not apply to an unattached trailer unless a premium is charged.

    - Since there are many liability hazards associated with an unattached trailer, a prudent insured will purchase specific liability coverage on a trailer.

    d) Excluded Uses 

    - Coverage will not be provided.

    - This exclusion states that unless coverage is expressly given by endorsement, the insurer will not be liable under this policy while the automobile is used as a taxicab,

    o Public omnibus,

    o Livery,

    o Jitney,

    o Or sightseeing conveyance or for carrying passengers for compensation

    o   Or hire.