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By Chris Boggs, Big “I” Virtual University Executive Director

​Insurance Services Office (ISO) filed 30 changes to its personal auto policy (PAP) program with an effective date of Sept. 1, 2018. Nine (really 10) changes are being made to the base PAP form (PP 0 01) and 21 endorsements were either revised, removed or created.

This article focuses on the nine (really 10) changes to the “base” personal auto policy – the PP 00 01. None of the new or altered endorsements are discussed in this article. Stay tuned for that information.

ISO cites nine changes to the PP 00 01; however, when studied closely, what is reported as nine changes to the base form is really 10 changes. Each change is briefly described in the following paragraphs; and a few opinions are expressed.

Newly Acquired Auto Wording
In prior personal auto policy forms, insureds were granted automatic coverage for the remainder of the policy term when a replacement vehicle was purchased (the insured sold or traded in their 2006 Chevy Malibu for a 2018 Jaguar XJ). The insured was not required to tell the carrier about the vehicle for coverage parts A (Liability), B (Medical Payments) and C (Uninsured Motorist) to apply for the remainder of the policy term.

The only coverage that did not automatically continue to the end of the policy term was Part D (Physical Damage). If the insured wanted collision and/or other-than-collision (OTC), the insurance carrier needed to be notified of the newly acquired vehicle and the desire for the coverage. The amount of time required for such notification depended upon whether the insured’s policy already provided collision and/or OTC coverage or not:

  • If at least one vehicle on the policy had OTC and/or collision, the insured had 14 days to notify the carrier of the newly acquired vehicle and the desire for coverage. The coverage was backdated to the date of acquisition if this requirement was met; or
  • If no vehicle on the policy had OTC and/or collision, the insured only had four days to provide notice for coverage to be effective back to the date of acquisition.

(Note: these notification requirements apply separately to OTC and collision. If the car had collision but not OTC, the insured had to notify the insurer within four days to garner OTC back to the date of acquisition. If the inured only wanted collision on the newly acquired vehicle, they had 14 days to notify the carrier.) 

So, what has changed in the new form wording? Now the insured is required to notify the insurance carrier of any newly acquired vehicle—whether it’s an additional vehicle or a replacement vehicle—within 14 days to pick up any coverage as of the date of acquisition. There is no longer any automatic coverage granted for the remainder of the policy term.

ISO made this change to allow carriers the ability to change the coverage symbol and charge the correct premium when necessary.

Public or Livery Conveyance Exclusion
Two changes are being made to this exclusionary wording: 1) The exclusionary wording currently found in the PP 23 40 Public or Livery Conveyance Exclusion is being incorporated into the base coverage form; and 2) an exception for volunteer or charitable use of a vehicle is being added to the form.

Currently, when an insurance carrier desires to specifically exclude any activities or exposures arising from the use of a covered vehicle as part of a transportation network platform (Uber, Lyft, etc.), the PP 23 40 is attached. This wording states that when the app is turned on, coverage provided by the PAP ceases. This exclusionary wording will now be included in the PAP and allows for the removal of this endorsement.

ISO also addressed concerns in this section that the public or livery conveyance exclusion might be misapplied when a vehicle is used for volunteer or charitable purposes (Meals on Wheels, volunteer medical transportation or other such activities). The concern obviously being that a carrier might attempt to apply the exclusion, for example, when someone is driving an elderly person to a medical
appointment as part of volunteer activities. New exception wording specifically states that the exclusion does not apply when the vehicle is being used for volunteer or charitable purposes.

Personal Vehicle Sharing Program Exclusion
Endorsement (PP 23 16) As the name suggests, this required endorsement specifically excludes coverage for any vehicle that is enrolled in AND being used in a vehicle sharing program. When both requirements of enrollment and active use are met, PAP coverage ceases.

ISO is withdrawing the endorsement and including the exclusionary wording within the PP 00 01.

​Custom Equipment Exclusion Endorsement (PP 13 06)
Wording from this required endorsement is being incorporated into the PAP wording. As a result, ISO is withdrawing this endorsement.

The exclusionary wording removes coverage for custom equipment such as (not a complete list): Special carpeting or insulation; furniture or bars; height-extending roofs; body, engine, exhaust or suspension enhancers; winches, or anti-roll or anti-sway bars; custom grilles, louvers, side pipes, hood scoops or spoilers; custom wheels, tires or spinners; custom chrome, murals, paintwork, decals or other graphics; or caps, covers or bedliners.

In the current (soon to be prior) edition of the PAP, coverage for some custom equipment is already excluded. But in the 05 edition, the policy specifically states that the exclusion does NOT apply to a cap, cover or bedliner in or upon any “your covered auto” which is a pickup. These items will now be excluded.

The newly incorporated wording allows coverage for the first $1,500 of custom equipment. If more coverage is needed, the insured must attach the Excess Custom Equipment Coverage (PP 03 18) endorsement. 

ISO states that there is no impact on coverage; this statement does not appear to be true. Items that were specifically excepted from the exclusion are now excluded; and where there was no coverage for any special equipment previously, there is now up to $1,500. This change creates a reduction and broadening of coverage.

Racing Exclusion
ISO is expanding the current racing exclusion to exclude coverage for any vehicle located inside a facility designed for racing for the purpose of participating in any prearranged or organized driver skill training or driver skill event.

Industry desire to exclude activities related to racing is reasonable; but this is an unreasonable expansion of the exclusion. Now any activities occurring on or at a racing facility in an attempt to improve driver skill are excluded.

I want my 17-year-old daughter to become a better driver (and who doesn’t want their teenagers to be better drivers). As a result of this desire, I register her for a driver skill training class conducted at Charlotte Motor Speedway (about 30 minutes from my house). When this wording takes effect, I will have no coverage under my PAP for any injury or damage she may cause as a result
of these activities.

This exclusion is short-sighted and a very bad idea. Why would the industry want to punish their insureds when they are trying to improve their driving skills, doesn’t that ultimately improve results on the road and in ultimate claims payouts? I understand excluding the race training, but I just am at a loss why there would be no coverage when I undertake to improve my kid’s driving skills.

Flying Car Exclusion
Currently, there are no viable flying cars (though many are trying to build them) and there is no flying car exclusion within the PAP or by endorsement, so ISO is getting way ahead of the game. ISO believes technology and economics will soon or eventually allow for flying cars. I can’t say I disagree with this opinion.

Because of this belief, new policy wording excludes injury or damage arising from, related to, or occurring as a result of flying cars. So even getting hit by a car that can fly will be excluded under med pay.

In reality, there is currently no effect as a result of this additional wording, but eventually this may be a limitation on or reduction of coverage. This is a total exclusion—the vehicle does NOT have to be flying at the time—the requirement excludes coverage when the vehicle is designed and able to fly.

Other Insurance Clarification
In Coverage Part A, the current policy wording reads, “However, any insurance we provide for a vehicle you do not own, including any vehicle while used as a temporary substitute for “your covered auto,” shall be excess over any other collectible insurance.” The problem with this wording is that personal umbrella polices generally state they are excess over any other insurance.

Because two policies state they are excess over other policies, this lead to confusion in the courts since both policies stated they were excess. To solve this confusion, ISO added wording to the Other Insurance provision in Part A to recognize the possibility of an umbrella and state that it is not excess over a policy that is intended and is specifically an excess policy: “except insurance written specifically to cover as excess over the limits of liability that apply in this policy.”

There is no real coverage effect resulting from this change, just a clarification of intent.

Transportation Expense Coverage
ISO’s unendorsed transportation expense limit provided in Coverage D is currently $20 per day / $600 maximum. ISO states this limit does not appear to have kept up with market conditions. To remedy this market realities issues, ISO is increasing the base transportation expense limit to $30 per day / $900 maximum.

This change has no effect on coverage; it is simply a limits increase.

Duties After a Loss
Part E B.3.b. in the Duties After an Accident or Loss provision requires the insured to submit “as often as reasonably requested” to examination under oath. But, there is currently no specific requirement that the insured provide a recorded statement if requested by the carrier. Thus, the insured could refuse such a request without violating the duties owned and such refusal would not endanger their coverage.

ISO is adding wording requiring the insured to submit as often as reasonably required to recorded statements. According to ISO, gathering a recorded statement is less expensive and less time consuming than an examination under oath.

An additional duty is being placed upon the insured as a result of this change. This change leads to some questions: How often is reasonable? Might this result in carriers looking for more opportunities to search for misrepresentation or fraud?

That’s All – For Now
Remember, these changes represent wording now included in the base PAP (PP 00 01). The reason I point this out again is because some of the newly included policy language should probably be endorsements; but they are not. 

Some of the new wording gives rise to unique questions and problems. Stay tuned to see if any problems result from these changes.

​​Copyright 2018 Independent Insurance Agents & Brokers of America, Inc. All rights reserved. Republished with permission.

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