8.2 Limit Of Liability Copy

Topic Progress:

The limit of liability clause distinguishes between a limit for bodily injury liability and a limit for property damage liability.

An example is $100/$300/$50.

The $100 represents maximum bodily injury per person per accident, the $300 represents the maximum bodily injury per accident, and the $50 the maximum property damage per accident. These numbers are in Increments of $1,000.

The BI liability limit shown in the declarations for each person is the maximum limit of liability for all damages arising out of BI sustained by anyone person in anyone auto accident. In other words, the PAP has a limit to the amount that anyone person can receive in anyone accident; as an example, if the stated limit is $5,000, that is the most anyone person can receive, regardless of the total amount of BI damages that are suffered.

The property damage liability limit is the amount shown in the declarations and is on each accident basis. The amount shown in the declarations is the maximum limit of liability for all property damage resulting from anyone auto accident. If this stated amount is $25,000, the most the insurer will payout into for PD in anyone auto accident, regardless of the number of cars involved in the accident or the number of vehicles shown in the declarations.

Out of State Coverage

The out of state provision in the PAP offers a liberalization of coverage. An insured involved in an out of state auto accident is provided the coverages of his or her policy as usual, and if the state (or Canadian province) where the accident occurs has a financial responsibility law calling for higher limits than the named insured has on his or her PAP this clause grants those higher limits.

The out of state coverage clause also declares that if the state where the accident occurs has a compulsory insurance law requiring a nonresident to maintain insurance, the PAP will provide at least the required minimum amounts and types of coverage. This last phrase might seem to indicate that if the accident-scene state required no-fault coverage and the named insured did not purchase that type of coverage, the personal auto policy would provide it automatically.

Financial Responsibility

This clause declares that when the auto policy is certified as future proof of financial responsibility, this policy shall comply with the law to the extent required. Now, financial responsibility laws require drivers who have been involved in accidents or who have been convicted of certain offenses (such as driving under the influence) to maintain proof of financial responsibility for future reference. Most people in this situation use liability insurance as their proof and this clause aids their cause.

The limit of liability clause also prohibits duplicate payments. This means that if the injured claimant receives payments under part A of the PAP (liability coverage), that same’ claimant will not be entitled to payments under part B (medical payments coverage) or ‘Part C (uninsured motorists coverage) for the same elements of loss.

Supplementary Payments

The supplementary payments made under the terms of the PAP are in addition to the limit of liability. There are five supplementary payments noted on the PAP and they are paid on behalf of “an insured”; this means the named insured, family members, and any other who meet the definitions of “insured” as listed on the PAP:

• The first supplementary payment is up to $250 for the cost of bail bonds.
• The second supplementary payment is for premiums on appeal bonds and bonds to release attachments in any suit defended by the insurer
• The third payment is for interest accruing after a judgment is entered in any suit defended by the insurer.
• The insurer promises to pay up to $100 a day for loss of earnings of an insured if that, insured attends hearings or trials at the request of the insurer. This supplementary payment applies only to loss of earnings, not other income
• The last supplementary payment is a rather all-inclusive one-other reasonable expense incurred at the request of the insurer.