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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.
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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.
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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.
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