Property & Casualty Insurance Exam (National Portion)Casualty InsuranceMedium
An insured driver causes an accident, resulting in $40,000 in bodily injury to another party. The insured's Personal Auto Policy (PAP) has a bodily injury liability limit of $50,000 per person / $100,000 per accident. The insured is found legally liable, and supplementary payments are incurred. Which of the following would NOT be covered under the PAP's Supplementary Payments provision?
- ALoss of earnings for the insured while attending hearings or trials at the insurer's request.
- BExpenses incurred by the insured for defense of the claim, including attorney fees.
- CThe $40,000 bodily injury judgment against the insured.
- DUp to $250 for the cost of bail bonds required because of the accident.
Show answer & explanationAnswer & explanation
Correct answer: C. The $40,000 bodily injury judgment against the insured.
Supplementary Payments cover expenses like defense costs, bail bonds, and loss of earnings, which are paid in addition to the policy's liability limits. The actual bodily injury judgment ($40,000) is paid under the Bodily Injury Liability coverage, not Supplementary Payments.
Why the other options are wrong
- A. This is a standard supplementary payment.
- B. This is a standard supplementary payment.
- D. This is a standard supplementary payment.
PAP Supplementary Payments
Additional payments made by the insurer in a Personal Auto Policy (PAP) that are outside of and in addition to the policy's stated liability limits. These cover specific expenses related to a liability claim.
- Paid in addition to liability limits.
- Includes defense costs, bail bonds, and appeal bonds.
- Also covers loss of earnings for attending trials at insurer's request.
Memory trick: Supplementary Payments are the 'extra help' that goes 'beyond the limit' to manage your legal mess.