Property & Casualty Insurance Exam (National Portion)Casualty InsuranceHard
A client has a Personal Auto Policy (PAP) with liability limits of $50,000 per person / $100,000 per accident. The client causes an accident, and the court awards $75,000 in damages to one injured party. The policy also includes Supplementary Payments. Which of the following would NOT be covered under Supplementary Payments in this scenario?
- AUp to $250 for the cost of bail bonds.
- BInterest accruing on the judgment after entry.
- CThe $25,000 portion of the judgment exceeding the policy's per-person limit.
- DEarnings lost by the insured due to attending a trial at the insurer's request.
Show answer & explanationAnswer & explanation
Correct answer: C. The $25,000 portion of the judgment exceeding the policy's per-person limit.
Supplementary Payments cover various expenses related to a liability claim, such as defense costs, bail bonds, and loss of earnings. However, they do not extend the policy's liability limits. The $25,000 portion of the judgment exceeding the $50,000 per-person limit is the insured's responsibility, not covered by Supplementary Payments.
Why the other options are wrong
- A. Bail bonds are a standard Supplementary Payment.
- B. Interest on judgments is a standard Supplementary Payment.
- D. Loss of earnings while attending trial at the insurer's request is a standard Supplementary Payment.
Supplementary Payments (PAP)
Additional payments provided by a Personal Auto Policy (PAP) that cover certain expenses related to a liability claim, separate from and in addition to the policy's stated liability limits.
- Paid in addition to the liability limits.
- Includes defense costs, bail bonds, appeal bonds, interest on judgments, loss of earnings.
- Does NOT increase the primary liability coverage amount for damages.
Memory trick: Supplementary Payments are the 'extra helpers' for legal costs, not for boosting the main liability payout.