A client has a Personal Auto Policy (PAP) that includes Supplementary Payments. The insured is involved in an accident and is sued. Which of the following expenses would typically be covered under Supplementary Payments, in addition to the liability limits?
- ALoss of earnings for the insured due to missing work for the trial, up to $250 per day.
- BAttorney fees for the at-fault insured's defense.
- CCost of bail bonds required because of the accident, up to $2,000.
- DPre-judgment interest on the amount owed by the insured.
Show answer & explanationAnswer & explanation
Correct answer: B. Attorney fees for the at-fault insured's defense.
Supplementary Payments in a PAP are designed to cover various expenses associated with a liability claim, in addition to the policy's stated liability limits. These typically include the cost of defense, such as attorney fees, court costs, and investigation expenses. While some supplementary payments cover bail bonds (usually up to $250) and loss of earnings (usually up to $250 per day for attending hearings), attorney fees for the insured's defense are a core component.
Why the other options are wrong
- A. Loss of earnings is typically covered, but the limit is usually lower, such as $250 per day, not 'up to $250 per day' as an exclusive or primary focus, and the question asks what would *typically* be covered *in addition* to liability limits, and defense costs are a more fundamental aspect.
- C. Bail bonds are covered, but usually up to a specific, lower amount (e.g., $250), not generally $2,000.
- D. Post-judgment interest on the portion of the judgment the insurer pays is typically covered, but pre-judgment interest on the total amount owed is less common or limited.
PAP Supplementary Payments
Supplementary Payments in a Personal Auto Policy (PAP) cover specific expenses related to a liability claim, such as defense costs, bail bonds, and loss of earnings, paid in addition to the policy's liability limits.
- Paid in addition to liability limits.
- Covers defense costs (attorney fees, court costs).
- Includes limited amounts for bail bonds and loss of earnings.
- Also covers post-judgment interest.
Memory trick: Extra cash for court, bail, and missing work.