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Overview of Automobile Coverages

Overview of Automobile Coverages 1. Automobile liability coverage 2. Medical payments coverage 3. Physical damage coverage, comprehensive and collision 4. Uninsured motorists coverage Vicarious Liability and the Automobile 1. Agency-principal relationships 2. Family purpose doctrine

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Overview of Automobile Coverages

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  1. Overview of Automobile Coverages • 1. Automobile liability coverage • 2. Medical payments coverage • 3. Physical damage coverage, comprehensive and collision • 4. Uninsured motorists coverage

  2. Vicarious Liability and the Automobile • 1. Agency-principal relationships • 2. Family purpose doctrine • 3. Parents who sign application for license • 4. Permissive use statues

  3. Guest Hazard Laws • 1. At one time, most states had guest laws, which restricted the right of passengers to sue the driver of an auto they occupied. • 2. Injured guest can collect from a negligent driver only if the driver was operating in a grossly negligent manner. • 3. No jurisdiction has adopted a guest law for many years and the laws in many states have been repealed or declared unconstitutional.

  4. Auto Liability Insurance Requirements • 1. As late as 1971, only three states had compulsory auto liability insurance laws. • 2. Currently, 40 states and the District of Columbia have compulsory auto liability insurance laws. • 3. The remainder of the states have Financial Responsibility Laws.

  5. Financial Responsibility Laws • 1. Despite widespread enactment of compulsory auto insurance laws, most states retained financial responsibility laws. • 2. The laws require all parties involved in an accident causing bodily injury or property damage above a specified amount to show proof of financial responsibility. • 3. Sometimes called “free-bite” laws, because proof of financial responsibility is required only after an accident.

  6. Financial Responsibility Laws • 4. Financial responsibility is proved by a certificate of insurance (SR-21) or by depositing cash or securities with the state. • 5. If proof cannot be provided, the individual’s license will be revoked until proof of future financial responsibility (SR-22) is provided.

  7. Insurance for High Risk Drivers • Drivers who cannot obtain auto liability insurance through normal market channels may obtain coverage from an assigned risk plan or alternate “shared market” mechanism: • automobile insurance (assigned risk) plan • reinsurance pool • joint underwriting association • Maryland State Auto Insurance Fund

  8. Criticisms of the Tort System as It Relates to Automobiles • 1. Many persons who are injured remain uncompensated. • 2. Amount of compensation depends on attorney’s skill. • 3. Traditional system is inequitable, overpaying and underpaying. • 4. Traditional system is too expensive.

  9. No-Fault Concept • 1. Under the no-fault concept, no attempt is made to fix blame. • 2. Each party collects for injuries sustained from his or her own insurance company. • 3. Under a pure no-fault system, the right to sue would be abolished.

  10. Types of Auto Reform Laws • 1. Pure no-fault • 2. Modified no-fault • 3. Expanded first party

  11. Typical No-Fault Benefits • 1. Medical Expenses up to specified maximum. • 2. Loss wages up to specified dollar maximum. • 3. Loss of services (e.g., by homemaker) up to specified dollar maximum.

  12. Automobile Insurance Rating Plans • Most automobile insurance rating systems begin with three basic factors • 1. Age and sex of the driver • 2. Use of the auto • 3. Driver’s record

  13. Automobile Rating SystemOperator Classification • Adult Classifications • 1. Principal operator age 75 or over • 2. Principal operator age 65 to 74 • 3. Principal operator age 50 to 64 • 4. Only operator female, age 30 to 49 • 5. All other adult operators

  14. Automobile Rating SystemOperator Classification • Youthful Operator Classifications • 6. Female under 25, not married, owner or principal operator • 7. Male under 25, married • 8. Female under 25, not married, not owner or principal operator • 9. Male under 25, not married, not owner or principal operator • 10. Male under 30, not married, but is owner or principal operator

  15. Automobile Rating SystemUse classification • 1. Pleasure use • 2. To and from work less than 15 miles • 3. To and from work over 15 miles • 4. Business use • 5. Farm use

  16. Driver and Use Rating Factors • Pleasure Under Over BusinessFarmPrincipal Operator Use 15 mi. 15 mi. Use Use • Age 75 & Over 1.00 1.05 1.15 1.20 .85 • Age 65 to 74 .85 .90 1.00 1.05 .70 • Age 50 to 64 .80 .85 .95 1.00 .65 • Female, age 30 to 49 1.00 1.05 1.15 1.20 .85 • Other Adult Operator 1.00 1.05 1.15 1.20 .85

  17. Automobile Rating System • Youthful operator discounts • 1. Drivers training credit • 2. Good student discount

  18. Sample: Youthful Driver Rating Factors • Pleasure or To Work or SchoolYouthful Operator Age Farm Useor Business Use • Unmarried F (Not O/PO) Under 21 2.10 2.25 • Unmarried F (Not O/PO) 21 - 24 1.30 1.45 • Unmarried F (O/PO) Under 21 2.60 2.75 • Unmarried F (O/PO) 21 - 24 1.60 1.75 • Unmarried M (Not O/PO)Under 21 2.50 2.65 • Unmarried M (Not O/PO) 21 - 24 1.35 1.50 • Unmarried M (O/PO)Under 213.30 3.45 • Unmarried M (O/PO) 21 - 241.75 1.90 • Married Male Under 211.55 1.70 • Married Male 21 - 24 1.25 1.40

  19. Safe Driver Rating System • Safe driver rating plan charges points for violations and accidents • 1. 40 point surcharge for 1 point • 2. 50 additional point surcharge for second point (+ 90 total) • 3. 60 additional point surcharge for third point (+150 total) • 4. 70 additional point surcharge for fourth point (+220 total)

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