Author: Mike Edwards

"While the camper trailer was being towed, it somehow became uncoupled, and the tongue of the trailer rammed the rear of their new Ford Expedition, causing several thousand dollars damage. Luckily, no other cars were involved in the accident. Dad says he must have forgotten to properly secure the coupler latch on the trailer, and does remember getting a phone call while he was getting the camper ready to be hooked up. So it's understandable that he feels responsible, and expects his auto insurance to cover the damage to her Expedition.

"We submitted the claim under his PAP. The adjuster's initial response was that the daughter is responsible, since she was driving the vehicle at the time of the accident, and her policy is primary, since the trailer was attached to her vehicle. He said the daughter should submit a collision claim to her PAP. In addition, he said that the dad's PAP does not apply, since the trailer was owned by the dad, but not declared on his PAP.

"We have not received a formal, written denial yet, but I wanted your thoughts."

But here are my thoughts on how the ISO PAP would respond. This should give you a basis to compare the PAP of your insured. Assume Jack and Jill Smith are your insureds, and their daughter Jillette borrowed the camper trailer.

Issue #1: Who is responsible?

The adjuster's comment that the daughter (Jillette) was responsible "because she was driving the vehicle" might just be an off-the-cuff comment, and is certainly not the final word on whether or not Jack's PAP liability coverage will respond. Note how broad the insuring agreement is:

PP 00 01 01 05

Part A – Liability Coverage

Insuring Agreement

A. We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident.

Comments:

(1) There are, of course, situations where legal liability is so obvious that it is not necessary to wait for a court to make that determination. I don't think this is one of those cases.

(2) That's not to say that Jillette did not cause, or contribute to, the trailer becoming uncoupled. Had the accident involved third party bodily injury, a court might be called on to determine what percentage Jack and Jillette each had as tortfeasors. But given the relatively small amount of physical damage to Jillette's Expedition, and the fact that that Jack admits that he probably did not secure the camper trailer to Jillette's Expedition properly, there would seem to be no doubt about this being a valid PD (property damage) liability claim under his PAP.

Issue #2: Whose PAP is primary?

Here is how Jack's ISO PAP describes the primary/excess issue:

PP 00 01 01 05

Part A – Liability Coverage

Other Insurance

If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own, including any vehicle while used as a temporary substitute for "your covered auto", shall be excess over any other collectible insurance.

Comments:

(1) In the last sentence, note that Jack's PAP is excess for non-owned vehicles. Since the trailer is owned by Jack, his PAP is primary. The fact that it is hitched to his daughter's auto is not relevant, where primary/excess is concerned.

(2) That's not to say that a proprietary non-ISO PAP has the same provision.

Issue #3: Does Jack's camper trailer have to be declared (scheduled) on his PAP in order for liability coverage to apply?

PP 00 01 01 05

Part A – Liability Coverage

B. "Insured" as used in this Part means:

1. You or any "family member" for the ownership, maintenance or use of any auto or "trailer".

2. Any person using "your covered auto".

 

Definitions

J. "Your covered auto" means:

1. Any vehicle shown in the Declarations.

2. A "newly acquired auto".

3. Any "trailer" you own.

Comments:

(1) Jack is an insured for the "ownership, maintenance, or use of any auto or trailer" (declared or not). [See B.1.]

(2) Jillette is an insured under Jack's PAP while she is "using" his trailer. [See B.2.] Note that coverage applies to persons "using...'your covered auto'," which includes "Any trailer you own." [See Definition J.3.]

(3) Proprietary forms may be different. To that point, I read a proprietary non-ISO PAP some time ago that provided liability coverage for an owned trailer "only while attached to Your Covered Auto." (Yikes!)

Issue #4: ISO PAP vs non-ISO PAP

As I mentioned earlier, given the diversity of personal auto policies (PAP) in the marketplace today, this claim could be handled in very different ways. While product diversity and competition in a marketplace (insurance or otherwise) is the beating heart of free enterprise, consumers must never forget "caveat emptor." (Merriam-Webster Unabridged notes that the earliest known use of that phrase is 1523, so it's hardly a new concept.)

However, the more "consumer expert" articles and websites on insurance I read, the more I am concerned that important factors such as the coverage provided by different policies is being totally overshadowed by price. In addition, a growing number of insurance industry experts have expressed alarm about how insurance today is being treated as a mere commodity, particularly personal lines, and most especially – personal auto.

Ironically, the dictionary definition of "commodity," read in the context of an insurance policy, exactly describes this dynamic: "Commodity: (1) a mass-produced unspecialized product; (2) a good or service whose wide availability diminishes the importance of factors other than price." (Merriam-Webster Unabridged.) Since the vast majority of "consumer expert" articles I've read seem to consistently generalize, misstate, or ignore important coverage issues, which are often repeated in other forums, my own view is that the only "commodity" in insurance is actually the "consumer expert."

A typical example: A consumer posts a question, such as, "Does my auto policy cover...", to which the consumer experts writes a lengthy response, without ever citing specific policy language. I doubt seriously that these "experts" have even read their own auto insurance policy, much less compared coverage between various other auto policies.

A colleague of mine recently coined a phrase that is the modern insurance version of "caveat emptor": "The bitterness of no coverage is remembered long after the sweetness of low price has been forgotten." (John Eubank, CPCU, ARM.) John often uses this phrase in E&O classes, as a reminder to agents that we also must read and understand the coverage forms we sell, as a vital part of both properly serving our insureds, as well as following sound E&O loss control procedures.

For additional information

Is Insurance a Commodity?

(Comments: This is posted on the IIABA's Virtual University (VU). It is a new resource section on the VU, which provides links to many articles on the subject. It is frequently updated, and at present, it has 20 VU articles, as well as 31 articles from other sources. In addition, there are 3 recorded webinars, and links to 10 insurance industry discussion groups.)

Price Check

(Comments: This is one of the best articles posted on the VU website, regarding the issue of price and the commoditization of insurance. It includes 16 specific examples of key coverage differences in certain insurance forms.)

Last Updated: November 2, 2016