Author: Chris Boggs
Insurance Services Office (ISO) filed 30 changes to its personal auto policy (PAP) program effective September 1, 2018. The changes are almost a year old and many if not most carriers have adopted the new language.
If you have not yet reviewed these changes, this article quickly addresses the nine (really 10) changes made to the base PAP form (PP 0 01) and the 21 endorsements that were either revised, removed or created.
Note, as the title states, this is a brief synopsis of the changes. Links to more detailed information about these changes are found at the end of this article.
Revisions to the Base PAP (PP 00 01)
ISO cites nine changes to the PP 00 01; however, what is reported as nine base form changes really amounts to 10 changes. Each change is briefly described in the following paragraphs and a few of my own opinions are expressed.
Newly Acquired Auto Wording
Prior personal auto policy forms granted insureds automatic coverage for the remainder of the policy term when a replacement vehicle was purchased (the insured sold or traded in their 2006 Chevy Malibu for a 2019 Jaguar F Pace). Liability (Part A), Medical Payments (Part B) and Uninsured Motorist (Part C) were granted for the remainder of the policy term even if the insured did not tell the carrier about the new vehicle.
Physical damage (Part D) was the only coverage that did not automatically continue for the remainder of the policy term. In the past, if the insured wanted collision and/or other-than-collision (OTC), the insurance carrier had to be notified of the newly acquired vehicle and the desire for the coverage. The amount of time required for such notification depended upon whether the insured's policy already provided collision and/or OTC coverage or not:
- If the PAP extended collision and/or OTC to at least one vehicle, the insured had 14 days to notify the carrier of the newly acquired vehicle and the desire for physical damage coverage. The coverage was backdated to the date of acquisition if this requirement was met; or
- If no vehicle on the policy had collision and/or OTC, the insured had only four days to provide notice for coverage to be effective back to the date of acquisition.
(Note: these notification requirements apply separately to OTC and collision. If the car had collision but not OTC, the insured had to notify the insurer within four days to garner OTC back to the date of acquisition. If the inured only wanted collision on the newly acquired vehicle, they had 14 days to notify the carrier.)
ISOs new PAP form wording requires the insured to notify the insurance carrier of any newly acquired vehicle whether it's an additional vehicle or a replacement vehicle within 14 days to pick up any coverage as of the date of acquisition. There is no longer any automatic coverage granted for the remainder of the policy term.
ISO made this change to give carriers the ability to change the coverage symbol and charge the correct premium when necessary.
ISO increased the amount of available payment for loss of earnings to attend hearings to $250 per day from the prior limit of $200 per day. This makes the payment consistent with other ISO forms.
Public or Livery Conveyance Exclusion
Two changes made to this exclusionary wording are: 1) The exclusionary wording previously found in the PP 23 40 Public or Livery Conveyance Exclusion was incorporated into the base coverage form; and 2) an exception for volunteer or charitable use of a vehicle was added to the form.
Previously, when an insurance carrier desired to specifically exclude any activities or exposures arising from the use of a covered vehicle as part of a transportation network platform (Uber, Lyft, etc.), the PP 23 40 was attached. The endorsement stated that coverage ceased when the app was turned on and the vehicle was made available for use. This exclusionary wording is now included in the base PAP language. Two endorsements are available to alter this wording.
ISO also addressed concerns that the public or livery conveyance exclusion might be misapplied when a vehicle is used for volunteer or charitable purposes (Meals on Wheels, volunteer medical transportation or other such activities). The concern obviously being that a carrier might attempt to apply the public or livery exclusion when someone is driving an elderly person to a medical appointment as part of volunteer activities. New exception wording specifically states that the exclusion does not apply when the vehicle is being used for these types of volunteer or charitable purposes.
Personal Vehicle Sharing Program Exclusion Endorsement (PP 23 16)
ISO withdrew the endorsement and included the exclusionary wording within the PP 00 01. As the name suggests, this required endorsement specifically excludes coverage for any vehicle that is enrolled in AND being used in a vehicle sharing program. When both requirements of enrollment and active use are met, PAP coverage ceases.
Custom Equipment Exclusion Endorsement (PP 13 06)
Wording from this required endorsement was incorporated into the base PAP wording leading to the withdrawal of the PP 13 06 endorsement.
The exclusionary wording removes coverage for custom equipment such as (not a complete list): Special carpeting or insulation; furniture or bars; height-extending roofs; body, engine, exhaust or suspension enhancers; winches, or anti-roll or anti-sway bars; custom grilles, louvers, side pipes, hood scoops or spoilers; custom wheels, tires or spinners; custom chrome, murals, paintwork, decals or other graphics; or caps, covers or bedliners.
In the prior edition of the PAP, coverage for some custom equipment was already excluded. But in the 05 edition, the policy specifically stated that the exclusion does NOT apply to a cap, cover or bedliner in or upon any "your covered auto" which is a pickup. These items will now be excluded.
The newly incorporated wording allows coverage for the first $1,500 of custom equipment. If more coverage is needed, the insured must attach the Excess Custom Equipment Coverage (PP 03 18) endorsement.
ISO stated that there is no impact on coverage; this statement does not appear to be true. Items that previously were specifically excepted from the exclusion are now excluded; and where there was no coverage for any special equipment previously, there is now up to $1,500. This change creates both a reduction and broadening of coverage.
ISO expanded the racing exclusion to exclude coverage for any vehicle located inside a facility designed for racing for the purpose of participating in any prearranged or organized driver skill training or driver skill event.
Industry desire to exclude racing-related activities related is reasonable; but this is an unreasonable expansion of the exclusion. Now any activities occurring on or at a racing facility in an attempt to improve driver skill is excluded.
I want my 18-year-old daughter to become a better driver (and who doesn't want their teenagers to be better drivers) leading me to register her for a driver skill training class conducted at Charlotte Motor Speedway (about 30 minutes from my house). With this new wording in effect, I have no coverage under my PAP for any injury or damage she may cause during this training.
This exclusion is short-sighted and a very bad idea. Why would the industry want to punish their insureds when they are trying to improve their driving skills, doesn't that ultimately improve results on the road in ultimate claims payouts? I understand excluding race training, but I am at a loss why there would be no coverage when I undertake to improve mine or my kid's driving skills.
Flying Car Exclusion
Currently, there are no viable flying cars (though many are trying to build them) but ISO believes technology and economics will soon or eventually allow for flying cars. I can't say I disagree with this opinion.
Because of this belief, the new flying car exclusionary wording excludes Injury or damage arising from, related to, or occurring as a result of flying cars. So, even getting hit by a car that can fly is now excluded.
In reality, there is currently no effect on coverage, but eventually this may be a limitation on or reduction of coverage. This is a total exclusion - the vehicle does NOT have to be flying at the time the requirement excludes coverage when the vehicle is designed and able to fly.
Other Insurance Clarification
In Coverage Part A, the old" policy wording read, 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." The perceived problem with this wording was that personal umbrella polices generally state they are excess over any other insurance.
Because two policies state they are excess over other policies, this lead to confusion in the courts. To solve this confusion, ISO added wording to the Part A Other Insurance provision to recognize the possibility of an umbrella and state that the PAP is not excess over a policy that is intended and is specifically an excess policy.
There is no effect on coverage as a result of this change, only a clarification of intent.
Transportation Expense Coverage
ISO's increased the base transportation expense limit to $30 per day / $900 maximum provided in Coverage D from the previous $20 per day / $600 maximum. ISO believed the prior limit did not comply with current market conditions.
This change has no effect on coverage, it is simply a limits increase.
Duties After a Loss
Part E B.3.b. in the Duties After an Accident or Loss provision historically required the insured to submit as often as reasonably requested" to examination under oath. But there was no specific requirement that the insured provide a recorded statement even if requested by the carrier. Thus, the insured could refuse such a request without violating the duties owned and such refusal would not endanger coverage.
ISO added wording requiring the insured to submit as often as reasonably required to recorded statements. According to ISO, gathering a recorded statement is less expensive and less time consuming than an examination under oath.
An additional duty is being placed upon the insured as a result of this change. This change leads to some questions: How often is reasonable? Might this result in carriers looking for more opportunities to search for misrepresentation or fraud? The answers are unknown at this point.
21 Endorsement Additions/Changes/Etc.
- Trailer/Camper Body Coverage (Maximum Limit of Liability) PP 03 07: New mold exclusionary wording was added to the endorsement resulting in a reduction of coverage. The New exclusionary wording reads: We will not pay for: Loss due to "fungi", wet or dry rot, or bacteria meaning the presence, growth, proliferation, spread or any activity of "fungi" wet, or dry rot, or bacteria."
- Coverage for Damage to Your Auto (Maximum Limit of Liability) PP 03 08. ISO inserted the statement, Coverage is not provided on an agreed value basis." The Endorsement is intended for use with special value autos such as classic and antique autos allowing these vehicles to be written on a stated value basis. The new wording simply reinforced that coverage is NOT on an agreed value basis in an attempt to allay any belief on the insured's part that the listed amount is the amount that will be paid. Ultimately, this is simply an attempt to more specifically clarify the intent.
- The PP 03 10 Change Endorsement was withdrawn. This endorsement was intended for use when the policy was endorsed after the effective date in any way to document the date a policy change became effective. Carriers told ISO they did not use the endorsement, so ISO decided the endorsement needed to be withdrawn from use. One effect of the removal of this endorsement was that the 27 endorsements referencing the PP 03 10 all were revised to remove reference to the PP 03 10.
- Three changes were made to the PP 03 11 Underinsured Motorist Coverage endorsement to dovetail with revisions in this base form:
- The volunteer or charitable use exception wording was added to the endorsement;
- The personal vehicle sharing exclusionary wording is incorporated into the endorsement wording; and
- The flying vehicle exclusionary wording was added.
- PP 03 21 Limited Mexico Coverage endorsement was revised because ISO research showed that contrary to popular industry belief and understanding, not all accidents are considered criminal offenses in Mexico. If bodily injury occurs, the accident is a result of intoxication or the driver left the scene, yes, those may be criminal; otherwise, they are likely civil matters. Further, Mexican federal law is not the only law regulating the use of an auto and insurance, the state in which the accident occurs may also assert authority over the accident. So, insurance requirements may differ from locale to locale. The new warning replaces are" and does" with less definitive language and now reads:
AUTO ACCIDENTS IN MEXICO MAY BE SUBJECT TO THE LAWS OF MEXICO, NOT THE LAWS OF THE UNITED STATES. UNDER MEXICAN LAW, AUTO ACCIDENTS ARE CONSIDERED A CRIMINAL OFFENSE AS WELL AS A CIVIL MATTER.
THE COVERAGE WE PROVIDE YOU BY THIS ENDORSEMENT MAY NOT MEET MEXICAN AUTO INSURANCE REQUIREMENTS.
- ISO made minor alterations to the Miscellaneous Type Vehicle Endorsement PP 03 23 introducing a mold exclusion under coverage Part D and adding a definition of fungi." ISO also revised the exception to Exclusion 7 to include an extension of coverage to reinforce that coverage is excluded for any motor home a named insured does not own when used as a temporary substitute for a covered motor home.
- ISO revised the PP 03 28 Miscellaneous Type Vehicle Amendment (Motor Homes) to allow an insured to purchase liability, med pay, comp and/or collision when a motor home that is a your covered auto" is rented to others, but of course, this is provided for an additional premium.
- The PP 03 34 Joint Ownership Coverage endorsement was revised by ISO to address current trends in household makeup. Prior wording allowed resident individuals (other than husband and wife), related or not, and non-resident relatives to have and insure joint ownership. The new endorsement provides for a listing of the joint owners; and If the person is a non-resident relative, space is now available to enter the name and address. Coverage information has been removed from the endorsement (because it's found in the declarations); and the new wording replaces husband and wife" with spouses" (some state laws necessitated this change). The changes had no effect on coverage, but they do allow the carrier increased flexibility to include relationships such as ownership by a grandparent and a grandchild; parents purchasing cars for children who live part time in the household after a divorce; and a parent/child joint ownership where they live in separate residences.
- The PP 03 35 Auto Loan/Lease Coverage endorsement was altered to address: 1) how interest from deferred payments are to be handled; and 2) primacy of coverage when another source of gap coverage applies to the loss. According to ISO, coverage was reduced by these changes.
- The PP 02 01 Suspension of Insurance, or lay up" coverage endorsement was revised adding Other Than Collision to the schedule of coverages that can be suspended.
- The Named Non-Owner Coverage PP 03 22 endorsement was revised making physical damage coverage an available option.
- ISO revised the PP 13 03 Trust Endorsement provide more flexibility to accommodate various trust structures. Multiple revisions were made regarding the naming of the trust, the grantor and the trustee.
- PP 33 05 Full Safety Glass Coverage endorsement is a new optional endorsement that applies when Other Than Collision (OTC) coverage is in effect and the auto is listed in the endorsement.
- Key Replacement and Related Services Coverage PP 33 27 was introduced to keep up with the market. Many (if not the majority of) newer vehicles utilize keys with highly sophisticated electronics that can cost up to $500 to replace. This endorsement pays, without application of a deductible, for:
- Reasonable expenses to get into the car if the fob is lost or stolen;
- The cost to replace and program keys or key fobs lost or stolen; and
- A maximum limit is found in the schedule for each listed auto.
- Pet Injury Coverage PP 33 31 was introduced because of current trends and the fact that some carriers already offer this coverage. Coverage extends from Part D and the insured chooses a limit with no applicable deductible. Coverage applies only when:
- Collision and OTC applies to at least one vehicle;
- The pet (limited to dog or cat) owned by a you" or family member" is in the car at the time of the accident; and
- The car qualifies as a your covered auto" or a non-owned auto."
Covered costs include vet expenses or cost to cremate or dispose of the pet and incurred within one year of the date of loss. The limit is a per loss (per occurrence) limit.
- ISO introduced the PP 33 30 Child Restraint System Coverage optional endorsement to keep up with the market. Carriers using proprietary forms already provide this optional endorsement. The PP 33 30 provides coverage for the value of a child restraint system following an accident. Coverage extends from Part D and applies only when:
- Collision and OTC applies to at least one vehicle;
- The child restraint system is owned by the you or a family member;" and
- The child restraint system is inside a your covered auto" or a non-owned auto" at the time of the loss.
A maximum limit is shown in the schedule or declarations and provides replacement with like kind and quality without application of a deductible.
- The PP 33 10 Replacement Cost Coverage Endorsement, as its name suggests, replaces ACV loss settlement with replacement cost. To qualify for replacement cost, the covered auto must:
- Be added to the policy and the loss must occur within 24 months of purchase (and the insured must be the original owner); and
- Have less than 24,000 miles at the time of the loss; and
- Suffer a total loss
There is no automatic coverage for a newly acquired auto or a leased vehicle. Coverage is subject to a deductible and there are a few other provisions:
- The amount of coverage is limited to the amount to replace with a new vehicle of the same make, model, trim level and equipment (or its equivalent). It does not say model year.
- If the same make, model, trim, equipment is not available then the carrier will pay for one similar, but not to exceed 110% of the MSRP of the covered auto.
- Additional Resident of Your Household PP 33 37 was developed to accommodate current living arrangement trends. An additional insured" type endorsement, ISO anticipates this endorsement will be used to extend coverage to individuals such as live-in nannies, roommates, domestic partners (unless law finds otherwise) and significant others who do not own but have access to the named insured's vehicle(s). The endorsement:
- Allows the naming of an additional resident;
- Amends the definition of family member" to include the named resident;
- Specifies that the carrier is depending on the insured to be truthful; and
- Requires the insured to notify the carrier if residency changes.
- Personal Property Coverage PP 33 42 is a Millennial-based endorsement designed to extend homeowner-like (not homeowners' coverage) personal property coverage to personal property anywhere in the world. Coverage is:
- Provided on an open peril basis;
- Paid on an ACV basis with a replacement cost option.
That's All But You Can Get More
Although ISO filed these changes with an effective date of September 1, 2018, not every carrier adopted the changes immediately. And two states did not adopt the changes at all, Hawaii and North Carolina. Additionally, there are several states where ISO does not establish effective dates, these include California, Colorado, Texas and Virginia.
Regardless, every agent must understand these changes. This article is but a quick review of these changes; for more a deeper dive into these changes, the VU offers an on-demand webinar and a Risk & Reality Report which is a white paper based off the webinar.
Click here for information on the webinar. Click here for more information on the Risk & Reality Report. Please note that if you purchase the on-demand webinar, you get the Risk & Reality Report free.
Last Updated: August 12, 2019