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Who and What are Eligible for a PAP (Personal Auto Policy)?

Definitions

In order to understand the ISO Personal Vehicle Manual rules that deal with the issue of who may be insured, it’s necessary to understand how the manual defines some terms. Remember that definitions that appear in the manual are relevant to the eligibility rules, but they do not appear in the PAP and are not part of the insurance contract.


“Private Passenger Auto”

“Private passenger auto” is defined as a four-wheel motor vehicle other than a truck-type vehicle. It has to be owned or leased under contract for a continuous period of at least 6 months, not utilized as a public or livery transportation vehicle for passengers, and not rented to other parties (for example, not enrolled in a peer-to-peer car rental program.

Personal Vehicle Manual rules and exclusions in the PAP itself make it clear that vehicles used in these capacities should be insured on a commercial auto policy or a specialty policy.

A pickup or van is considered a private passenger auto if it has a gross vehicle weight (GVW) rating of 10,000 pounds or less or is a vehicle with a GVW rating greater than 10,000 pounds, for which a symbol is displayed in the symbol and identification section of ISO’s Symbol and Identification Manual, and is not used to carry or deliver any goods, unless such use is (a) incidental to the insured’s business of installing, maintaining, or repairing any furnishings or equipment or (b) for farming or ranching.

If the named insured is a farmer who uses the smaller pickup he owns to run errands for his farm business, this pickup qualifies as a private passenger auto that is eligible for coverage on a PAP.

A pickup or van used by a government employee for the federal government is considered a private passenger auto only if it meets the other requirements listed above. In addition, coverage is limited to that provided under the Federal Employees Using Autos in Government Business (PP 03 01) endorsement, which excludes the US government and any of its agencies as “insureds” in the liability coverage section.

An insurer that writes personal auto insurance does not want to provide coverage for the US government.


“Owned”

The term “owned” includes an auto leased under contract for at least 6 consecutive months. If the lease contract requires the lessee of the auto to provide primary liability coverage for the lessor, this is accomplished via the Additional Insured—Lessor (PP 03 19) endorsement. “Owned” also includes a vehicle that is owned by a trust.


“Gross Vehicle Weight”

GVW is defined as the maximum loaded weight for which a single vehicle is designed, as determined by the manufacturer. Thus, it is the sum of the weight of the truck plus the weight of its maximum cargo.


“Resident”

“Resident” means any person who resides in the same household as an applicant. A person in active military service with the US armed forces is not considered a resident in the applicant’s household unless they customarily drive the automobile.

Autos Owned by Individuals or Married Couples

As we said earlier, the first part of the PAP eligibility rules stipulates that a PAP is used to provide coverage for private passenger autos if they are owned by an individual or spouses occupying the same residence. Both spouses can be listed as named insureds on the declarations, and it is generally advisable to do so.


What If the Car Is Owned by Two or More People Who Are Not Married to Each Other?

In most states, the unendorsed PAP does not recognize the joint ownership of vehicles except with respect to a married couple residing in the same household. The Joint Ownership Coverage (PP 0334) endorsement can be added for nontraditional households. This endorsement amends the “you” and “your” definition to cover these types of households.

The second part of the manual’s eligibility rule indicates that a PAP can insure private passenger autos, pickups, and vans if they are jointly owned by two or more

 resident relatives other than spouses;

 resident relatives; or

 nonresident relatives, including a nonresident spouse if (a) they are written on a specified auto basis and (b) the Joint Ownership Coverage (PP 03 34) endorsement is added to the policy.


What about Other Types of Vehicles?

The third part of the eligibility rule stipulates that a PAP can insure motorcycles, motor homes, golf carts or similar vehicles, and snowmobiles if they are

 written on a specified vehicle basis and

 owned by (a) an individual, (b) spouses, (c) two or more relatives other than husband and wife, or (d) two or more resident individuals.

Coverage is limited to the vehicles specified in the Miscellaneous Type Vehicle (PP 03 23) endorsement or the Snowmobile (PP 03 20) endorsement. If the named insured has two private passenger autos, a motor home, and an all-terrain vehicle, coverage on all can be provided with a PAP with the attachment of the PP 03 23 endorsement. If the insured also has a snowmobile, coverage can be provided with the PP03 20 endorsement, which can also cover a trailer designed to be towed by the snowmobile.


Can Drivers Who Don’t Own a Car Buy Insurance?

The fourth part of the rule indicates that a PAP can provide coverage for a named individual or resident spouse who does not own an auto but who may operate rented or borrowed automobiles. This is accomplished via the Named Non-Owner Coverage (PP 03 22) endorsement.

For example, if a couple’s only motor vehicle is titled in the name of the husband’s employer and insured under a business auto policy, it might seem a PAP is not needed. However, neither spouse would have protection if, instead of driving the employer-owned vehicle, they borrow a friend’s car and the insurance on the friend’s car has lapsed. The same is true of a rental car rented in the spouse’s name. The named

non-owner endorsement provides protection in these situations. The PP 03 22 endorsement also becomes necessary if the individual who has only a business-owned vehicle needs a personal umbrella policy because the umbrella insurer will require underlying personal auto liability coverage.


What If the Legal Owner Is a trust?

The fifth part of the eligibility rule deals with trusts. It specifies that a PAP can insure

 vehicles considered as private passenger autos and

 motorcycles, motor homes, golf carts, or similar type of vehicles, as well as snowmobiles, trailers, and camper bodies if titles to these vehicles have been transferred to or held by a trust.


This provision is subject to three requirements.

 The grantor/settlor of the trust and/or the trust itself must be (a) an individual or spouses and (b) the only named insured(s) shown in the declarations.

 A vehicle owned by the trust, in which the grantor/settlor is a corporation, is ineligible under the PAP and must be written under a commercial auto form.

 The vehicle is ineligible if a trustee of the trust is a partnership, joint venture, corporation, limited liability company, some other organization, or a licensed professional unless that named insured is a relative of the trust’s grantor/settlor.

Coverage under a trust arrangement is afforded via the Trust Endorsement (PP 13 03).


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