Overview of Automobile Coverages

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 No jurisdiction has adopted a guest law for many years and the laws in many states have been repealed or declared unconstitutional.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)