New Tune: Understanding ISO’s Recent Changes to the PAP

Insurance Services Office (ISO) filed 30 changes to its personal auto policy program effective Sept. 1, 2018. Over a year later, most carriers have adopted the new language.

How well do you understand the changes ISO made to the base PAP form (PP 0 01) and the 21 endorsements it either revised, removed or created?

Base Form Revisions

Newly Acquired Auto Wording. Historically, the PAP granted insureds automatic liability, medical payments and uninsured motorist coverage for the remainder of the policy term when a replacement vehicle was purchased. Physical damage was the only coverage that did not continue for the remainder of the policy term.

If the insured wanted collision and/or other-than-collision coverage, the carrier had to be notified of the newly acquired vehicle and the desire for coverage. Time limits for this notification depended upon whether the insured’s policy already provided collision and/or other-than-collision coverage:

  • If the PAP extended collision and/or other-than-collision coverage to at least one vehicle, the insured had 14 days to notify the carrier of the newly acquired vehicle and the desire for coverage.
  • If the PAP extended no physical damage coverage to any vehicle, the insured had only four days to notify the carrier of the desire for coverage. 

ISO’s 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 of acquisition. No automatic coverage is granted. 

Supplementary Payments. ISO increased the coverage amount to $250 per day for loss of earnings to attend hearings from the prior limit of $200 per day.

Public or Livery Conveyance Exclusion. Prior to 2018, when a carrier wanted to specifically exclude any activities or exposures arising from the use of a covered vehicle as part of a transportation network platform such as Uber or Lyft, it attached the public or livery conveyance exclusion endorsement (PP 23 40), which ended coverage when the transportation network platform app was turned on and the vehicle was made available for use. This exclusionary wording is now included in the base PAP language.

ISO also addressed concerns that the public or livery conveyance exclusion might be misapplied when a vehicle is used for volunteer or charitable purposes, such as Meals on Wheels or volunteer medical transportation. New exception wording specifically states that the exclusion does not apply when the vehicle is being used for 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 to specifically exclude coverage for any vehicle enrolled in and being used in a vehicle-sharing program.

Custom Equipment Exclusion Endorsement (PP 13 06). ISO withdrew the PP 13 06 endorsement and incorporated the wording into the base PAP to exclude specific types of custom equipment.

Racing Exclusion. 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. Now, any activities occurring on or at a racing facility in an attempt to improve driver skill are excluded.

Flying Car Exclusion. There are no viable flying cars currently in existence, but the base form now contains a flying car exclusion.

Other Insurance Clarification. ISO added wording to the Part A Other Insurance provision to recognize the possibility of an umbrella and reduce potential legal confusion. New wording states that the PAP is not excess over a policy that is intended specifically as an excess policy.

Transportation Expense Coverage. ISO increased Coverage D’s transportation expense limit to $30 per day/$900 maximum from $20 per day/$600 maximum.

Duties After a Loss. Historically, the insured was not required to provide a recorded statement after an accident even if the carrier requested one; and such refusal did not endanger coverage. New policy wording requires the insured to submit to recorded statements as often as reasonably required.

Revised Endorsements

  • ISO added new mold exclusionary wording to the Trailer/Camper Body Coverage (Maximum Limit of Liability) PP 03 07 Endorsement, resulting in a reduction of coverage.
  • ISO inserted the statement “Coverage is not provided on an agreed value basis” into the Coverage for Damage to Your Auto (Maximum Limit of Liability) PP 03 08 Endorsement.
  • ISO withdrew the PP 03 10 Change Endorsement, which was intended for use when the policy was endorsed after the effective date.
  • ISO made three changes to the PP 03 11 Underinsured Motorist Coverage Endorsement to dovetail with revisions in the base form:
    • Addition of the volunteer or charitable use exception wording
    • Incorporation of the personal vehicle sharing exclusionary wording
    • Addition of the flying vehicle exclusionary wording
  • ISO revised the PP 03 21 Limited Mexico Coverage Endorsement based on research that determined not all accidents are considered criminal offenses in Mexico as previously thought. The new warning replaces “are” and “does” with less definitive language and now reads: 

AUTO ACCIDENTS IN MEXICO ARE SUBJECT TO THE LAWS OF MEXICO, NOT THE LAWS OF THE UNITED STATES. UNDER MEXICAN LAW, AUTO ACCIDENTS MAY BE 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 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) Endorsement to allow an insured to purchase liability, med pay, comp and/or collision when a motor home that is “your covered auto” is rented to others.
  • ISO revised the PP 03 34 Joint Ownership Coverage Endorsement to provide for a listing of joint owners and, if the person is a non-resident relative, space for name and address. ISO removed coverage information from the endorsement because it’s found in the declarations.
  • ISO altered the PP 03 35 Auto Loan/Lease Coverage Endorsement to address handling of interest from deferred payments and primacy of coverage when another source of gap coverage applies to the loss. 
  • ISO added other-than-collision coverage to the schedule of coverages that can be suspended under the PP 02 01 Suspension of Insurance Endorsement.
  • ISO revised the Named Non-Owner Coverage PP 03 22 Endorsement to make physical damage coverage an available option.
  • ISO revised the PP 13 03 Trust Endorsement to provide more flexibility to accommodate various trust structures.

New Endorsements

  • The PP 33 05 Full Safety Glass Coverage Endorsement applies when other-than-collision coverage is in effect and the auto is listed in the endorsement.
  • The Key Replacement and Related Services Coverage PP 33 27 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.
    • The schedule for each listed auto shows a maximum limit.
  • The Pet Injury Coverage PP 33 31 Endorsement extends coverage from Part D and applies only when all of the following conditions are met:
    • Collision and other-than-collision coverage applies to at least one vehicle.
    • The dog or cat owned by “you” or a “family member” is in the car at the time of the accident.
    • The car qualifies as “your covered auto” or a “non-owned auto.”
    • Covered costs include vet expenses or costs to cremate or dispose of the pet incurred within one year of the date of loss. The limit is per occurrence.
  • The PP 33 30 Child Restraint System Coverage Endorsement provides coverage to replace a child restraint system following an accident. Coverage extends from Part D and applies only when all of the following conditions are met:
    • Collision and other-than-collision coverage applies to at least one vehicle.
    • The child restraint system is owned by “you” or a “family member.”
    • The child restraint system is inside “your covered auto” or a “non-owned auto” at the time of the loss.
    • The schedule or declarations shows a maximum limit, which provides replacement with like kind and quality without application of a deductible.
  • The PP 33 10 Replacement Cost Coverage Endorsement replaces actual cash value loss settlement with replacement cost. To qualify for replacement cost, all of the following conditions must be met:
    • The covered auto must be added to the policy and the loss must occur within 24 months of purchase, with the insured as the original owner.
    • The covered auto must have less than 24,000 miles at the time of the loss.
    • The covered auto must 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 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. Wording does not specify model year. If the same make, model, trim or equipment is not available, the carrier will pay for one similar, but not to exceed 110% of the Manufacturer Suggested Retail Price of the covered auto.
  • The Additional Resident of Your Household PP 33 37 Endorsement was developed to extend coverage to individuals such as live-in nannies, roommates, legal domestic partners 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.
    • Requires the insured to notify the carrier if residency changes.
  • The Personal Property Coverage PP 33 42 Endorsement was designed to extend homeowners-like personal property coverage to personal property anywhere in the world. Coverage is provided on an open-perils basis and paid on an actual cash value basis, with a replacement cost option.

Note that although ISO filed these changes with an effective date of Sept. 1, 2018, not every carrier adopted the changes immediately, and two states did not adopt the changes at all: Hawaii and North Carolina. Additionally, ISO does not establish effective dates in four states: California, Colorado, Texas and Virginia.

Chris Boggs is executive director of the Big “I” Virtual University (VU).

For more details on this topic, check out the VU’s webinar and Risk & Reality Report.