This part of our sample fault-based automobile policy is important because it lets you know the general provisions that apply to the entire policy. It also includes your rights and the insurance company’s rights in dealing with one another as insurer and insured. Basically, there are ten subsections; each will be explained where they are not self-explanatory.
1. Policy Period, Territory
This policy applies only to accidents, occurrences and losses during the policy period and only to such accidents, occurrences and losses happening within the United States, its territories or possessions, or Canada or between their ports.
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If you are driving on the island of Puerto Rico, owned by the United States, you are covered under the policy; if you are driving in Mexico, you are not. 2. Premium
You shall pay any additional premium required because of:
(a) the application of this insurance to a newly acquired car; or
(b) any endorsement or amended Declarations to the policy.
Any premium adjustment necessary shall be made as of the date of such change or acquisition in accordance with our manuals.
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It’s pretty obvious that if you add an additional car onto your policy, your premium will go up. If you amend the coverage by endorsement or on the Declarations, and that increases your coverage, your premium will increase, as well.
3. Two or More Cars
When two or more cars are insured under this policy, the terms of this policy shall apply separately to each, but a car and a utility trailer attached to it shall be considered one car as respects Part I of this policy, and separate cars under Parts V and VI of this policy including any applicable deductibles. |
For liability purposes (Part I of the policy), if you have a car with an attached utility trailer, it is treated as one vehicle. With regard to Parts V (Car Damage) and VI (All Risks Physical Damage), your car and utility trailer are treated as two separate vehicles and you may need to pay two deductibles.
4. Suits Against Us
We may not be sued unless there is full compliance with all the terms of this policy. We may not be sued under the Liability Coverage until the obligation of an insured person to pay is finally determined either by judgment against the person after the actual trial or by written agreement of the person, the claimant and us. No one shall have any right to make us a party to a suit to determine the legal liability of an insured person.
No cause of action shall accrue to the insured person under Part IV unless within one year from the date of the accident:
(a) suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction, and notice of such suit has been given to us; or
(b) agreement as to the amount due under the policy has been concluded; or
(c) the insured person has formally instituted arbitration proceedings. |
These are the insurance company’s rules regarding filing a lawsuit.
You cannot launch a lawsuit against your insurance company in the following situations:
(1) You have NOT done everything you are supposed to do under the policy’s provisions;
(2) Fault is an unresolved issue.
Furthermore, you cannot include your insurer as a party to a lawsuit when the lawsuit is to determine whether or not you are at fault for an accident or loss.
With a UM (Uninsured Motorist) claim, you cannot head to court against your insurance company unless within a year from the date of the accident, one of three events has occurred:
(1) you have sued the UM and you have notified your insurer of the suit; or,
(2) you have settled a claim under the policy; or,
(3) you have begun arbitration proceedings.
5. Our Recovery Rights (Parts IV, V and VI)
In the event of any payment under this policy, we are entitled to all the rights of recovery of the person to whom payment was made against another. That person must sign and deliver to us any legal papers relating to that recovery, do whatever else is necessary to help us exercise those rights and do nothing after loss to prejudice our rights.
When a person has been paid damages by us under this policy and also recovers from another, the amount recovered from the other shall be held by that person in trust for us and reimbursed to us to the extent of our payment. |
The first paragraph says that if your insurance company pays you for loss or damages under the UM coverage, the Car Damage provision or the All Risks Physical Damage provision of your policy, the insurance company has the right to recover its money it has paid to the responsible party. You have to help them by providing them with any relevant legal papers, and certainly not do anything to hurt their chances of recovery. For example, should you be in an auto accident with an uninsured motorist, and you settle with your insurer, your insurance company may then sue the uninsured at-fault driver to get their money back.
The second paragraph says that if you collect money from your insurer for damages or a loss, and receive a settlement for the same damages or loss from another source, the amount you have collected from the other source must be turned over to your insurance company. For example, suppose a tree (which was in bad health to begin with) falls on your car in a storm and you collect for damage to your vehicle under the All Risks Physical Damage Part of your policy. Then the owner of the tree settles with you because he should have had that sick tree removed long ago. In this case, you will have to repay your insurer the amount it paid related to your claim.
6. Assignment
Interest in this policy may not be assigned without our written consent. If the policyholder named in the Declarations or the spouse of the policyholder resident in the same household dies, the policy will provide coverage until the policy expiration date to:
(a) the surviving spouse; or
(b) the legal representative of the deceased person while acting within the scope of duties of a legal representative; or
(c) any person having legal custody of your insured car until a legal representative is appointed.
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You may not assign, i.e., hand over, the benefits (coverage) afforded by your policy without the written consent of the insurance company. If you or your spouse dies, coverage is provided automatically for the surviving spouse until the policy expiration date; or, if the deceased has a legal representative, coverage is provided for him or her while acting as their legal representative; or, if someone has legal custody of the deceased insured’s car, that person will be covered until a legal representative is appointed.
7. Bankruptcy
We are not relieved of any obligation under this policy because of the bankruptcy or insolvency of any insured person while this policy is in effect.
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The sample fault-based policy states that if you declare bankruptcy or become insolvent for any reason while you are insured under the policy, the insurance company is still obligated to provide you with the coverage for which you are paying.
8. Cancellation or Non-renewal of This Policy
You may cancel this policy by returning it to us or by advising us in writing when at a future date the cancellation is to be effective.
We may cancel by mailing notice of cancellation to you at the address shown in the Declarations or by delivering the notice:
(a) not less than 10 days prior to the effective date of cancellation for non-payment of premium; or
(b) not less than 20 days in California, or 30 days in Nevada, prior to the effective date of cancellation, if the policy has been in effect less than 60 days in California or 70 days in Nevada and is not a renewal policy; or
(c) not less than 20 days in California or 30 days in Nevada, prior to the effective date of cancellation, if this policy has been in effect for 60 continuous days or more in California or 70 days or more in Nevada; however, we will cancel such a policy only for:
(i) non-payment of premium; or
(ii) the suspension or revocation of your driver’s license or the motor vehicle registration of any car you own or for the suspension or revocation of the driver’s license of any other operator who either lives in your household or customarily operates your insured car, providing any suspension or revocation occurs during the policy period; or
(iii) any other reason permitted by the laws of California or Nevada, depending on the state in which you reside at the time the policy is issued or renewed.
We will mail to you at the address shown in the Declarations or deliver to you notice of non-renewal not less than 20 days before the end of the policy period in California, and not less than 30 days before the end of the policy period in Nevada, if we decide not to renew this policy.
This policy will automatically terminate at the end of the policy period if you do not accept our offer to renew.
If other insurance is obtained on your insured car, any similar insurance afforded under this policy for that car will cease on the effective date of the other insurance.
If different requirements for cancellation and non-renewal or termination of policies are applicable because of the laws of your state, we will comply with those requirements.
Proof of mailing a notice is proof of notice.
Upon cancellation you may be entitled to a premium refund; if so, we will send it to you but our making or offer of a refund is not a condition of cancellation. If you or we cancel, the refund will be computed on a pro rata basis.
The policy terminates on the effective date of cancellation shown in the applicable notice.
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Although these rather lengthy rules regarding cancellation and non-renewal are pretty clear and specific, please note that because our sample fault-based policy was written in California, and serves both California and Nevada, its rules may differ from those in your state, and may do so significantly. Please be sure to check your own policy’s provisions regarding cancellation and non-renewal.
9. Changes
This policy and the Declarations include all the agreements between you and us relating to this insurance. No change or waiver may be effected in this policy except by endorsement issued by us. If a premium adjustment is necessary we will make the adjustment as of the effective date of the change. |
You cannot make changes to your policy without contacting your insurance company. The policy is a contract between you and the company and should you wish to make any changes, you must contact the company. They will make the change by way of an endorsement, if necessary, and either charge you accordingly if an increase in the premium is due as a result of the change, or refund some money.
10. Renewal
At the expiration of this policy, we will upon your request issue a policy provided that:
(a) you have carried automobile insurance with us for the preceding five years, and
(b) you maintain an active membership in the [Name of Company’s Association]
(c) you are a resident of California or Nevada, and
(d) you hold a valid California or Nevada driver’s license, and
(e) you pay the applicable insurance premium when due.
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For the rules about renewal, our sample fault-based policy is company specific. Your own insurer’s provisions are probably somewhat similar, but check it to make sure. Obviously, if you do not live in California or Nevada, the residency and driver’s license requirements will differ. Most insurance companies also do not have an association requiring membership. |
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