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Regardless of the outcome depicted in this article, the owner of the title must be listed on the policy as a "named insured", or at the very least as an "additional insured" (per the company's restrictions).   Always ask your agent if any coverage gaps could be present when the car is titled to someone other than the person insuring it... Congruently as with unlisted drivers.

Cross-Liability PAP Claim: Who’s On the Hook?
by Bill Wilson



A 2005 ISO PAP insures Mom and Pop. Driving-age Son is a resident of the household. Pop co-signs a loan for an auto for Stepson, who resides in another state. The title shows both Pop and Stepson, but Stepson insures the auto in his name with another 2005 ISO PAP—no mention of Pop.

Stepson later moves into the household with Mom, Pop and Son and notifies his insurer that he has moved. But the policy still does not include co-owner Pop as a named insured.

Q
: "Son backs Mom’s car into Stepson’s car in the driveway. Stepson's insurer repairs his car and subrogates against Son. Mom and Pop's insurer denies the $1,900 liability claim for Son's damage to Stepson's car because Pop owns both cars, citing the Owned or Transported Property exclusion. Is this correct?"

A
: “The cited exclusion says [emphasis ours]: ‘We do not provide Liability Coverage for any “insured”...For “property damage” to property owned or being transported by that “insured”.’

Note that the exclusion applies to ‘that’ insured who owns the property. Pop is the co-owner of Stepson's auto, not Son. So the exclusion doesn't apply to Son—only to Pop. Check out this article from the Big ‘I’ Virtual University for more details: ‘PAP Annotated Part A – Liability Coverage: Exclusions.’

Clearly, the exclusion only applies to the insured (‘that “insured”’) who owns the property. If a liability insured damages property owned by another liability insured, the exclusion doesn’t apply. This supports the principle of severability of interest. The ISO PAP program has a specific mandatory exclusionary endorsement for insured vs. insured (cross-liability) claims:
 
‘PP 03 26 — Liability Coverage Exclusion Endorsement

LIABILITY COVERAGE
 
The following exclusion is added to Part A, Section A:

We do not provide Liability Coverage for any "insured" for "bodily injury" to you or any "family member".’

The endorsement only applies to bodily injury. If ISO wanted to exclude liability for damaging the property of other insureds, they could have included it in this endorsement.

Needless to say, both Pop and Stepson as co-owners should have been named insureds on Stepson's policy. ISO has a Joint Ownership endorsement that allows nonresident relatives that jointly own an auto to be named insureds. The endorsement can also apply to nonrelatives who live together. This would also prevent Stepson's insurer from subrogating against Pop, since he would be an insured.

For that matter, it's arguable that Pop qualifies as an ‘insured’ under Stepson's policy once they began living together, but we'll save that debate for another day.”


Bill Wilson is director of the Big “I” Virtual University. This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, email logon@iiaba.net to request login information.
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