ISO PERSONAL MOTORCYCLE POLICY ANALYSIS

(November 2018)

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This is a discussion of Insurance Services Office's (ISO) Personal Motorcycle Policy (PMP) Form MT 00 01.

AGREEMENT

This opening section merely states that payment of applicable premium initiates the vehicle contract as stated in the sections that follow the Agreement.

DEFINITIONS

This section defines the terms that are critical to understanding how the policy responds to eligible losses. The following is a summary of the defined terms:

A. The terms “you” and “your” both have specific meanings.

1. The policy uses the terms "you" and "your" in reference to the "named insured" that appears in the policy declarations

2. The terms also refer to the named insured's spouse, but only if that spouse lives in the same household.

Once a spouse is in a different address or location, he or she still qualifies under the definitions of “you” and “your” until the earliest of the following:

· He or she has been out of the household for 90 days

· The former spouse gets his or her own policy where he or she is the named insured

· The policy period ends.

Example: Jake and Nelly, Jake’s wife, are insured under a PMP with a policy term of 6/4/18 to 6/4/19. On 8/7/18, they legally separate and Jake leaves the insured household (Nelly was the named insured). On 11/27/18, Jake buys and insures his own cycle. Jake no longer qualifies under the definition of “you” or “your” when he’s been out of the household for more than 90 days; in this case, 11/5/18.

Note: A spouse who becomes a named insured on his or her own policy is no longer an insured under their former resident spouse’s coverage.

B. The terms "our," "us" and "we" mean the company that issues and maintains the motorcycle policy coverage.

C. The PMP considers a leased motorcycle (as defined under the policy) to be an owned vehicle if there is a written lease that covers a period of six months or longer.

D. "Bodily injury" refers to sickness, disease, or bodily harm. This definition even includes death if it is a direct result of sickness, disease or bodily harm.

Example: Morgan, who is covered under a PMP, lost control of his cycle while turning too quickly at an intersection. He slid off the street, onto a curb and strikes a pedestrian. The pedestrian sues Morgan for his injuries and, later, amends the damages sought when she has to be treated for infections that stemmed from her original injuries. The injuries and infection qualify as bodily injury.

E. "Business" means any trade, profession or occupation. In other words, it is any regular activity that generates income.

F. A "family member" is any person who is a relative by blood or by marriage. Any persons who are adopted, wards or foster children qualify as "family members." However, no person is a family member unless they reside in the same household as the named insured.

Example: Jay jumps on Paul’s motorcycle and attempts to drive it around the block. He’s never operated a cycle before. He comes up to a stop sign, panics and accelerates. He jumps off the cycle before it plows into a store’s display window. Jay’s accident is eligible for coverage under Paul’s PMP because Paul is Jay’s foster parent.

G. The definition of “motorcycle” refers to vehicles that are motorized and meet all of the following requirements:

· Include a saddle or seat to accommodate a rider

· Operate with a maximum of three wheels that make contact with a travel surface

· Is intended, via its equipment and design, to travel over public roads

A sidecar may qualify under the motorcycle definition. Qualification exists only when a given sidecar is original equipment that has been installed by the applicable motorcycle’s manufacturer.

The PMP defines two types of trailers.

H. Motorcycle cargo trailer

A cargo trailer is any trailer that is intended, via its design, to be towed by a vehicle that meets the definition of a motorcycle.

I. Motorcycle transport trailer

A transport trailer is one that is intended, via its design, to be towed by vehicles other than motorcycles (including private passenger autos, pickup trucks and vans) and which is used to move motorcycles.

Note: Due to their distinct purposes, motorcycle cargo trailers and motorcycle transport trailers are mutually exclusive under their respective definitions.

J. “Newly acquired motorcycle”

1. This term applies to a motorcycle (including motorcycle cargo or transport trailers) that the named insured obtains possession of during a given policy term. A newly acquired item could be either owned or acquired under a written lease.

Example: Cary’s motorcycle is insured under a PMP with a policy 8/10/18 to 2/10/19 policy period. On 10/3/18, a friend who is going to live in Europe for a year leaves his motorcycle in Cary’s care, giving him permission to use it as he likes. While the friend’s cycle is under Cary’s control, it does not qualify as a newly acquired motorcycle.

2. The coverage that is available for newly acquired motorcycles depends on the type of coverage provided by the PMP.

a. All coverages other than Part D, Coverage for Damage to Your Motorcycle.

The insured has to report a new motorcycle no later than 14 days from its acquisition. During those 14 days, the coverage is equal to the broadest coverage existing for a motorcycle that appears on the policy declarations.

This part of the policy states that, once coverage is requested (within the 14-day timeframe), coverage only lasts a maximum of 14 days from the date of the vehicle being owned unless the insurer agrees, in writing, to provide the coverage.

This policy wording may be problematic, causing confusion. The point is to cap the coverage period for unreported, owned motorcycles to a maximum of 14 days. This is not typically an issue since, in most situations, acquiring a vehicle is a transaction in which securing insurance coverage is a priority (i.e., loan and leasing arrangements). However, it is easy to have a situation that would exceed this time period and, yet, still need to be covered by an insurer.

Example: Emma has a motorcycle insured under a PMP. Just before she goes on vacation with a friend, she purchases another motorcycle. She bought it so her nephew could accompany her on a 10-day road adventure. After returning from her trip, it occurs to her that she didn’t add the cycle to her policy. She contacts her agent by email. The email was sent in 13 days after the purchase. A couple of days later, (the 15^th after the purchase date), she has an accident with the new cycle. Her insurer has yet to send confirmation that the cycle has been added. Technically, coverage would not exist but, practically speaking, it would not make sense for the insurer to treat this as an uncovered situation.

b. Coverage for Damage to Your Motorcycle - Collision

Collision coverage is granted for a “newly acquired motorcycle” on the date it becomes an owned vehicle. HOWEVER, the insured MUST report the acquisition:

(1) Within 14 days of becoming the vehicle's owner when at least one motorcycle on the existing policy appears on the declarations with collision coverage. The coverage provided is equal to the broadest coverage existing for a motorcycle that appears on the policy declarations.

(2) Within four days after becoming the vehicle owner if no motorcycle on the existing policy has Collision Coverage. If the named insured complies within the required timeframe and a loss occurs before the insured requests coverage (reports the motorcycle) a Collision deductible of $500 will apply.

This part of the policy states that, once coverage is requested (within the 4-day timeframe), coverage only lasts a maximum of 4 days from the date of the vehicle being owned unless the insurer agrees, in writing, to provide the coverage.

c. Coverage for Damage to Your Motorcycle - Other Than Collision Coverage

Other than Collision Coverage for a “newly acquired motorcycle” is available once the vehicle is owned by an insured, as long as that insured:

(1) Reports the vehicle within 14 days of acquisition, but only if at least one existing motorcycle on the policy rated for Other Than Collision Coverage.

(2) Reports the motorcycle within four days of acquisition if no existing (listed) vehicle is rated for Other Than Collision Coverage. If a loss occurs to a vehicle within the reporting timeframe (for instance on day three after acquisition) an Other Than Collision deductible of $500 is in effect.

d. One policy provision applies uniformly to all coverages mentioned under policy parts J.2. a., b. and c.

If the named insured fails to report a vehicle’s acquisition during a policy period, then NO coverage will be provided ONCE the referenced reporting time-frames are passed. If such a vehicle is reported AFTER the required reporting timeframes pass, any coverage to which the insurance company agrees to takes effect on the date on which that vehicle was actually reported to that insurer. Further, the insurer must agree to provide that coverage in writing.

K. "Occupying" means in, upon, getting in, getting on, getting out or getting off.

Example: Lester parks his cycle outside of a convenience store. He returns to it with his purchases and finds a young man admiring the bike. The admirer shares that he wants a cycle just like it and that he wonders what it’s like to ride on it. Lester offers to take the admirer on a short ride. The admirer literally jumps onto the cycle, causing Lester to lose control and the cycle falls over on them both. Lester is “occupying” the bike during this situation.

L. "Property damage" means the loss of use of, damage to or destruction of tangible property.

While this simple definition is inclusive, it still permits some elements of a loss to be denied.

Related Court Case: Does Repair Mean Restoration?

M. The definition of “your covered motorcycle” refers to:

· Vehicles that are described in the PMP declarations

· Vehicles that an insured acquires after the beginning of the policy period (called "newly acquired motorcycles")

· Trailers that are owned by any named insured. Such trailers must meet the definitions of either motorcycle cargo or transport trailers AND must appear on the PMP declarations

· Motorcycles and trailers (as defined by the policy) that, while not owned by a named insured, are used as a substitute for a covered vehicle. However, the substitution has to be due to the other vehicle being serviced, repaired, lost or destroyed.

Example: Neal’s motorcycle is in a local garage having its engine rebuilt and it will be a week until it’s ready. The garage lends Neal a motorcycle to use in the meantime. The loaner cycle is a covered motorcycle.

PART A - LIABILITY COVERAGE

Insuring Agreement

A. The PMP covers bodily injury and/or property damage for which a covered person is legally obligated to pay damages because of a motorcycle accident. The agreement also obligates an insurer to defend a claim or lawsuit. However, once the policy's limit of liability has been exhausted, the insurer's obligation to continue paying to legally defend an insured ends.

The PMP gives the insurer discretion on defending and/or settling a given claim. As it is with standard vehicle liability policies, the PMP contains the potential of an unlimited defense obligation. This is due to it not specifying a monetary limit on the amount that may be paid to defend a covered person. However, the policy does allow a company to have some control over their financial duty to protect a covered person in a given claim. Per the insuring agreement, a company does not have to provide a defense under ALL situations. An insurer doesn’t have to defend any bodily injury or property damage loss is ineligible for protection.

Example: Hannah loves riding on her PMP insured motorcycle, but she often gets upset at car and truck drivers. One morning, after a driver in a pickup nearly runs her off the road, she follows the driver. When the other driver parks and exits his pickup, Hannah roars through the parking lot, intended to scare him. When she applies her brakes, she loses control, slides and her motorcycle strikes the pickup owner. After investigating the incident, Hannah’s insurer denies the claim, stating that the injuries were due to her deliberate action.

B. Under Part A - Liability Coverage, an insured is:

1. The named insured or any family member. They are insured only regarding the operating, owning, or maintaining of vehicles that quality under the PMP’s definition of the named insured covered motorcycle.

Example: Lisa had an accident involving the child of one of her neighbors. Lisa noticed some roughness in her motorcycle’s engine during her latest ride. As soon as she gets of her cycle, she props it against a stand she uses when servicing it. The 8 y.o girl who lives next door runs up to ask if she can help Lisa. Lisa asks her to get her ratchet set from her garage. Lisa then allows her to be her “assistant.” When she asks for a tool, the girl, instead of getting closer to Lisa, reaches out too far to hand it to her, she loses her balance and falls against the cycle’s still hot engine, severely burning herself The girl’s parents later sue Lisa. Lisa is considered an insured from an incident related to maintaining her cycle.

2. A person who is using the defined named insured’s covered motorcycle.

Note: There is no requirement that the person is operating the motorcycle with permission. The PMP also considers other persons and organizations to be covered persons under very limited circumstances.

3. A person or organization that is considered legally responsible for an omission or act committed by a person covered under this policy.

Supplementary Payments

This section advises the insured of several, additional coverages that are available.

1. One supplemental coverage will pay for the cost of bail bonds, but this coverage is limited to a total of $250. However, the bond has to be connected with a vehicle accident with covered bodily injury or property damage. A bond that is due solely to a traffic violation isn't covered.

2. The policy pays for the costs of premiums on appeal bonds and attachment bonds, but only those involved in a suit that the insurance company is defending.

3. The PMP also pays for any interest on judgments that have been entered. However, any interest payment obligation ends once an offer to pay the policy's limit of insurance is made.

4. The PMP pays for loss of earnings caused by hearings or trial attendance and other reasonable expenses caused by an insurance company's request.

Concerning loss of pay, the PMP pays a maximum of $250 per day to reimburse a covered person for lost earnings. This supplemental coverage does not include loss of other sources of income. There is no other limitation regarding loss of earnings, so the limit could be paid for one or for a dozen occurrences of lost pay.

5. Finally, under Supplementary Payments, the policy will pay any reasonable expenses that are due to activity requested of an insured by the insurer.

Example: Shawna had to meet with her insurance company’s adjuster who had some questions about her claim. The meeting took nearly two hours. Shawna was late getting to the other side of town where she had arranged to meet with a person who wanted to buy tickets to a concert she couldn’t attend. Shawna requests that the insurer reimburse her for the loss of the chance to sell her tickets. The insurer rejects that part of her expense claim.

A very important point is that any supplemental payments do not reduce the PMP’s other, primary policy limits.

Exclusions

This coverage part's exclusions fall under category A, having to do with "insureds," and category B, which concerns vehicle ownership, maintenance and use.

A. There are a number of situations that fail to qualify for liability coverage under the PMP:

1. The Personal Motorcycle Policy doesn't provide liability protection to insureds that deliberately injure other persons or property. Because this point sometimes causes confusion, it's important to examine what is meant by intent.

2. The PMP excludes coverage for property damage to property that any insured owns or transports.

Example: Joan collides with a car while returning from a friend’s house on her motorcycle. Joan’s sidecar hit another car while Joan was attempting to pass a narrow street. The sidecar is destroyed as was a friend’s game system that she was borrowing to play at home. Her insurer pays for the damage to her sidecar but does pay for the game system.

3. Any property that an insured has rented, uses or is caring for is also without protection if damaged or destroyed. The good news is that an exception is made for damage involving an insured’s home or garage.

4. This exclusion negates bodily injury coverage to any person who is hurt while working for an insured. However, an exception is made for domestic employees who aren’t covered by and are not required to be covered by workers compensation.

5. If an insured is using a covered motorcycle to make money by transporting either people or property, that insured has just made the vehicle ineligible, except if the situation involves either voluntary or charitable use.

Example: Timmy is a volunteer at his church’s annual festival. The festival is huge and, on a location, covering several acres. He helps by taking different volunteers to their work assignments, using his motorcycle on paths designated around the festival location. Should he get into an accident, this use should be one that is eligible for coverage under his PMP.

6. This exclusion takes coverage away from any insured while involved in any “business” that is NOT ranching or farming

Example: Paula lives in downtown Bigland, a community that is filled with businesses that cater to young artists, musicians, etc. Paula owns a music studio but has a part-time job where she makes meal deliveries. During one delivery, she is distracted while trying to find an address. She runs a traffic light and hits a pedestrian. This loss is NOT eligible for coverage because she’s using the motorcycle in business.

7. Don’t look for coverage under the PMP unless you’re operating a covered motorcycle in the belief that you have an insured’s permission.

Note: This standard is subjective. This means that evaluation of a loss must include consideration of the operator’s point of view, at least regarding his or her thoughts on whether the motorcycle was operated with an insured’s permission. Persons who qualify under the policy as a family member are not subject to this exclusion. The rationale is that family members will hold a presumption of having permission and prohibiting coverage under such circumstances typically fails to meet the standard of reasonable expectations.

Related Court Case: Was Unlicensed Driver A Permissive Operator?

Example: A newly licensed biker has been dying to try her mom’s motorcycle. Her mother has promised to let her ride the cycle; however, she will be out of town on business for several days. The daughter thinks it couldn’t do any harm to just start the cycle in their backyard. She gets the keys, starts it and hits the accelerator. The cycle takes off and she and the cycle plows into their backyard fence. This loss would be eligible for coverage.

8. No bodily injury or “property damage” is covered if separate coverage exists (or would exist except for exhausted limits) under a nuclear energy liability policy issued by three named sources (Nuclear Energy Liability Insurance Association., Mutual Atomic Energy Liability Underwriters and Nuclear Insurance Association of Canada) or their successors.

9. The PMP specifically excludes coverage for any legal responsibility any insured may have for operating or owning a vehicle when that vehicle is involved with, even minor delivery activity. Even food or newspaper delivery activity bars the insured against the policy’s liability protection.

Note: As is the case with exclusion A.6., an exception is made for charitable or voluntary activity.

Example: Sherri is in a collision while making deliveries to businesses and apartments in her area. However, the deliveries were of posters, advertising her area’s free community festival and she volunteered to make the deliveries. This activity would not be excluded by her PMP.

B. These are other situations that are ineligible for coverage.

1. If the vehicle’s main purpose (design) is for off-road use, it isn’t protected under the PMP. An exception exists for both motorcycle cargo and transport trailers.

Related Article: Glossary of Basic Automotive Terms

2. Exclusion B.2 explains that the PMP is not meant to cover racing exposures. This item bars coverage for vehicles that are either in the midst of or are preparing for any form of competition including nonsanctioned skills competitions.

This exclusion includes an important exception. If an event or training is connected to a Motorcycle Safety Foundation or any state agency course that is intended to improve cycle operating skills, coverage still applies if a loss should occur.

C. Situations involving limited liability protection

The next four exclusions are unusual because instead of totally excluding coverage they limit coverage to no more than the applicable state’s financial responsibility law. The applicable law is considered to be the state where the covered motorcycle is principally garaged.

1. Any loss that occurs when the motorcycle is operated by a person who is impaired by the use of either of the following:

a. Alcohol

b. Any controlled substance

The level of alcohol influence is based upon the protocol used by authorities in the applicable state where a loss occurs.

With regard to controlled substances, the use of any Controlled Substance(s) as defined by the Federal Food and Drug Law at 21 U.S.C.A. Sections 811 and 812 brings about this exclusion. Controlled Substances include, but are not limited to:

· Cocaine

· LSD

· Marijuana

· All narcotic drugs

This exclusion makes an exception for any loss involving the legitimate use of prescription drugs by a person following the orders of a licensed health care professional.

Note: Medical marijuana use has not been tested in court yet. It is a specifically listed controlled substance and continues to be illegal under the Federal Food and Drug Law. However, this exclusion’s application in practice will vary, especially in jurisdictions that permit the use of medicinal marijuana as well as the states that have legalized marijuana’s use.

2. Any loss in which an insured was committing a felonious activity and bodily injury or property damage resulted

3. Any loss that occurs when an insured is operating a motorcycle with the intent to escape capture or arrest by the authorities

4. Any loss that occurs when an insured operating the motorcycle does not have a valid driver’s license. A driver’s permit, with regard to this exclusion, is treated as a valid license.

D. Ineligible Damages

This policy only provides compensatory damages (those that reimburse for injury or damage) NOT to other forms of damage that are often awarded by courts or other agencies. Therefore, no coverage under the PMP is extended to either punitive or exemplary damages.

Related Court Case: Trucking Firm Not Entitled to Punitive Coverage – Although this is a commercial auto claim, the case does examine a situation regarding punitive v. compensatory damages.

Limit of Liability

A. The monetary limit that appears on the policy declarations page is the maximum amount of coverage that applies to the damages from any single motorcycle loss. This maximum is not affected by the number of vehicles, insureds, or claims involved, or the number of vehicles or premiums appearing on the declarations page. This arrangement is true of both bodily injury and property damage claims.

The particulars of a given loss may well affect how payments may be distributed, but the maximum remains the maximum.

Example: Polly’s PMP has the Bodily Injury limits of $100,000/$300,000 and Property Damage limits of $100,000. She is in an accident.

Scenario 1: The claim against Polly involves two persons seriously injured and one vehicle destroyed. In this instance, the maximum available BI coverage for the incident is $200,000 and the maximum PD coverage is $100,000.

Scenario 2: The claim against Polly involves five persons seriously injured and three vehicles seriously damaged. In this instance, the maximum available BI coverage for the incident is $300,000 and the maximum PD coverage is $100,000.

B. This section explains that, regardless of whether coverage exists under more than one coverage part (specifically parts A, B and/or C); no duplicate payments will be made under the PMP. This limitation means that, even if portions of a single claim qualify for coverage under Part A - Liability as well as Part B - Medical Payments and/or Part C - Uninsured Motorists coverage, an insured will not be paid more than once for any portion of his or her loss. This provision assists in preserving the policy’s intent to limit compensation to indemnification.

Out-Of-State Coverage

This Personal Motorcycle Policy provision allows the PMP to respond to a loss according to a given state’s requirements. Paragraph A.1. of this provision states that the policy will provide a higher limit for bodily injury or property damage liability coverage to meet whatever is minimally required by the state in which a covered loss occurs. Paragraph A.2. explains that the PMP will comply with the minimum amounts and types of coverages that may be required by a state’s compulsory insurance law while the covered motorcycle is being operated in that state.

Paragraph B of this provision states that no one is eligible for duplicate payments.

This provision prevents technicalities to bar or limit coverage because of the different ways that states structure their coverage requirements. The provision allows travelers to cross state lines without having to worry about making specific coverage adjustments beforehand.

Financial Responsibility

The PMP, when considered as valid proof of financial responsibility, is to be interpreted as complying with the governing financial responsibility law. This is helpful and flexible because financial obligations required of drivers vary significantly by state.

Related Article: Financial Responsibility Limits

Other Insurance

In the event that other sources of liability insurance exist, Part A-Liability Coverage of the Personal Motorcycle Policy will pay on a basis that equals its share of the total amount of insurance available to cover an eligible loss involving a covered motorcycle. If the loss involves a non-owned substitute motorcycle or trailer, the PMP responds on an excess basis, paying only after the primary policy has paid its limit.