AUTO INSURANCE

Introduction
Every state requires a person who drives on its roads to have liability insurance. Yet it is estimated that
perhaps as many as 25% of the auto accidents in Kansas are caused by uninsured drivers. How can that
be? How do these laws work?
Liability insurance means that the insurer is only required to pay damages to people who are injured by
the liability, or fault, of the insured driver. That refers to negligence. If someone is not at fault his
insurer would have no obligation to pay the other people who are injured in an accident.
Another confusing point about auto insurance is that like many states Kansas has a no fault law. But
unfortunately it is misleading. There is a no fault aspect to auto insurance law in Kansas, but only up to
a point. The idea is that because it takes time for insurance adjustors and others to investigate the actual
cause of an accident, in the meantime the passengers in the respective vehicles may have medical bills
being incurred.
So the only aspect of auto insurance that is truly no fault in Kansas, is called PIP. PIP coverage
requires a liability insurer to pay the medical bills of all of the people in the insured drivers car up to
minimum limits, regardless of fault. Later the insurers will sort out who was at fault and the insurer of
the driver actually at fault will reimburse the other insurer. Or at least that is the idea.
Types of Coverage
Liability insurance covers the driver for bodily injuries and property damage caused by her negligence
while driving. The reason liability insurance is required by law is to protect other people who are
injured by the driver. The obligation of the insurer is to pay up to the limits of the policy and to pay for
attorneys fees and costs in defending the insured driver. Kansas law requires a liability policy to
provide some additional coverage, including PIP and Uninsured/Underinsured coverage.
Full coverage means that the insured person has liability insurance plus property Collision and
Comprehensive (Other than Collision) coverage. The law does not require drivers to Full Coverage
because it only provides coverage to the drivers own car. However, banks which loan money to buy a
car require the owner to have full coverage to protect the banks lien in the car in the event it is damaged
for any reason.
How do the limits work?
Auto insurance limits are quoted by the use of three numbers, such as 100/300/50. Each number
represents a thousand dollars, so that the number 100 refers to $100,000. The first number means that
the insurer is contractually obligated to pay up to $100,000 per person injured. This means that the
insurer is not required to pay more than $100,000 for personal injuries for any one person. If Lonny is
negligent and crashes into Tom, and Toms personal injuries are $200,000, Lonnys insurer is only
required to pay Tom $100,000.

The second number refers to the accident. So the insurer is obligated to pay up to, but not more than,
$300,000 for the accident, no matter how many people are injured. This can be confusing. Suppose that
Lonnys negligence causes injuries to Tom and Brenda in the other car. The insurer would have an
obligation to pay up to $100,000 for each of them, so the cap in this situation is actually $200,000. If
there are three or more people in the car, then the insurer might pay up to $300,000, but no more. And
that is true even if there are five people injured the maximum obligation is to pay $300,000.
The third number refers to property damage, which usually means damage to the other cars. It could
also cover damage to buildings, trees, etc. The insurer would be obligated to pay to repair or replace
other cars damaged by its insureds negligence up to a maximum of $50,000.
Minimum Limits
Every state has minimum limits for liability insurance. The highest minimum limits are 30/60 (there is
no requirement for property damage the purpose of minimum limits is to protect against personal
injuries). The lowest is 10/20. The most common is 25/50, which is what Kansas has.
In Kansas, the lowest minimum limits a person can buy is 25/50/10, and $4,500 for PIP. All of these
limits can be increased. These are very low limits. Imagine if you cause an accident in which four
people in the other car are seriously injured, with all of them having at least $100,000 in personal
injuries. The insurer will pay $50,000 and you are responsible for the rest. And if the other persons car
is worth more than $10,000, you will be responsible for the excess.
How do the Kansas limits work when you are driving in other states? Your Kansas limits will apply
except when you are driving in a state which has higher minimum limits. For example, in Alaska the
minimum limits are 50/100. If you have the minimum limits allowed by Kansas law 25/50 and you
cause an accident in Alaska, your insurer will pay up to 50/100 for personal injuries to other people
injured due to your fault. The rationale is that Alaska does not want anyone driving on its highways that
have less than 50/100. The states effectively work together on that. What happens if you are driving in
a state that has lower limits than Kansas. The answer is that your auto insurer will pay up to 25/50 you
will never have lower limits than what your Kansas policy provides
The Policy
Like most insurance, auto insurance is sold through standard forms. There will be some variance from
company to company, though most of the basic coverages and definitions are the same. The standard
policy contains four parts:
Part A Liability Coverage
Part B Medical Payments (PIP) Coverage
Part C Uninsured/Underinsured Coverage
Part D Property Damage Coverage

Who is Insured?
The named insured or insureds in the Declarations are insured. Also insured are resident family
members. People who drive your covered auto are also insured, if they have your permission to drive
the car.
Vehicles Covered
Obviously, the cars listed in the Declarations are covered. But there is also coverage while the insured is
driving certain other vehicles. First, you are covered when you are driving a loaner car or a rental car.
You are covered for any trailer you are pulling behind the car.
The other important issue has to do with coverage for a newly acquired auto. What happens, for
example, when you trade your car for a new car? Or what happens when you are insured for one car but
buy a second or additional car? The answer is that any car that you buy or trade for is automatically
covered so long as you notify the auto insurer within 30 days.
Part A Liability Coverage
As with all other liability insurance policies, the insuring agreement of Part A covers accidents which
cause bodily injury or property damage. Accident means a sudden and unexpected event. If someone
were to deliberately ram his car into another car, or a pedestrian, then there is no coverage.
Duty to settle within policy limits: Kansas law requires the insurer to act reasonably in settling cases on
behalf of the insured. The policy gives the insurer the right to hire an attorney, which means an attorney
of the insurers choice and not the insured. And the insurer has quite a lot of latitude in deciding how
much to pay to settle a case within policy limits. The insured has no say in whether to settle or how
much to pay so long as the case can be settled within policy limits.
For example, suppose Ed is sued for negligence by Leon. If Eds limits are 100/300, then the limits for
this accident are $100,000. Suppose that before trial Leons attorney offers to settle the case for policy
limits, $100,000, but Eds insurer refuses to pay that amount because it believes it is too much, or
because it believes that at trial it can win the case and pay nothing. Now suppose that the case goes to
trial and the jury returns a verdict for Leon of $150,000. Contractually the insurer only has to pay
$100,000, so Ed is responsible for the remaining $50,000.
Kansas law provides that if the insurer acts unreasonably in refusing to pay within policy limits to settle,
the insured can sue the insurer and the court has the authority to order the insurer to pay the full amount
of the judgment.
Key Exclusions: There are several important exclusions to Part A coverage.
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Intentional acts
Business use of the vehicle (other than for farming)
Property owned or rented by, or being transported or under the care of the insured
Vehicles with less than four wheels
Using a vehicle without a reasonable belief that the insured has a right to do so
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Other Insurance Clause: Many auto policies have a clause which basically says that the insurers
obligation to cover an accident is excess over any other applicable insurance. That means that if there
happens to be two or more policies which cover the same accident the other insurance policy will be
primary and this policy will only apply if the amount of damages exceeds the policy limits of the other
policy. The problem is that often both policies have the same clause. So the courts have to sort that out
and the rule of thumb is that the policy covering the car involved in the accident is primary. For
example, if Jim owns a Toyota and loans it to Bob and Bob causes an accident, Jims insurer has primary
coverage and Bobs policy has excess coverage.
Part B Medical Payments (PIP)
PIP is the no fault aspect of auto insurance in Kansas. As noted, a liability policy is intended to cover
you for your negligence which injures someone else or her property. But because it often takes time to
sort out who is at fault, and because people in both cars are often injured and need medical attention, the
law of most states, including Kansas, requires the auto liability insurer to pay the medical expenses of
every passenger in the car that it insures, regardless of who is at fault, up to the policy limits per person.
In Kansas the minimum limits for PIP are $4,500 per person, though the insured can increase those
limits along with the overall policy limits.
For example, Xavier, Yancy, and Zeke are in a Ford Focus and are injured when Wendy ran a stop sign
and crashed into Yancys car. Wendy was 100% at fault. All four people received medical attention.
Yancys auto insurer would pay up to $4,500 (assuming Yancy had minimum limits) for Yancy and each
of his passengers. Wendys insurer would pay up to $4,500 for her medical bills. Later, Wendys insurer
will reimburse Yancys insurer for the medical bills it paid.
This right of Yancys insurer to be reimbursed is supported by the law of subrogation. Subrogation
means that an insurer that pays for damages which are ultimately determined to be the fault of the other
driver. Suppose Wendys insurer refused to acknowledge Wendys fault and refused to reimburse
Yancys insurer. Yancys insurer has the legal right to sue Wendy for negligence in a tort case, in
Yancys name, and Wendy would be legally obligated to pay for the damages. In reality, Wendys
insurer would then be legally obligated to pay the damages if a verdict is rendered.
Part C Uninsured/Underinsured Coverage
Kansas law also requires liability insurers to provide uninsured and underinsured motorist coverage.
The idea is to protect insured drivers who are injured as a result of the fault of other drivers who either
have no auto insurance at all, or whose insurance limits are below the limits of the injured driver. Note
that this coverage has nothing to do with property damage only for bodily injuries. The best way to
explain this is to use an example.
Anns car crashes into Zoes car and Ann is at fault. Ann is uninsured and Zoe has 100/300 limits.
Zoes total bodily injuries are $150,000. Keep in mind that Zoe can sue Ann for the $150,000 and obtain
a state court judgment, but Ann has no insurance to pay for it. If Ann does not have $150,000 Zoe is
obviously in a bad position. But Zoes liability insurer will be required to pay $100,000 to Zoe for her
injuries for the uninsured coverage.
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Change the facts. Ann has the minimum limits allowed by Kansas 25/50. Zoe has 100/300 limits.
Anns insurer will pay $25,000 for the per person limits. Zoe then makes a claim with her insurer for the
underinsured coverage. Her insurer will pay $75,000 the $100,000 per person limit for her insurance
less the $25,000 she received from Anns insurer. Underinsured coverage only applies if the person who
is not at fault has limits higher than the limits of the driver who is at fault. If they both have the same
limits underinsured coverage does not apply.
Part D Property Damage
There are two aspects to property damage coverage. Part D pertains to the property damage caused by a
negligent driver, but only for the other persons property damage. A liability policy does not cover
damage to your car if you are at fault. The limits for property damage are separate, so if a person has
25/50/10 the insurer will pay up to $10,000 for damage to property. This limit will apply no matter how
much property damage is caused or how many cars are damaged.
Collision/Comprehensive
Full coverage means that you have both Collision and Comprehensive (also called Other than
Collision). Collision covers your car, no matter who is at fault, for damage to your car if damaged in a
collision. That means a moving vehicle crashing into a car, a tree, etc. Comprehensive covers your
car for non-collision reasons hail, tornado, vandalism, tree limb falling on your car and hitting an
animal. I know that hitting a deer is a collision but for some reason it falls under the Comprehensive
coverage.
Rental Cars
Are you covered under your auto policy when renting a car? When you rent a car the rental company
will ask if you want to get insurance. Confusingly, they talk about waivers. A loss damage waiver, or
LDW means that technically you are not buying insurance through the rental car company, you are
paying to have the rental car company waive any legal obligation you have for the rental car damage.
Here are the basics. Your liability insurance covers you if you injure someone in a rental car, up to your
limits. It will also cover damage you cause to someone elses car if you are at fault. The trickier part is
what about the damage to your rental car? Suppose, for example, you back into a concrete wall in a
parking lot and damage the rental car. If you have liability insurance only, you do not have insurance for
that. If you have full coverage you should be covered for that, but it depends upon your policy. So it is
a good idea to check with your agent to be sure. But generally, if you have full coverage and good limits
you do not need to buy insurance from the rental car company.
Limits for Property Damage
The insurer will pay for repair costs to the car in question up to the limits. But what happens if the
repair costs are more than the market value of the car? The answer is that the insurer is not obligated to
pay the repair costs in that case. That is the definition of a car being totaled. The insurer will pay the
actual cash value of the car in that case, but not the full cost of repairs.