The Driveway, the Borrowed Splitter, and the Defense Bill
Dale R. carries 100/300/50 liability, a $500 collision deductible, and a $250 other-than-collision deductible. Backing his F-250 out of a tight driveway at dusk, he clipped a brick pillar and crushed the neighbor's $6,800 retaining wall. He also destroyed the $1,200 log splitter he had borrowed from that same neighbor the week before and left sitting in the drive, and he struck the neighbor's landscaper, who suffered a broken ankle, $21,000 in medical bills, and a $15,000 pain-and-suffering demand. The landscaper's tools, which were in the truck bed at the time, are a $1,400 loss. Dale's insurer assigns counsel, who bills $18,500 through trial and files a $3,000 appeal. Dale misses two days of work for depositions and earns $310 a day. The total property claims presented are $9,400, the bodily injury suit is tried to judgment, and the judgment comes in at $130,000.
1. Which of the three property claims does Part A pay, and which are excluded?
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Only the retaining wall is covered. Part A pays sums the insured becomes legally obligated to pay as damages because of property damage caused by an accident arising out of the ownership or use of a covered auto, and a neighbor's wall is exactly that. The log splitter and the landscaper's tools are excluded because of the care, custody, and control exclusion: property in the insured's charge is excluded from Part A, whether borrowed, rented, or being hauled for someone else. That exclusion exists because such property is expected to be insured elsewhere - the owner's homeowners or inland marine form. The $6,800 wall claim fits comfortably inside the $50,000 property damage limit, so no limit question arises there. Advise the neighbor and the landscaper to tender the splitter and tool losses to their own property insurers and expect subrogation against Dale to be barred by that same exclusion.
2. Does the $21,500 in defense and appeal costs erode the liability limits, and how much of Dale's lost income does the policy pay?
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Defense costs do not erode the limits. The PAP treats defense costs and related expenses as supplementary payments payable in addition to the limit of liability, so the $100,000 per-person and $300,000 per-occurrence limits remain intact even after $21,500 is spent. That is a deliberate feature of the form: it removes any incentive for the carrier to shortchange the defense to preserve limits. Lost earnings are a supplementary payment but capped, not open-ended. The form pays up to $200 a day for loss of earnings because the insured must attend hearings or trials at the insurer's request. Dale earns $310 a day and missed two days, so he recovers $400, not $620. Bail bond costs, up to $250, would be another supplementary payment but nothing in these facts triggers it.
3. The judgment is $130,000 against a $100,000 per-person limit. Who pays what, and what does that reveal about the insurer's conduct?
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The carrier pays its $100,000 per-person limit plus the supplementary payments already described; Dale is personally exposed to the remaining $30,000 unless the assets or insurance elsewhere respond. That gap is the exam point: limits shown on the Declarations are not a guarantee that a verdict will be paid in full, and an insured who carries minimum or mid-tier limits absorbs excess judgments personally. It also raises the good-faith question. A liability insurer owes a duty to settle within limits where liability is clear and a claimant offers to settle for an amount within the limit. If the plaintiff made a within-limits demand and the carrier refused unreasonably and tried the case, the carrier can be held liable for the entire judgment, including the $30,000 above the limit. The adjuster should document every demand and settlement evaluation.