Question

John occasionally borrows the car of his friend, Sophie. Sophie has a PAP with liability limits of $100,000/$300,000/$50,000. John also has a PAP, and his liability limits are $250,000/$500,000/$50,000. John had an accident while using Sophie's car and was found to be legally liable for $300,000 in bodily injury liability for injuries suffered by one person. How much will be paid by each policy?

Answer 1

Sophie's insurance pays $100,000 as the primary coverage, and John's policy pays the remaining $200,000 as secondary coverage for the $300,000 bodily injury liability.

Step-by-step explanation:

When two auto insurance policies are involved in a claim, the primary policy typically pays out first, up to its policy limits, before the secondary policy comes into play. In this case, because John was driving Sophie's car, Sophie's insurance would be considered the primary policy and John's as secondary or excess coverage.

Sophie's policy has limits of $100,000 per person for bodily injury, which means her policy would pay $100,000 towards the total liability of $300,000. After Sophie's policy limit has been exhausted, John's policy would then cover the remaining $200,000, as his policy has higher limits of $250,000 per person for bodily injury.

In summary, Sophie's policy would pay out the policy limit of $100,000, and John's policy would pay the remaining $200,000 of the bodily injury liability.