Question

Randy has a Towing and Labor endorsement on his Personal Auto Policy, with a maximum benefit of $50.00 and Mechanical Breakdown coverage with a $100 deductible. One day while driving to work, the engine simply stops, and he has to have the car towed to a garage for repair. The mechanic finds the crankcase has no oil in it, and the engine has frozen up. The mechanic can find no oil leak. It just appears that no one has checked the oil in a long time. The engine block must be replaced at a total repair cost of $2,370.00. Randy gets a bill from the garage for $65.00 for towing and $35 for the inspection/diagnosis. How much can you pay him?

(A) $65.00
(B) $35.00
(C) $90.00
(D) $50.00

Answer 1

Randy can be reimbursed a maximum of $50.00 under his Towing and Labor endorsement, which is the maximum policy limit for towing his vehicle, but he cannot receive coverage for inspection/diagnosis or the engine replacement since these are not covered expenses.

Step-by-step explanation:

Randy's Personal Auto Policy includes a Towing and Labor endorsement with a maximum benefit of $50.00 and Mechanical Breakdown coverage with a $100 deductible. When his car engine stopped due to a frozen engine block because of no oil, the costs incurred were $65.00 for towing and $35.00 for inspection/diagnosis, with a total repair cost of $2,370.00 for the engine block replacement.

The insurance benefit for towing and labor can only offset the towing expense up to the policy limit of $50.00. Thus, the maximum amount Randy could be reimbursed for the claim would be $50.00. This does not cover the diagnosis fee or the repair costs, as these fall under the mechanical breakdown coverage, which has a $100 deductible that is greater than the diagnostic cost and does not apply to the lack of maintenance issue with the engine.