A note on sources. The outline follows the ISO Personal Auto Policy (PAP): definitions, Part A liability, Part B medical payments, Part C uninsured/underinsured motorists, Part D damage to your auto, Part E duties after an accident or loss, Part F general provisions. ISO's forms were not read, so this chapter describes the typical structure in our own words. Figures from the model form are marked typical ISO default and no practice question is built on them. The "In Arizona" boxes come from Arizona statutes read in primary form on azleg.gov (footers dated 09/09/26).
6.1 Definitions (outline: Definitions)
Typical definitions: you (the named insured and a resident spouse); family member (a resident of your household related by blood, marriage or adoption); bodily injury; property damage (including loss of use of tangible property); occupying (in, upon, getting in, on, out or off); your covered auto (a vehicle in the declarations, a newly acquired auto, a trailer you own, a temporary substitute). A replacement auto is typically covered automatically; an additional auto typically if you ask within a stated period (typical ISO default: 30 days). A temporary substitute is a non-owned auto used while your covered auto is out of service for breakdown, repair, servicing, loss or destruction.
The PAP is a personal form built around you and your family; the business auto form (Chapter 7) is built around which autos are covered.
6.2 Personal Injury Protection Definitions (outline: Personal Injury Protection Definitions)
Personal injury protection (PIP) is first-party coverage, usually a state-specific endorsement, paying the insured's own losses after an accident regardless of fault; it is the core of no-fault insurance where required. Typical defined terms: covered person (named insured, family members, occupants of the covered auto); medical expenses and funeral expenses; income loss (a percentage of gross income actually lost, with monthly and time maximums); essential services (cost of household services the injured person can no longer perform); basic economic loss (the total of the benefit categories). Medical payments pays only medical and funeral costs; PIP also pays lost income and essential services.
In Arizona The compulsory financial responsibility statute prescribes minimum limits only for bodily injury or death and property damage to others, which are liability limits; it contains no PIP requirement. (ARS 28-4009(A)(2)) UM and UIM are an offer (6.5), and medical payments appears in the sections read only through the lien rule (6.4). (ARS 20-259.01(A), (B), (J)) Nothing in the sections read requires PIP or medical payments. On whether an insurer offers a PIP endorsement in Arizona, confirm with DIFI.
6.3 Liability Coverage (outline: Liability Coverage)
Bodily Injury and Property Damage (outline: Bodily Injury and Property Damage)
Part A pays damages for which an insured is legally responsible because of bodily injury (injury to others) or property damage (tangible property of others; your own car is Part D) arising out of ownership, maintenance or use of an auto, and defends until the limit is used up. Typical insureds: you and family members for any auto or trailer; any person using your covered auto; anyone legally responsible for an insured's acts with your covered auto.
Split limits are per person / per accident / property damage: 25/50/15 means $25,000 BI per person, $50,000 BI per accident (subject to the per-person cap), $15,000 PD. A combined single limit (CSL) is one pool for all BI and PD in an accident.
In Arizona Minimum limits. An owner's motor vehicle liability policy must insure the named insured and permissive users against liability imposed by law, within the United States or Canada, with these limits per vehicle: (ARS 28-4009(A)(2)) | Policy issued or renewed | BI one person | BI two or more, one accident | PD | |---|---|---|---| | On or before June 30, 2020 | $15,000 | $30,000 | $10,000 | | Beginning July 1, 2020 | $25,000 | $50,000 | $15,000 | The date is the policy's issue or renewal date, not the accident date. Several carriers' policies may together satisfy the requirement; a binder satisfies it; coverage above the minimum is outside the statute; a fleet of seven or more has a per-accident cap with no stacking. (ARS 28-4009(A)(1), (D), (E), (F)) By written agreement a policy may exclude a driver named in it; the exclusion survives renewals until the insurer agrees in writing to restore cover. (ARS 28-4009(A)(3)) The policy need not insure workers' compensation liability, injury to the insured's employee, property owned by or in the care of the insured, intentional harm, or a private passenger vehicle while its driver is logged in to a transportation network company (TNC) unless expressly covered. (ARS 28-4009(C)(4)) Once covered injury or damage occurs the insurer's liability for the required insurance is absolute and cannot be annulled afterward by agreement. (ARS 28-4009(C)(5)(a); ARS 20-1123)
Worked example 6.A (minimum limits). A 25/50/15 insured injures X (damages $40,000) and Y ($30,000) and damages a $22,000 car. Per person: X capped at $25,000, Y at $25,000, total $50,000 (the per-accident cap). PD pays $15,000. Total $65,000; the insured owes $15,000 + $5,000 + $7,000 = $27,000. A $100,000 CSL would have paid all $92,000.
Supplementary Payments (outline: Supplementary Payments)
Typically paid in addition to the limit: defense costs, premiums on bail, appeal and attachment-release bonds, post-judgment interest on the part the insurer pays, lost earnings of an insured at the insurer's request (a stated daily maximum), and other reasonable expenses at the insurer's request.
Exclusions (outline: Exclusions)
Typical Part A exclusions: intentional injury or damage; property owned, transported by, or in the care of the insured; injury to an employee in employment; the business of selling, repairing, servicing or storing vehicles; use without reasonable belief of permission; business use of other than a private passenger auto, pickup or van; public or livery use (car pool excepted); racing; non-owned vehicles furnished or available for the regular use of you or a family member (the hole the Extended Non-Owned endorsement fills, 6.10); vehicles with fewer than four wheels; war and radioactive contamination.
In Arizona TNC drivers. A private passenger policy need not cover use while the driver is logged in to a TNC network or providing TNC services unless it expressly does. (ARS 28-4009(C)(4)(e)) An insurer may cancel if a regular driver provides TNC services without an endorsement or other insurer's cover. (ARS 20-1631(D)(6)) A TNC endorsement is not "basic coverage"; terminating it needs 45 days' notice with an explanation that continued TNC activity might lead to cancellation or nonrenewal. (ARS 20-1631(O)) No insurer must offer such cover. (ARS 20-1631(P))
Liability Extension to Towed Vehicle (outline: Liability Extension to Towed Vehicle)
A towed vehicle or trailer travels as one unit with the covered auto. Typically liability follows the covered auto and a trailer you own, and extends to harm caused to others while the covered auto is towing. Damage to the towed unit itself is a Part D question (is it a covered auto or listed trailer?) or, if it is property of others in your care, a liability exclusion. Wording varies; answer from the policy language in the question.
6.4 Medical Payments Coverage (outline: Medical Payments Coverage)
Part B pays reasonable medical and funeral expenses incurred within a stated time (typically three years) for bodily injury to an insured in an auto accident, regardless of fault, up to a per-person limit. It is first-party and optional. Insureds: you and family members as occupants of, or pedestrians struck by, a motor vehicle, and others occupying your covered auto. Typical exclusions: vehicles with fewer than four wheels, livery use, injury covered by workers' compensation, regularly furnished non-owned vehicles, racing, war. It pays no lost income, pain and suffering, or property damage.
In Arizona Medical payments lien. For accidents after December 31, 1998, a medical payments insurer may have a lien on any amount over $5,000 paid under that coverage for the accident, and must compromise it fairly. To perfect it: record a statement with the county recorder where the accident occurred within 60 days after the payment over $5,000; mail a copy within 5 days of recording to the insured and each person and carrier alleged liable; record a release within 30 days after satisfaction. (ARS 20-259.01(J)) Medical payments is also a "basic coverage" under the renewal-modification rule (6.8). (ARS 20-1631(K))
6.5 Uninsured and Underinsured Motorists Coverage (outline: Uninsured and Underinsured Motorists Coverage)
Part C is first-party protection that pays what an insured is legally entitled to recover from the at-fault owner or operator of a vehicle that is uninsured or underinsured, paid by the insured's own insurer. Insureds are typically you, family members and occupants of your covered auto.
Definitions (outline: Definitions)
UM: the at-fault vehicle has no (or too little) liability insurance, its insurer denies cover or is insolvent, or it is a hit-and-run. UIM: the at-fault driver is insured, but not enough.
In Arizona (ARS 20-259.01) - UM coverage is coverage for damages due to bodily injury or death if the vehicle that caused them is not insured by a policy with at least the section 28-4009 limits (25/50/15 for policies from July 1, 2020). A driver insured at those limits is not "uninsured." (E) The test is the statutory minimum, not "any insurance." - An insured vehicle whose liability insurer cannot pay within limits because of insolvency is an uninsured vehicle. (D) - UIM applies when the sum of limits of all BI liability bonds and policies applicable at the time of the accident is less than total damages, and applies to the difference. (G) This is the damages test, not limits-to-limits. - UM and UIM are separate and distinct; UIM does not cover a claim against an uninsured motorist. (H) - A payment up to the at-fault policy's BI limits precludes UM based on that insured's fault. (F) - Unidentified vehicle and no physical contact: the insured must provide corroboration that it caused the accident. (M)
Bodily Injury (outline: Bodily Injury)
The Arizona statute speaks of damages due to bodily injury or death; the statute read adds no uninsured property damage coverage. The coverage pays damages the insured could recover from the at-fault driver (medical expense, lost earnings, pain and suffering, as the policy and law allow), up to the per-person and per-accident UM/UIM limits.
UM and UIM Rejection (outline: UM and UIM Rejection)
Arizona's mechanics differ from a "written rejection" rule in other states.
In Arizona (ARS 20-259.01(A), (B)) - The offer. Every insurer writing automobile liability policies must make UM available and offer it by written notice, covering all persons insured, in limits not less than the BI liability limits; the same duty applies separately to UIM. At the named insured's request the insurer shall include the coverage. - How. The offer of limits is made on a form approved by the director. A producer who uses that form satisfies the producer's standard of care in offering and explaining the coverage. - What controls. The declarations page, sent to the named insured, is the final expression of the named insured's decision to purchase or reject, and is valid for all persons insured. The statute does not use the words "rejection must be in writing"; whether the Department's rules or the approved form require a signature was not verifiable. Confirm with DIFI before telling a client what to sign. - Limits. The insured may buy UM up to the BI limits but not less than the 28-4009 limits (BI part: $25,000/$50,000), and UIM up to the BI limits; no UIM floor is stated. - No form needed if the insured buys coverage equal to the BI limits. - No re-offer on reinstatement of a lapsed policy, or transfer, substitution, modification or renewal, or when the 28-4009 minimums change. An insurer may not drop UM/UIM at renewal without the insured's written consent. (ARS 20-1631(K)) - Optional or not required. An insurer may offer UM/UIM for livery, rented or business-property vehicles, and may require the same UM/UIM limits on all vehicles it insures for the named insured (C); it need not offer on commercial liability, excess or umbrella policies without primary auto cover (L). - Multiple policies. The insurer may limit recovery to one policy selected by the insured; if the policy lacks a statement of that right, the insurer must notify the insured in writing within 30 days after notice of the accident. (H) - Subrogation. The UM insurer may sue the uninsured motorist in the insured's name. (I, K)
Worked example 6.B (offer). An applicant buys BI 100/300. The producer gives the approved form offering UM and UIM up to 100/300. If the applicant buys 100/300, no form is needed; if less, the form is the producer's record and the declarations page is the final expression. Next renewal needs no re-offer. UM below 25/50 cannot be bought; UIM has no stated floor.
Worked example 6.C (UIM damages test). Maria's damages are $90,000; the at-fault policy limit is $25,000 (paid); Maria's UIM is 100/300. UIM pays the difference: $90,000 - $25,000 = $65,000, total $90,000. With a $50,000 UIM limit, UIM pays $50,000. If damages were only $20,000 (below the at-fault limit), UIM pays nothing. If the at-fault driver had no insurance, UM, not UIM, applies.