North Carolina Adjuster Practice Exam

Why might Tom's PAP liability insurance deny him coverage after his accident?

1. He was driving under the influence

2. He was using a vehicle not covered by his policy

3. He was engaged in an employment-related activity

4. The accident occurred outside of work hours

The correct answer is: He was engaged in an employment-related activity

The correct answer underscores the principle that personal auto policies (PAP) typically exclude coverage for accidents that occur while an individual is engaged in work-related activities. If Tom was using his personal vehicle to conduct an employment-related task, his PAP liability insurance may deny coverage because such policies often specify that they are meant for personal use only. This means that if the vehicle was being used for any work purpose, including delivering goods or making business-related trips, the policy would not cover accidents that arise during those activities, as professional liability typically requires different coverage, often provided through a commercial auto policy. In contrast, the other options suggest scenarios that may or may not impact coverage differently. Driving under the influence would certainly create grounds for coverage denial, but the specifics of Tom's situation imply that the issue relates to the nature of the activity he was performing at the time of the accident. Using a vehicle not covered by his policy would also potentially lead to denial, but in this case, the essential factor lies in whether Tom was engaged in an employment-related activity, which voids coverage under a personal auto policy. Thus, understanding the limitations of personal auto policies is crucial when assessing coverage after an accident.