Study guide
5.6 PAP Exclusions
Property & Casualty Insurance Exam
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1 Introduction
0.1 About the Property & Casualty Exam 0.2 How to Use This Course
2 Chapter 1: Insurance Fundamentals
1.1 Risk and Risk Management 1.2 Types of Risk 1.3 Principles of Insurance 1.4 The Insurance Contract 1.5 Policy Structure and Components
3 Chapter 2: Property Insurance Concepts
2.1 Property Coverage Basics 2.2 Perils, Hazards, and Exclusions 2.3 Valuation Methods 2.4 Coinsurance and Insurance to Value 2.5 Deductibles and Policy Limits
4 Chapter 3: Dwelling Policies
3.1 Dwelling Policy Overview 3.2 Dwelling Policy Forms (DP-1, DP-2, DP-3) 3.3 Dwelling Property Coverages 3.4 Dwelling Exclusions and Conditions
5 Chapter 4: Homeowners Policies
4.1 Homeowners Policy Overview 4.2 Homeowners Policy Forms (HO-2 through HO-8) 4.3 Section I: Property Coverages 4.4 Section II: Liability Coverages 4.5 Homeowners Exclusions 4.6 Homeowners Conditions 4.7 Common Homeowners Endorsements
6 Chapter 5: Personal Auto Policy
5.1 Personal Auto Policy Overview 5.2 Part A: Liability Coverage 5.3 Part B: Medical Payments Coverage 5.4 Part C: Uninsured/Underinsured Motorists 5.5 Part D: Physical Damage Coverage 5.6 PAP Exclusions 5.7 No-Fault Insurance and PIP
7 Chapter 6: Liability Insurance Concepts
6.1 Liability Insurance Basics 6.2 Negligence and Tort Law 6.3 Types of Legal Liability 6.4 Personal Umbrella Policies
8 Chapter 7: Commercial Property Insurance
7.1 Commercial Package Policy (CPP) 7.2 Building and Personal Property Coverage Form 7.3 Causes of Loss Forms 7.4 Business Income Coverage 7.5 Businessowners Policy (BOP)
9 Chapter 8: Commercial General Liability
8.1 CGL Policy Overview 8.2 Coverage A: Bodily Injury and Property Damage 8.3 Coverage B: Personal and Advertising Injury 8.4 Coverage C: Medical Payments 8.5 CGL Exclusions 8.6 CGL Limits and Conditions
10 Chapter 9: Commercial Auto Insurance
9.1 Business Auto Policy Overview 9.2 Covered Auto Designation Symbols 9.3 BAP Liability Coverage 9.4 BAP Physical Damage Coverage 9.5 Garage and Truckers Coverage Forms
11 Chapter 10: Workers Compensation
10.1 Workers Compensation Overview 10.2 Part One: Workers Compensation Insurance 10.3 Part Two: Employers Liability 10.4 Workers Compensation Exclusions 10.5 Other States and USL&H Coverage
12 Chapter 11: Other Commercial Lines
11.1 Inland Marine Insurance 11.2 Ocean Marine Insurance 11.3 Commercial Crime Insurance 11.4 Surety Bonds 11.5 National Flood Insurance Program 11.6 Professional Liability Insurance 11.7 Commercial Umbrella and Excess Liability 11.8 Boatowners and Personal Watercraft Insurance 11.9 Farm and Ranch Insurance 11.10 Mobile Home and Manufactured Housing Insurance 11.11 Title Insurance
13 Chapter 12: Insurance Regulations and Ethics
12.1 Producer Licensing 12.2 Producer Authority and Responsibilities 12.3 Unfair Trade Practices 12.4 Claims Settlement Practices 12.5 State Insurance Department 12.6 Penalties and Disciplinary Actions
5.6 PAP Exclusions
Key Takeaways Explain This Topic AI
Intentional injury or damage is excluded across the PAP — fortuitous loss is a requirement of insurability
Regular business or livery use (taxi, delivery, full-time rideshare) is excluded; commuting and a share-the-expense carpool are allowed
Vehicles with fewer than four wheels (motorcycles, mopeds), vehicles furnished for the insured's regular use, and racing are excluded
Rideshare drivers face a coverage gap when the app is on but no passenger is engaged; a rideshare/TNC endorsement closes it
Nuclear hazard, war, and damage to property the insured owns or has in their care are excluded across the relevant coverage parts
Last updated: June 2026
Why Exclusions Matter
The PAP's insuring agreements are broad; exclusions carve out what the policy will not pay so that coverage stays affordable and insurable. Many exam questions are really exclusion questions in disguise ("the policy will NOT cover..."). Group the exclusions by the part they sit in.
Part A (Liability) Exclusions
- Exclusion Plain meaning
- Intentional injury or damage Deliberate harm is not a fortuitous loss
- Property owned or transported Damage to property the insured owns or is in the insured's care
- Bodily injury to an employee Workers' compensation responds instead
- Public or livery conveyance Taxi/for-hire use; carpool share-the-expense is excepted
- Vehicle furnished for regular use A non-owned car routinely available to the insured
- Vehicles with fewer than four wheels Motorcycles, mopeds
- Racing / speed contest Track and timed events
- Business-Use Nuance
Allowed: commuting to work, occasional business errands in a private passenger auto. Excluded: delivering goods or passengers for a fee, company-owned vehicles, and regular commercial use — these require a commercial auto policy .
Part B (Medical Payments) Exclusions
- Exclusion Example
- Vehicle owned by the insured but not on the policy A second car left off coverage
- Vehicle used as a residence Living in a converted van
- Public/livery conveyance Operating as a taxi (carpool exception)
- Business use of a non-owned vehicle Driving an employer's truck
- Racing Track-day injury
- Vehicle with fewer than four wheels Motorcycle
- Part C (UM/UIM) Exclusions
- Exclusion Reason
- Use without reasonable belief of permission Unauthorized use
- Settling without the insurer's consent Destroys subrogation
- Workers' compensation situations Covered by WC
- Part D (Physical Damage) Exclusions
- Exclusion Reason
- Wear and tear, freezing, mechanical/electrical breakdown Maintenance, not a sudden loss
- Road damage to tires (alone) Maintenance item
- Aftermarket electronic equipment Endorsement required (factory-installed is covered)
- Custom furnishings/equipment Endorsement required
- Non-owned auto furnished for regular use Not a covered auto
- Rideshare / Transportation Network Company (TNC)
Rideshare (Uber, Lyft) driving exposes the personal-use/livery exclusion. Coverage breaks into three phases:
- Phase Status Who covers
- Phase 0 App off, personal use Personal PAP
- Phase 1 App on, waiting for a request Often a GAP — PAP excludes livery; TNC limited liability may apply
- Phase 2/3 En route to / carrying a passenger TNC commercial policy (high limits)
The Phase 1 gap is the classic exam point. A rideshare/TNC endorsement extends the personal policy to cover that waiting period.
Racing
Excluded: organized racing, speed or timing contests, drag racing, and competitive track events. Not excluded: driver-education courses, defensive-driving classes, and ordinary skills practice that is not a timed competition.
Nuclear, War, and Catastrophe Exclusions
These apply broadly:
- Exclusion Coverage
- Nuclear reaction, radiation, contamination None
- War, warlike action, insurrection, rebellion None
- Discharge of a nuclear weapon (even accidental) None
- Excluded Vehicles
- Vehicle Why
- Motorcycles, mopeds, motor scooters Fewer than four wheels — need a separate policy
- ATVs, go-karts, dune buggies Off-road / recreational
- Golf carts (off premises) Recreational, narrow exception on premises
- Worked Scenarios
Uber driver, app on, no passenger. Sarah's personal PAP excludes livery use; Uber's full commercial coverage has not yet engaged — result: a Phase-1 coverage gap unless she carries a rideshare endorsement.
Pizza delivery. Mike delivers for a fee in his personal car. Regular delivery is business use — a personal PAP will deny the claim. He needs a commercial auto policy or his employer's coverage.
Exclusions vs. Conditions vs. Definitions
A recurring exam theme is distinguishing how the policy removes coverage. An exclusion says a particular loss is not covered (intentional acts, racing). A definition can quietly exclude by narrowing what counts as a covered auto or an insured (a motorcycle is simply not within "your covered auto"). A condition in Part E or Part F can suspend coverage when the insured fails a duty (no notice, no cooperation, settling without consent).
When a question asks why a claim was denied, identify which mechanism applies — the same outcome can flow from an exclusion, a definition, or a breached condition, and the correct answer hinges on the precise label.
The Family-Member and Named-Insured Exclusions
Some PAP forms historically contained a household or family-member exclusion that barred liability claims by one insured against another in the same household, on the theory that the policy should not let family members sue one another for the insurer's money. Many states have limited or struck down this exclusion, so coverage varies. The broader principle endures: the PAP excludes property damage to property owned by, rented to, or in the care of the insured under Part A, which is why backing into your own garage door is a Part D physical-damage question, not a Part A liability claim.
Workers' Compensation and Employee Exclusions
Part A excludes bodily injury to an employee of an insured arising in the course of employment, because workers' compensation is the exclusive remedy there (a domestic employee not covered by WC may be an exception). It also excludes liability assumed under a contract and bodily injury for which the insured is an insured under a nuclear energy liability policy. These overlap-prevention exclusions keep the auto policy from stepping on coverages designed for those risks, and the exam likes to test which policy is the correct one to look to.
Quick Map: Which Coverage Was Defeated
- Fact pattern Exclusion at work Correct fix
- Pizza delivery crash Business/livery (Part A) Commercial auto policy
- Uber app on, no rider Public/livery + the Phase-1 gap Rideshare/TNC endorsement
- Aftermarket stereo stolen Electronic-equipment (Part D) Customized-equipment endorsement
- Track-day collision Racing (all parts) No coverage available
- Hit own fence Owned-property (Part A) Part D Collision on own car
Trap: "Intentional acts" excludes the insured's deliberate harm, but an act that is merely negligent or reckless (not intended to cause the specific harm) is generally still covered.