63. Hank, who is the named insured under a Personal Auto policy, borrows a neighbor's car and hits a parked car while driving the neighbor's auto. The neighbor is also insured under a Personal Auto policy. Whose policy would provide Liability coverage for this loss?
Answer: B
The neighbor's Personal Auto policy would be primary; Hank's policy would apply on an excess basis.
In this scenario, the neighbor's Personal Auto policy is the primary coverage that would respond to the liability resulting from the accident. Hank's Personal Auto policy would serve as secondary coverage if needed.
A) Hank's Personal Auto policy is the only policy that would respond
This option is incorrect because both policies can respond to the loss, but Hank's policy would not be the sole responder in this case. Liability coverage is typically provided by the vehicle owner's policy, which in this case is the neighbor's.
B) The neighbor's Personal Auto policy would be primary; Hank's policy would apply on an excess basis
This option is correct because when an insured borrows a vehicle, the vehicle owner's liability policy generally provides primary coverage. Hank's policy may then cover any excess liability beyond what the neighbor's policy covers.
C) Neither Personal Auto policy would apply to the loss
This option is incorrect as it overlooks the fact that at least one of the policies, specifically the neighbor's, would provide coverage for the liability incurred from the accident. Both policies are in effect; thus, this statement is not valid.
D) The neighbor's Personal Auto policy is the only policy that would respond
While this option correctly identifies that the neighbor's policy would respond, it fails to acknowledge that Hank's policy could also provide coverage as excess. Therefore, this statement is misleading as it suggests that Hank's policy has no role, which is not entirely accurate.
Conclusion
The correct answer highlights the primary and excess coverage roles of the policies involved. The neighbor's Personal Auto policy acts as the primary coverage for the incident, while Hank's policy serves as excess coverage in case the neighbor's limits are exceeded. The other options either misrepresent the coverage roles or incorrectly assert that no policies apply to the situation.