EXCESS MEXICAN COVERAGE FOR A PERSONAL AUTO POLICY

(September 2024)

Personal automobile policies written on cars garaged in the USA apply only to accidents, occurrences, and losses during the policy period while the automobile is within the USA, its territories and possessions, Canada, or is being transported between those locations. However, the Personal Auto Policy (PAP) does not offer coverage to a driver while operating a car in Mexico. Motorists driving from the USA to Mexico must buy special automobile insurance before crossing the border.

PP 03 21—Limited Mexico Coverage

The purpose of this endorsement is to give excess coverage over valid Mexican automobile insurance for covered autos that are used within 25 miles of the Mexico-USA border. There are two important considerations concerning the form's use:

1. Coverage is strictly on an excess basis. You must have an underlying, primary Mexican insurance policy. This endorsement only offers a layer of coverage over the Mexican policy if the limit of the Mexican policy proves to be inadequate. It will not drop down to provide primary coverage.

2. If an insured travels further than 25 miles into Mexico, this endorsement’s excess protection is void. It is important that insureds review their travel plans carefully and be aware of these limitations before going into Mexico. Poor planning may result in an insured being inadequately protected.

An insured planning to drive in Mexico can attach this endorsement to their existing personal automobile policy. The endorsed policy extends the policy coverage and conditions (on an excess basis) while the auto is driven in Mexico.

Any insured using this endorsement must be aware of the form’s cautious, opening wording. It conspicuously states that any accidents will be handled according to Mexican law, which MAY treat traffic incidents as criminal acts. Further, an insured is instructed that he or she MUST purchase valid, primary coverage from a properly licensed insurer in Mexico.

Note: Unless the insured has also purchased primary liability insurance through a licensed Mexican Insurer, this endorsement does not apply.

Financial responsibility and other vehicle insurance laws vary among Mexico’s states. The state minimums are affected by Mexican Federal auto law which mandates application of different compensation formulas. The base computation applies mandated multipliers to each state’s minimum wage. Different multipliers are used when an accident involves a fatal, third-party injury. Different multipliers are also used for criminal versus civil incidents. The judiciary in each state has the authority to decide, case-by-case, on whether an accident is criminal, civil or a combination. Finally, every state may apply an additional factor of up to seven times the amount of the initial, computed amount. For these reasons, final judgments can vary substantially. This situation is also the likely rationale for the form advising that it MAY NOT meet applicable Mexican insurance laws.

The ISO endorsement puts a limit of 25 miles on this coverage; beyond that point, excess coverage does not exist. In other words, an insured can only travel a maximum of 25 miles from the Mexican border or coverage ceases. In addition, this form offers excess coverage for a maximum of 10 days, after which the coverage is void. Further, the endorsement’s protection is excess over any other valid and collectible insurance.

The insured’s personal automobile policy, even if it bears the Mexican Coverage endorsement, may not be recognized by Mexican authorities. An individual, whether a resident of Mexico or a tourist, according to Mexican law, must be financially responsible for any injury or damage caused by an automobile accident. The law further states that a motorist involved in an accident must be detained until he or she shows satisfactory evidence of financial responsibility in the form of either an authorized Mexican insurance policy written by a Mexican company or cash.

Example: James and Julie were on their second day of vacationing in Nuevo Laredo. On the way to their hotel after a morning of site-seeing, James hits another car in an intersection. He shows the police a copy of his U.S. PAP that indicates that the PP 03 21 is attached. The officer advises that it doesn’t prove he has met financial responsibility requirements. He is arrested and incarcerated.

The Mexican Coverage endorsement attached to the insured's personal auto policy has value when used in conjunction with a valid Mexican-issued policy. The endorsement provides important excess coverage beyond the minimum financial responsibility limits of the Mexican policy. However, one problem is, if an accident obligation exceeds the primary Mexican insurance policy limits, the excess PAP coverage may still not be recognized by Mexican authorities. It is possible that a tourist could be detained until any excess amount is paid.

Mexican insurance policies may be purchased in a variety of ways including through agents or online via U.S. insurers which have legally established arrangements with authorized, Mexican insurers. Coverage may also be arranged on the border in California or Texas, by legally authorized agents of Mexican insurance companies operating on a surplus lines basis. Coverage purchased on the border tends to be substantially more expensive.

A PAP with a Mexican auto endorsement can be used as a backup to provide excess limits if necessary. Mexican auto policies may be written for only a few days or on an annual basis. However, regardless the length of separate, primary Mexican insurance, this endorsement’s 10-day maximum limit still applies.

If the insured is towing a trailer, he or she must purchase separate automobile liability insurance for the trailer, unlike the American automobile liability policy that automatically covers trailers under the same policy.

Since the limited coverage is extended only on an excess basis, the insurer does not have a duty to defend an insured for a suit that is filed in Mexico.

EXCLUSIONS

Besides the limitations that restrict coverage to apply for a maximum of 10 days and to accidents that occur while driving within 25 miles into that country, there are a number of additional exclusions. Specifically, there is no:

· coverage if liability insurance has not been obtained, and is not in force, from a licensed Mexican insurance company

· protection for any insured while occupying an auto other than an insured’s covered auto

· coverage for a citizen or resident of Mexico except for a loss payable under physical damage coverage—should a covered auto be damaged during an accident while being driven by a Mexican citizen or resident

· physical damage coverage for auto repairs made in Mexico unless the covered auto cannot be driven in its damaged condition; note that there is a limitation in case this event occurs: the most that an insurer is obligated to pay for repairs in Mexico is the actual cash value of those repairs that could have been made in the USA.