Does Your Personal Auto Policy
Cover Losses Which Occur During A Business Pursuit?
More and more of us are using our own car for work purposes. If we are involved in a car accident while working, are the losses covered? Maybe and maybe not.
The standard ISO personal auto policy form states that:
This coverage does not apply to:
* * * Bodily injury and property damage arising out of the ownership,
maintenance or use of a car when used to carry persons or
property for a charge. (Emphasis added).
This is commonly known as the “business pursuit exclusion.” The underwriting purpose is to exclude losses that occur when you are using your car for business reasons. Why? There is an increased risk of a loss occurring while you are driving while working. There is also an increased risk of a larger loss occurring. In other words, the loss will cost more. And there is a separate endorsement or auto business policy which has been created by the industry to better cover this type of risk.
However many gray coverage areas exist. For example, what if your daughter is a nanny and she is using a car you own to transport the children to the zoo? Or what if you have picked up a second job for “shoe money” as a pizza delivery man and need to use your own car for deliveries?
The clear intent of the business pursuits language is to exclude these losses. However the case law is inconsistent on whether such losses are covered. A quick look at examples will allow us to glean some coverage rules.
Example #1: An employee of postal service has been hired to deliver telephone books with his own automobile. Is he covered by his own auto policy if a loss occurs? NO! See, United States v. Milwaukee Guardian Ins. Co., 966 F.2d 1246 (8th Cir. 1992).
Example #2: An employee of postal service has been hired to deliver a rural mail route with his own automobile. Is he covered by his own auto policy if a loss occurs? YES! See, Cincinnati Ins. Co. v. W. Am. Ins. Co., 112 F. Supp. 2d 718, 722 (C.D. Ill. 2000).
Example #3: An employee is driving his co-workers and is reimbursed from the employer for mileage. Is he covered by his own auto policy if a loss occurs? YES! See, Travelers Ins. Co. v. State Farm Mut. Auto. Ins. Co., 175 F. Supp. 673, 675 (E.D. La. 1959) aff’d, 274 F.2d 208 (5th Cir. 1960).
Example #4: A babysitter is driving someone else’s children in her private auto to and from the childrens’ school. Is she covered by her own auto policy if a loss occurs? YES! See, Progressive Gulf Ins. Co. v. We Care Day Care Ctr., Inc., 953 So. 2d 250, 256 (Miss. Ct. App. 2006).
Example #5: A pizza boy is delivering pizza pies to nearby homes. Is he covered by his own auto policy if a loss occurs? YES! In Minnesota, Louisiana, Arkansas Tennessee and Ohio. NO! In Ohio, Texas and Delaware.
- The case law is very inconsistent.
- The better rule is to obtain a separate endorsement or policy to cover your auto losses when performing business work.
- The insured must not collect a separate fee or charge for the delivery. If he does, the courts tend to find that losses arising out of the task are excluded from coverage as a business pursuit.