Questions & answers: Does personal auto policy extend coverage to delivery of pizza?

Questions & answers: Does personal auto policy extend coverage to delivery of pizza?

Q: I am trying to find out if there are any court cases on the use of a private passenger auto in delivery of items, such as newspapers or pizza. In particular, I want to know if the public and livery exclusion of a personal auto policy would apply to a situation such as this, or if this would not be considered a livery situation. -GREGG BERRY

First State Insurance Agency, Middlebury, Indiana

A: The term “livery” is not defined in the personal auto policy As such, we will go to a couple of dictionaries for help.

Webster’s Dictionary refers to livery as the transport of persons, for hire.

The American Heritage Dictionary refers to livery as the transport of persons or property, for hire. Bottom line, livery normally refers to the hiring of an auto to transport either persons or property.

Going back to your concern, if an insured is hired by the public to transport persons or property, there would be no coverage. On the other hand, if the insured is delivering pizzas or newspapers for an employer or as an independent contractor, then we need to dig a little further and look at the business use exclusions. We will look at two additional definitions and then review business use exclusions.

First, who is the insured:

“A. Throughout this policy, ‘you’ and ‘your’ refer to:

1.) The `named insured’ shown in the Declarations; and,

2.) The spouse if a resident of the same household.”

Second, what is covered:

“J. `Your covered auto’ means:

1. Any vehicle shown in the Declarations.

2. Any of the following types of vehicles on the date you become the owner:

a. A private passenger auto; or

b. A pickup or van that:

(1) Has a Gross Vehicle Weight of less than 10,000 lb.; and

(2) Is not used for the delivery or transportation of goods and materials unless such use is:

(a) Incidental to your ‘business’ of installing, maintaining or repairing furnishings or equipment; or

(b) For farming or ranching.”

Now look at the Liability Exclusions, but not just Exclusion #7, but both #6 and #7:

“A. We do not provide Liability Coverage for any ‘insured’:

6. While employed or otherwise engaged in the ‘business’ of:

a. Selling;

b. Repairing;

c. Servicing;

d. Storing; or

e. Parking vehicles designed for use mainly on public highways. This includes road testing and delivery. This exclusion (A.6.) does not apply to the ownership, maintenance or use of `your covered auto’ by:

a. You;

b. Any family member’; or

c. Any partner, agent or employee of you or any `family member’.

7. Maintaining or using any vehicle while that `insured’ is employed or otherwise engaged in any ‘business’ (other than farming or ranching) not described in exclusion A.6.

This exclusion (A.7.) does not apply to the maintenance or use of a:

a. Private passenger auto;

b. Pickup or van that:

(1) You own; or

(2) You do not own while used as a temporary substitute for `your covered auto’ which is out of normal use because of its:

(a) Breakdown;

(b) Repair;

(c) Servicing;

(d) Loss; or

(e) Destruction; or…”

Based on the above definitions and exclusions, it appears that if the vehicle is:

1. a private passenger auto or a pickup/van under 10,000 lb. GVW, and

2. owned by the named insured or spouse, the following business uses are covered: farming/ranching;

artisan contracting (not used for the delivery or transportation of goods and materials unless such use is incidental to your “business” of installing, maintaining or repairing furnishings or equipment); and

any other business use not specifically excluded below (again, as long as it is an owned private passenger auto, pickup, or van).

The business uses specifically excluded are:

public livery or conveyance-use of vehicles for hire to the public to transport persons or property;

the selling, repairing, servicing, storing, or parking of autos or other vehicles for road use;

delivery or transportation of goods and materials by a van or pickup (other than the covered incidental artisan which includes installing, maintaining or repairing furnishings or equipment); or

any other business exposure, while using or maintaining a vehicle owned by someone other than the insured or spouse, (this includes vehicles loaned or provided to the insured or spouse by an employer), while that vehicle is being used for business purposes or anything to do with the insured’s employment. So the company vehicle provided to the insured by the employer is not covered while the insured is on company business, but would be covered while driving for pleasure.

We found only one applicable court case in the material available to us. Note that it was for the State of Ohio and that other states do not necessarily follow suit. Also note specifically the details of the case with respect to the insured’s delivery exposure.

Colonial Ins. Co., of CA versus Jermann, 102 Ohio App.3d 384, 657 N.E.2d 336 (lOth District 1995)

The following is a ruling made by the Ohio Court of Appeals, Tenth District.

The case involved a young man, named as an insured on his mother’s personal auto policy. The young man worked for a pizza delivery service. During the course of pizza delivery, the young man collided with another vehicle. The passengers of the second vehicle filed claims against the young man. His insurer denied coverage based on the exclusion for a vehicle being used to carry persons or property for a fee.

The trial court sided with the insured so the insurer appealed stating that the exclusion regarding carrying property for a fee should apply since the insured was compensated with wages, tips, commission.

The Court of Appeals disagreed and felt an ambiguity existed. They explained that the insured did not use his vehicle specifically for the purpose of carrying goods for a fee. Also, his employers did not charge an additional fee to their customers for delivery. The Court of Appeals sided with the trial court and affirmed coverage in favor of the insured, against the insurer.

Do you have a coverage question, tricky risk or debatable issue? Drop us a letter outlining the details and we’ll contact an industry specialist who will address your concern. Where possible, questions and answers will be printed in the column. Mail your questions to Rough Notes, Q&A Dept., 11690 Technology Drive, Carmel, IN 46032. Please include your name, address and phone number.

Copyright Rough Notes Co., Inc. Mar 1997

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