What Now??

[VRU1032]

Hello all, I'm hoping to get some answers to help lower my anxiety regarding a vehicle accident involving my car.

A few weeks ago, my 18 year old stepson was involved in a car accident while driving a car registered in my name. At the time he was delivering pizza for a local pizza Shoppe. The night of the accident, I immediately notified my insurance company to submit a claim. The car was an older car and I only had collision on it to cover damages done to the other vehicle. Long story short, my insurance company declined the coverage due to the fact that he was delivering pizza.

So what now?? What's going to happen? Will the other party's insurance company pay for her damaged vehicle? I will I get sued? Will my stepson get sued? This is horrible. Yes, shame on me for not knowing my policy inside out, but the fact is that I didn't know that he wouldn't be covered if he was in an accident while delivering pizza. I would never allowed him to use the car. He only did that job once in a blue moon anyway to help the owner who he is friends with and I never ever thought about if he was covered by insurance. UGH! Any suggestions will help. This feels like a bad dream. Even if it's bad news, I just want to know what to expect here. Thanks you.

 

[InsCommentary]

The adjuster needs to deny the claim in writing, citing the applicable exclusionary policy language, and how that language acts to exclude coverage for this accident. What does the denial letter say? What is the exact policy language being cited. The adjuster isn't always right and sometimes gray areas result in judgments in favor of insureds. Here's an article that mentions, without citation, a Pennsylvania court case that upheld one type of wording found in some policies, but the wording is different in different policies.

Does the ISO Personal Auto Policy Cover Pizza Delivery?

Author: Bill Wilson

After years of instructing personal auto seminars, probably the question that comes up most often (except, perhaps, for rental car issues) is whether or not the ISO PAP covers claims that arise out of the use of a personal auto for pizza delivery. Here's my opinion (along with that of several courts).


According to the 2005 ISO Personal Auto Policy, there is no coverage for an insured’s ownership or operation of a vehicle while it is being used as a public or livery conveyance, except that the exclusion does not apply to a share-the-expense car pool. The expressed intent of the policy drafters (via 1989 ISO filing memorandum) is that this exclusion is designed to preclude coverage for vehicles available for hire to the general public for the transportation of people or cargo (e.g., taxis, sight-seeing vans, package delivery services, etc.).

The wording of this exclusion in the 1986 ISO Personal Auto Policy made it applicable to the transportation of "persons or property for a fee," but it was determined that the wording in that policy edition was being more restrictively applied than intended by the policy drafters. Therefore, in the 1989 ISO Personal Auto Policy, ISO reverted to the "public or livery conveyance" language of prior forms (e.g., the non-simplified Family Auto Policy) which had been extensively adjudicated to mean "a vehicle held indiscriminately for hire to the general public."

This exclusion presents "gray" areas as to coverage for certain activities such as newspaper deliveries, rural mail carriers (for subrogation claims under the Federal Tort Claims Act), home products sales reps (e.g., Avon, Amway, etc.), and so forth. For example, a continuing controversy is whether or not the exclusion applies to "pizza delivery." One court, in interpreting the more restrictive "transporting persons or property for a fee" exclusion, ruled that the exclusion did not apply to an employee using his own auto in the course of employment, largely because the delivery charge did not directly benefit the insured (United Services Automobile Association v. Couch, Tennessee Court of Appeals, 1982).

At least two other state courts (and Supreme Courts at that) have also found coverage under the PAP for pizza delivery: (1) USF&G v. Lightning Rod Mutual Ins. Co., Ohio Supreme Court, 1997, and (2) RPM Pizza, Inc. v. Automotive Cas. Ins., Louisiana Supreme Court, 1992. In addition, other courts holding the exclusion to be ambiguous include Progressive Cas. Ins. Co. v. Metcalf, 501 N.W.2d 690 (Minn. Ct. App. 1993), Pizza Hut of Am., Inc. v. W. Gen. Ins. Co., 36 Ark. App. 16, 816 S.W.2d 638 (Ark. Ct. App. 1991), and Cincinnati Ins. Co. v. W. Am. Ins. Co., 112 F. Supp. 2d 718 (D. Ill. 2000). The first two of these three cases involved pizza delivery and the last mail delivery.

One Pennsylvania court found that the "carrying persons or property for a fee" exclusion DID bar recovery, though the dissenting opinion makes a compelling argument that the court was mistaken, given the body of case law on this exclusion around the country.

In recognition of the likelihood that the unendorsed policy covers such use, at least one company has addressed this issue by introducing a mandatory "Food Delivery Exclusion" endorsement that can be removed, on a case-by-case basis, for a premium surcharge. When in doubt, clarify the company’s claims position in advance.

In addition, comparison of this exclusion with the Insuring Agreement seems to indicate that the exclusion may not be as broad as usually interpreted. The insuring agreement covers the "ownership, maintenance or use" of any auto by "you" or "family members" and the "use" of "your covered auto" by other persons. This exclusion, however, applies only to "ownership or operation...while" the vehicle is being used as a public or livery conveyance. Therefore, the exclusion does not apply while the vehicle is not being used as a public or livery conveyance. And, even while being used as such, "you" and "family members" would be covered for maintenance of the vehicle, plus any "use" not involving "operation" of the auto.