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April 26, 2022 - Following the great resignation of 2021 and the height of the COVID-19 pandemic, two things remain in high demand: home delivery and workers.
What potential delivery drivers (and their employers) might not realize, however, is that the driver's personal auto policy may not cover accidents that happen while they are making deliveries in their own car.
Consider the following scenario:
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A retired father with a little too much time on his hands goes on an afternoon walk in his small town to get his 10,000 steps a day. Mother's Day is next weekend, so he pops into a local flower shop to get some ideas.
He asks the shop owner about the best flowers to give his wife on Mother's Day. He mentions that he would like the flowers to be delivered to his home.
This sends the shop owner reeling — complaining about personnel shortages and lamenting that she cannot seem to offer a wage high enough to get extra delivery drivers to work on one of her busiest days — Mother's Day.
In the middle of this discussion, the father gets a phone call from his wife. He learns that she is actually going to be out of town on Mother's Day because she is taking a trip to visit her own mother that day.
Excited that he dodged a trip to his mother-in-law's home, the father tells the shop owner he would be happy to help her out if she really needs delivery drivers that badly. The shop owner is overjoyed. She agrees to pay the father $15/hour and asks him to use his truck to complete the deliveries.
On Mother's Day, the father shows up with his truck ready to get started. On his way to make his first delivery, a young girl and her dog both run after a ball into the street. Unfortunately, the father doesn't react quickly enough and runs over both the girl's feet, the dog's tail, and the ball.
The father assures the girl's mother that he has insurance that will cover the accident. The father also assumes the shop owner must have some insurance for this since he was her employee after all.
But this situation is a bit more complicated than the father initially assumed.
Many personal automobile policies exclude coverage for liabilities arising out of the use of an insured car to carry persons or property for money.
The exact wording of the policy exclusion can be significant. Some policies include broader exclusionary language that removes coverage when the insured car is used to carry persons or property for compensation or a fee while others may be slightly narrower, excluding coverage when the insured car is used to carry persons or property for a fee. The reference to compensation more easily excludes delivery drivers who are being paid hourly rather than on a per-trip or per-delivery basis.
When a delivery driver is paid an hourly wage, some courts may not enforce more narrowly drafted "carrying for a fee" exclusions. For example, in Prudential Property & Cas. Ins. Co. v. Sartno, (588 Pa. 205 (2006)), the Pennsylvania Supreme Court did not enforce a "for a fee" exclusion against an hourly pizza shop employee whose job duties "included cleaning the restaurant, preparing food, and delivering pizza." The court reasoned that on the one hand, being paid a wage could qualify as carrying the pizzas for a fee, but on the other hand, it may not be for a fee because the pizzeria did not charge its customers a delivery fee.
However, in Progressive Ins. Co. v. Nationwide, (No. 96CA006538, 1997 WL 461558, at *3 (Ohio Ct. App. Aug. 6, 1997)), an Ohio Appellate court determined that a carry "for a fee" exclusion was enforceable. The court reasoned that because Pizza Hut charged a delivery fee, a pizza delivery driver working for Pizza Hut was getting a fee for the delivery. As the court explained, "Pizza Hut charged its customers a fee, and is therefore unambiguously excluded from coverage under the Nationwide insurance contract."
Courts applying the broader exclusionary language — carrying property "for compensation or a fee" — do not have to engage in a fee analysis and have instead found that merely paying an hourly wage to someone employed as a delivery driver qualifies as "compensation." These courts have enforced the exclusion, noting that this broader "compensation or a fee" language removed any uncertainty. (See, e.g., Discover Property & Cas. Co. v. Progressive Cas., 2011 Ohio 3841, ¶ 11, 2011 WL 3366367, at *2 (Ohio App. 8 Dist., 2011) (reasoning that "the terms 'compensation' and 'for hire' indicate the exclusions apply to payment to drivers in any form for the deliveries, not just a specific sum.")).
In the flower delivery example, it is not entirely clear whether the father will be covered under his personal auto policy.
In states that enforce carry for compensation exclusions, even though his employment is only temporary and part-time, the retired father was being compensated for delivering the flowers — weighing in favor of a more broadly worded carry for compensation exclusion applying.
However, if the retired father's personal auto policy only excludes carrying property for a fee, the arguably narrower exclusion may not apply. The retired father was not paid per delivery, and the shop owner may not charge a delivery fee. In addition, courts in some states may refuse to apply this exclusion altogether. Therefore, a "fee" exclusion may not apply because the retired father did not receive a special fee for each delivery.
Ultimately, whether the retired father's personal auto policy provides coverage is going to be influenced by the exclusion's wording and depend on a close analysis of all the facts surrounding the employment and deliveries.
The father in this example is not necessarily left without any insurance at all. The flower shop could have a commercial auto policy that already covers its delivery drivers if it typically makes deliveries. Therefore, the father may have some insurance that could cover him for this accident.
It is possible that even if the flower shop has commercial auto coverage in the first place, it may not cover the father driving his own vehicle. It is common for commercial auto coverage to only cover vehicles specifically listed on the policy. A flower shop that has its own delivery vehicles but hires additional workers for busy holidays — like Mother's Day — might only carry insurance coverage for its own delivery vehicles. The business owner may have thought, "Why pay extra premiums to cover my temporary employees' vehicles when I only hire extra delivery drivers for a couple holidays a year?"
The important thing to keep in mind is that when someone is driving people or property in exchange for money, although the driver's employer should have insurance, auto coverage may not be available for the driver through their own personal auto policy.
Always review the whole policy and applicable state and local rules when considering how a carry for pay exclusion could affect available auto coverage.
Erin Mindoro Ezra is a regular contributing columnist on insurance coverage for Reuters Legal News and Westlaw Today.
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Westlaw Today is owned by Thomson Reuters and operates independently of Reuters News.
Spring showers bring flowers: why personal auto policies may not cover delivery drivers - Reuters
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