Commercial Use Exclusions in Auto Policies

By Clay Martin | September 14, 2021

Commercial Use Exclusions in Auto PoliciesOne of the companies that nearly doubled its profits during the coronavirus pandemic is Instacart. Instacart is a food delivery service application that allows independent contractors to gain additional income by shopping for various customers. Shoppers can pick up, shop, and deliver groceries to the customer’s address in a designated time frame.

Not surprisingly, there was an increase of Instacart Shoppers from 130,000 in 2019 to 500,000 in 2020. While the increase in shoppers is beneficial for Instacart, the shoppers who deliver groceries encounter the same risks that independent contractors working with Uber and Door Dash encounter when it comes to commercial use for auto policies.

What is commercial auto coverage?

Companies that employ independent contractors such as Instacart take advantage of a policy known as commercial use auto coverage. Commercial use auto coverage allows businesses to safeguard themselves against any financial losses that stem from auto accidents. Instacart, however, is unique from other third-party applications because it is not specified whether the company provides commercial auto coverage.

What is specified is that independent contractors who sign a third-party agreement with Instacart must provide his or her own personal auto insurance. This can present many issues for the independent contractor, however, if their auto insurance contains a commercial use exclusion in the policy.

What are commercial use exclusions?

Traditionally, a personal auto insurance policy does not cover aspects such as liability, physical damage, medical payments, or uninsured motorists for drivers who use their vehicles for commercial use. Commercial use can cover a range of business activities such as taxi use or delivering grocery items; any activity where a vehicle is being used to transport people or goods and the driver can receive payment is defined as commercial use.

If an insurance company discovers that a driver is performing any commercial use activities with their vehicle under their personal auto insurance policy, the insurance company has the right to refuse coverage. This means that if the independent contractor is involved in a crash while performing work under Instacart, the driver may not be covered under their policy.

What is the difference between personal auto insurance and commercial auto insurance?

Besides the obvious difference in price, commercial auto insurance and personal auto insurance serve different purposes. In the eyes of the driver’s insurance company, a personal auto insurance policy is designed with the intention of keeping the driver and the driver’s family members protected and insured.

The personal auto insurance policy should not be used to cover any liabilities created by a business. Issues such as physical damage done to vehicles used for commercial use are covered under commercial auto insurance. Under a personal auto insurance policy, you are likely to be exempt from all coverage if your vehicle is used for these exclusions:

  • Public or Livery Conveyance. Many insurance companies define a public or livery conveyance as the public pickup and delivery of people or goods. If you are using your car for the purpose of picking and dropping off people or delivering goods such as groceries back and forth, that counts as commercial use.
  • Selling, Repairing, Storing, Servicing, or Parking Vehicles.

These two exclusions do not apply to drivers who use their personal auto insurance policies for professions such as farming or ranching. These exclusions also do not apply to drivers who maintain or use vehicles such as private passenger autos, pickups, motorhomes, vans, or trailers.

Broad definitions of commercial use in insurance policies

The issue with the broad definition of commercial use by insurance companies is that many actions on behalf of drivers can be classified as commercial use. Let’s say, for example, that an independent contractor used his or her own personal vehicle to travel from job site to job site. Should that person be exempt from using their personal auto coverage if they were involved in an accident on the way to another job site?

Would the insurance company try to justify a refusal of coverage based on what appears to be commercial use exercised by the driver? What about a driver who uses their own personal vehicle to run errands for a nonprofit organization? If the driver was involved in a car accident while running errands, would that be classified as commercial use? Would it even be fair to classify that action as commercial use?

Looking into commercial auto insurance

For independent contractors, it would be in their best interest to look into purchasing commercial auto insurance. Even for sole proprietors or small business owners, commercial auto insurance can provide many additional protections that a personal auto insurance policy cannot. If insurance companies discover that a driver’s personal vehicle was being used for commercial use, the policy can be canceled right then and there.

For commercial auto insurance, a driver can receive additional coverage for additional issues. In addition to legal expenses, bodily injury, and property damage, commercial auto insurance covers higher claims, different types of vehicles, and more complex legal problems for drivers. Any vehicle that is used to transport goods or equipment, drive clients or employees, perform a service that a driver is paid for, charge passengers a fee for riding in a vehicle, or hauling work-related loads can be covered under commercial auto insurance.

Hired and non-owned auto insurance

For independent contractors, sole proprietors, or small business owners who are still apprehensive about using commercial auto insurance, there is a policy known as hired and non-owned auto insurance that could satisfy some objections. With hired and non-owned auto insurance, a driver who uses his or her own personal vehicle to complete work errands can be covered.

Under this type of policy, drivers who operate their personal vehicles or vehicles owned by their employer are protected from being subject to auto liability lawsuits. Although hired and non-owned auto insurance covers auto liability coverage for drivers, it does not cover damage to the vehicle.

Were you wrongfully denied a claim by your insurance company after a car accident? Do you believe the insurance company undercut the value of the claim? If so, it’s time to speak with the experienced Huntsville insurance disputes attorneys at Martin & Helms. Call our office at 256-539-1990 or complete the contact form on our website to schedule a consultation. We also serve injured clients in Decatur, Athens and Madison, and throughout the Tennessee Valley region and North Alabama.

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