Priya's CR-V: Bakery Deliveries, a 25/50/25 PAP, and a Demand for the BOP Limit

Do not confuse the reservation letter with a denial.

• A reservation-of-rights letter preserves the insurer's right to deny later; it is not a coverage position. It should be answered with facts, not panic.
• The relevant PAP exclusions are narrow: carrying persons or property for a fee (livery and for-hire delivery) and, for non-owned autos, business use outside specified exceptions. Delivering the bakery's own goods is not carrying property "for a fee" in the livery sense - there is no separate delivery charge to a third party.
• The standard PAP does not broadly exclude business use of the named insured's own covered auto. That is precisely why insurers surcharge or add business-use endorsements - the base form covers it.
• The decisive documents: the declarations and endorsements. If the carrier attached a business-use exclusion or a delivery exclusion, the analysis flips. Read the actual form before answering the letter.

Likely conclusion: the PAP responds, but at 25/50/25 - and that is the real problem, not coverage.

Almost certainly not - and the demand is aimed at the wrong policy.

• The CGL coverage part excludes bodily injury and property damage arising out of the ownership, maintenance, or use of any auto. The CR-V is an auto. The exclusion applies whether Priya owns, hires, or borrows it.
• The narrow exceptions in that exclusion (parking an auto on the premises, loading/unloading in some forms, liability assumed under an insured contract) do not reach a rear-end collision on a delivery run.
• Non-owned and hired auto liability is added back only by endorsement - commonly a hired and non-owned auto liability endorsement, or a limited auto endorsement in some BOP packages. Whether Priya has one is a declarations-and-endorsements question, not an assumption.
• If the endorsement exists: it may respond to her liability for a non-owned auto used in the business, and coverage could be substantial. If it does not: the $1,000,000 BOP is irrelevant to this loss, and the claimant's demand should be answered with a coverage position letter, not a settlement discussion.

Quantify the gap

• Bodily injury: $60,000 − $25,000 per-person limit = $35,000 unpaid by the PAP. The $50,000 per-accident limit is not reached, so the per-person cap controls.
• Property damage: $22,000 is inside the $25,000 PD limit - covered.
• Priya's personal exposure on this loss: about $35,000, plus defense of any claim above limits, plus the possibility of an excess verdict.

What she should have bought

1. Commercial auto (or a business-use endorsement on the PAP if the carrier will write it) with limits aligned to the BOP - at least $1,000,000 CSL.
2. Hired and non-owned auto liability on the BOP if she ever uses employees' or rented vehicles.
3. A personal umbrella sitting over both - cheap relative to the gap it closes.
4. Higher underlying limits, so the umbrella is not eroded by a minimum-limits auto policy.

What to do now

• Tender to the PAP, answer the reservation letter with the delivery facts, and demand a coverage position in writing.
• Put the carrier and the claimant on notice of the limits so the claimant can decide whether to pursue Priya personally.
• Do not let the claimant's attorney treat the BOP discussion as an admission that the BOP applies; issue a written coverage position.
• Never issue a certificate or a letter describing the BOP as covering auto liability. That single sentence is how an E&O claim gets born.