Priya's Pickup: A Personal Auto Policy in a Landscaping Business
Priya owns a three-person landscaping company in the District. Her personal auto policy lists her 2019 pickup with 100/300/50 limits, $5,000 medical payments, and states the use as 'pleasure/commute.' In fact the truck plows two commercial parking lots every winter and tows a 14-foot enclosed trailer full of mowers; her employee Tom drives it daily to job sites. Last week Tom rear-ended a delivery van at a red light. The van driver has $60,000 of medical bills and $15,000 of lost wages; the van needs $22,000 of repairs. Tom has a valid license and Priya's permission. The company carries a CGL policy with a $1 million occurrence limit. There is no commercial auto policy and no hired or non-owned auto coverage.
1. Does the personal auto policy respond to the van driver's claim, and how much is payable?
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Who is an insured: the PAP covers the named insured and any person using the covered auto with permission. Tom had permission and a valid license, so he is an insured for this accident. The 'regular use' exclusion removes autos furnished for regular use - it does not remove a listed vehicle driven by an employee.
Does the business use defeat coverage? The PAP contains no blanket 'business use' exclusion for a listed auto. What it does contain is an exclusion for vehicles used to carry persons or property for a fee (livery). Plowing and hauling mowers is not livery, so the exclusion does not apply on its face. The real issue is misrepresentation of use on the application.
Misrepresentation analysis:
- The materiality is real - commercial rating is materially higher.
- But rescission after a loss is difficult: the carrier must show a material misrepresentation it relied on, and if the agent filled in 'pleasure/commute' without asking, the carrier's own producer created the problem.
- Most likely outcome: the carrier defends under a reservation of rights, pays the third-party claim (third parties are generally protected), and pursues premium adjustment, non-renewal, or a rescission action against Priya.
Payment:
- Bodily injury: $60,000 + $15,000 = $75,000, within the $100,000 per-person limit → $75,000.
- Property damage: $22,000, within the $50,000 limit → $22,000.
- Total $97,000, inside the $100,000/$300,000 structure. Med pay does not apply; it does not cover the other driver.
Flag before paying: the District is a compulsory no-fault jurisdiction with PIP. Confirm whether the van driver's PIP benefits and any tort threshold affect the liability payment, and apply offsets correctly.
2. Priya's agent tells her the CGL policy will cover the claim because the plow is 'mobile equipment.' Evaluate.
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The agent is wrong, and the reasoning is worth knowing because it recurs in exams.
The auto exclusion. The CGL excludes bodily injury or property damage arising out of the ownership, maintenance, use, or entrustment of any auto. A rear-end collision during a job-site trip is the paradigm case. Nothing in the CGL responds to the van driver's claim.
The mobile equipment argument fails on these facts. Mobile equipment (bulldozers, farm machinery, and similar) is excluded from the definition of auto, which is why CGL can cover it. But the definition carves back in any vehicle subject to motor vehicle registration. Priya's pickup is registered and plated for road use. A snowplow attachment bolted to a registered road vehicle does not convert the truck into mobile equipment. If she also owned an unregistered, self-propelled loader that injured someone on a job site, that would be a different analysis.
Result: a coverage gap. The company has liability for general operations but nothing for the vehicles that generate most of its liability exposure. The van driver will look to Priya and Tom personally for anything the PAP will not pay, and the PAP's own future is uncertain given the misrepresentation.
Also check: the CGL's 'use of automobiles' carve-outs sometimes cover loading and unloading. Here the loss happened in traffic, not during loading, so it does not help.
3. Design the fix. What coverages should Priya buy before the next winter season, and why?
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Buy a business auto policy (or commercial auto coverage part):
- Covered autos: schedule the pickup with the correct business classification, and add hired and non-owned auto liability so employee-driven rentals and personal vehicles used on company business are covered.
- Symbols matter: a 'symbol 1 - any auto' approach eliminates the gap between listed and unlisted vehicles.
- Limits: match or exceed the PAP's 100/300/50; a commercial auto claim involving a plow or trailer can generate serious injury.
Handle the trailer. Confirm the trailer is a covered auto on the commercial policy, not merely 'used with' a covered auto. Trailers are frequently dropped from schedules and produce nasty arguments after a loss.
Fix the personal auto policy. Either remove the truck from the PAP or re-rate it for business use. Leaving a commercially used truck rated 'pleasure' invites rescission on the claim that matters most.
Driver management:
- Motor vehicle records on Tom and any other driver at hire and annually.
- Written permission policy - no personal errands, no unlisted drivers.
- Non-owned auto liability if employees ever drive their own cars for the business.
Regulatory note: the District requires continuous compulsory liability coverage, and a lapse can jeopardize registration. Priya should not let the current policy lapse while the commercial policy is placed; bind the commercial auto effective the day the PAP is rewritten.