Pizza Delivery on a Pleasure-Rated Policy
A personal auto policy covers a 2019 Outback with limits of 100/300/50, medical payments of $5,000 per person, uninsured motorist coverage at 100/300, and collision with a $500 deductible. The named insured and her 22-year-old son, who lives at home and is a listed driver, are the only operators. The application states the vehicle is used for pleasure and commuting. In fact the son signed up with a food delivery app and runs Friday and Saturday dinner shifts. On a delivery run he runs a red light and strikes a sedan carrying two people. The driver has $78,000 in medical bills and $22,000 in lost wages; the passenger has $32,000 in bills; the sedan is a total loss with an actual cash value of $14,000. The son's friend, riding along, has $9,000 in bills. The Outback needs $11,000 in collision repairs. The policy contains a Part A exclusion for use of a covered auto while engaged in the business of transporting persons or property for a fee, and no delivery endorsement was added.
1. Does the policy respond to the accident? Analyze the use exclusion and the application misstatement separately.
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The exclusion. The exclusion is written around being engaged in the business of transporting property for a fee, and the son was doing exactly that at the moment of impact: an active delivery run, for compensation, on a vehicle rated for pleasure and commuting. Under the plain wording the exclusion applies to the accident, which means no defense and no indemnity for the son, and no collision payment either, because the physical damage exclusions track the liability exclusions for business use.
The misstatement. Separately, the application understated the vehicle's use. The insurer must generally show materiality and reliance, meaning it would have charged more or declined the risk had it known. Delivery use materially changes rating and eligibility, so this is a strong argument, though many states require clear and convincing proof for rescission and some require intent.
Interplay. The exclusion is the cleaner defense because it requires no proof of anyone's state of mind; the misrepresentation argument is a fallback. Either way the son is personally exposed for roughly $141,000 plus the property damage, and the parents face potential negligent entrustment claims.
2. Assume for this question that coverage applies. Calculate what the policy pays to each claimant, identifying which limit governs.
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Liability, Part A. Limits are $100,000 per person and $300,000 per occurrence.
- Sedan driver: $78,000 medical plus $22,000 wages equals $100,000, exactly at the per-person limit. Pay $100,000.
- Sedan passenger: $32,000, under the per-person limit. Pay $32,000.
- Son's friend: $9,000. He is an insured for medical payments, but he is also a liability claimant against the son, so his bodily injury claim is added to the occurrence total. Pay up to $9,000 subject to the per-person limit.
- Occurrence total: $141,000, well under $300,000, so no reduction is needed.
Property damage. The sedan's $14,000 ACV is within the $50,000 limit. Pay $14,000.
Medical payments. $5,000 is available to the friend, who has $9,000 in bills. Med pay is paid without regard to fault and generally is not reduced by the liability payment, but the carrier may have a subrogation right against the liability payment for the same bills, so do not double count in negotiation.
Collision. $11,000 minus the $500 deductible equals $10,500 to the Outback.
Total exposure is roughly $175,500, all inside the occurrence and property damage limits.
3. The son says he had the app on but had not accepted an order when a different accident occurred. How would that change the analysis?
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That fact pattern is the rideshare gap, and the answer depends on the app's status at the moment of loss.
App on, waiting for a request. Most personal auto forms treat this as ordinary personal use unless the policy contains a transportation network endorsement. The business-of-transporting-for-a-fee exclusion generally requires an actual passenger or delivery, so coverage under the personal policy is usually preserved. Some carriers write a TNC endorsement that excludes period one and relies on the network's contingent coverage; if such an endorsement exists, follow its wording.
Request accepted, en route or carrying a passenger. The personal policy is typically excluded and the network company's commercial policy, often $1,000,000, responds. That coverage is usually primary and includes the period after acceptance.
Practical point. The reason this matters here is that the family never told the insurer about any app work, so the carrier will assume the worst fact pattern. The burden of establishing precisely when the order was accepted falls on the insured, and app records are the evidence. Advise the insured to preserve the trip log before the app overwrites it, and expect the carrier to demand it before extending any defense.