Delivery App Driver, a Borrowing Son, and Two Third-Party Claims

Liability - no coverage. The PAP excludes liability coverage for any vehicle while it is used to carry persons or property for a fee, and the exclusion expressly lists delivery of food or other goods. Tasha was logged into the app with a customer's order in the car, which is precisely the excluded use. The exclusion applies whether the vehicle is owned, non-owned, or temporary, and it does not require the use to be full-time - 20 hours a week is a business use.

Physical damage - also denied or at serious risk. The standard form carries the same fee/livery exclusion into the damage-to-your-auto coverage, so the $9,000 collision claim is denied as well. Even if a particular form's Part D wording is narrower, the carrier will raise the business-use exclusion, and the claim is at best a coverage dispute.

Consequences Tasha is not expecting:

• She is personally exposed to Marcus for $180,000. Her liability limits (100/300) never come into play because there is no coverage to apply them.
• An unpaid judgment in Wisconsin implicates the state's financial responsibility law - a judgment debtor can lose driving privileges and registration until the judgment is satisfied. The gap is not merely financial; it is a license problem.
• The delivery app may carry a commercial auto or contingent liability policy that responds while she is actively on a delivery, typically excess and typically only during the delivery window. That is a possible source of defense, not a substitute for her own coverage, and it will not respond to the collision damage or to any period when she is logged in but between orders.

Defense obligation. Do not simply send a denial letter. The carrier will usually defend under a reservation of rights until the exclusion is established, because the duty to defend is broader than the duty to indemnify; the reservation preserves the right to recoup defense costs if coverage is ultimately denied.

Fix going forward: a commercial auto policy, or a carrier-specific delivery/rideshare endorsement if one is available for food delivery, plus disclosure to the agent in writing.

He is an insured. Devon is a family member living in the household and a listed driver, and he had permission to use a covered auto. The claim is covered.

Does the business context defeat coverage? No. The exclusions for business use target specific uses: carrying persons or property for a fee, public or livery conveyance, renting or leasing the vehicle, and vehicle businesses such as selling, repairing, or parking cars. Using a private passenger car to help an employer move donated furniture, with no fee charged and not as a regular part of a driving job, is ordinary permissive use. A personal auto policy does not exclude all business driving.

Which policy is primary?

• The nonprofit employer's business auto policy, if it has one, covers non-owned autos used in its business and would typically be primary for the employer's vicarious exposure.
• Tasha's PAP, however, is primary for this loss because the CR-V is a covered auto under her policy. The PAP's other-insurance clause makes it excess only when the covered auto is a non-owned auto. Since the car is Tasha's scheduled vehicle and Devon is an insured, her policy stands first, and the employer's carrier stands behind it or shares under its own other-insurance terms.
• Note the secondary exposure: if Devon is sued personally, his own policy (if he has one) or the household policy responds; if he had his own separate policy, both policies would apply, with the owner's policy typically primary.

Is the $2,000 rental payable? Yes. 'Property damage' includes loss of use of tangible property that has been physically damaged, so the reasonable rental cost while the parked car is repaired is damages because of property damage, subject to the $50,000 property damage limit. The $6,000 repair and $2,000 rental together ($8,000) fit easily. No deductible applies - the collision deductible applies only to damage to Tasha's own vehicle, not to third-party liability payments.

Practical: obtain the nonprofit's coverage information, tender to both carriers, and caution Devon that a liability payment is a chargeable accident on the household policy at renewal.

The claim is much stronger than a typical E&O claim, because it is affirmative advice, not an omission.

1. Standard of care. A Wisconsin producer must exercise reasonable care, skill, and diligence and must not misrepresent coverage. There is no general duty to advise a client on every possible gap, but once the agent is told a material fact - regular paid food delivery - and undertakes to answer, the agent must answer correctly or obtain the correct answer from the carrier.
2. Two theories. (a) Negligence: the agent failed to place the coverage the client requested or to disclose that it could not be placed. (b) Misrepresentation and, potentially, an unfair or deceptive practice, because telling an insured that an excluded use is covered is a statement about the terms of the policy that is false. Disciplinary exposure exists alongside the civil claim.
3. Damages are measured by the gap. Not $180,000 automatically. The measure is what would have been recovered had the correct coverage been in place (a commercial auto policy or delivery endorsement with some limit), offset by any coverage actually available - for example, the delivery app's contingent liability policy. If a $1,000,000 commercial auto policy could have been bought for a few hundred dollars more, almost the whole $180,000 is within the gap.
4. Defenses. The insured's own duty to read the policy and to disclose material facts; comparative negligence; and whether the client would actually have paid the additional premium for the correct coverage. Contributory fault reduces but rarely eliminates liability, especially against a producer who gave an affirmative assurance.

What the file must contain:

• A written record of the disclosure of the delivery activity, dated.
• A documented recommendation of commercial auto or the delivery endorsement, with the quoted premium.
• A signed declination if the client refused, or evidence coverage was placed.
• The app's certificate of insurance, if the client relied on it.
• A written follow-up summarizing what is and is not covered, sent after every renewal.

The takeaway for the exam: the failure to place coverage is arguable; the assurance that excluded activity was covered is not defensible. Never answer a coverage question from memory on a line the policy expressly excludes - get the carrier's written position.