Pizza Delivery in a Newly Acquired Car
Erin, 19, lives with her parents and drives their 2016 sedan, which is listed on the family's personal auto policy (liability 100/300/50, $5,000 medical payments, uninsured motorist, $500 collision). Three weeks ago she bought a 2004 Civic for $4,200 and began delivering pizzas in it two evenings a week. She never told the agent about the Civic or the delivery job. On Friday, while delivering a pizza, she ran a red light and struck Dana, a pedestrian, who has $140,000 in medical bills. The Civic, which carries West Virginia minimum limits in Erin's own name, has $3,000 of damage. The agent says the Civic was never added and that pizza delivery is commercial use the policy does not contemplate.
1. Is the Civic an insured auto under the parents' personal auto policy?
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No - the automatic window has closed. The PAP gives automatic coverage for a newly acquired auto, but only for a limited time: liability (and medical payments and uninsured motorist, in most forms) applies until the end of the 14th day after the vehicle is acquired. Physical damage is picked up only if the policy already carries collision on at least one listed auto, and then also for 14 days (4 days where it does not).
- Acquired: 21 days before the loss
- Automatic coverage ended: day 14
- Result: the Civic is not a "covered auto," so no liability, no collision, no medical payments, no UM from the parents' policy - including the $3,000 of damage to the Civic
Two aggravating facts: the family had a duty to notify the insurer of the acquisition and the new driver, and the delivery use would in any event have made the Civic ineligible for a standard PAP without a delivery endorsement. Coverage for Dana comes only from the Civic's own minimum-limits policy unless another source is found.
2. Who pays Dana's $140,000 claim, and in what order?
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Erin's own policy is primary and is nowhere near enough. The Civic's West Virginia minimum limits (25/50/25) pay at most $25,000 per person for Dana's bodily injury. Dana's remaining roughly $115,000 is uninsured by that policy.
The parents' PAP is not available at all - the Civic is not a covered auto, so there is no excess layer to drop down, and the fee-for-hire exclusion would independently bar coverage: a standard PAP excludes liability while a vehicle is used to carry persons or property for a fee, and pizza delivery is that use. The narrow share-the-expense carpool exception does not reach it.
Where the money realistically comes from: the pizzeria's business auto policy, which typically extends liability coverage to non-owned autos used in the employer's business. Erin should tender the claim there immediately and in writing. Beyond that, Erin faces personal exposure for the excess - relevant to a bankruptcy analysis and to any negligent-entrustment theory against the parents, which is weak on these facts because they did not supply the car.
3. Suppose Erin had been driving the family's listed 2016 sedan on that delivery. Would the parents' policy respond?
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No - and this is the warning the family needs. The fee-for-hire exclusion follows the use, not the vehicle. Even though the sedan is a listed covered auto, coverage for liability, defense, medical payments and collision is excluded while it is being used to deliver food for payment. The parents would receive a denial and, in most companies, a nonrenewal or rescission question for the unreported business use.
Consequences:
- The pizzeria's non-owned auto coverage becomes the primary realistic source, with the same tender strategy.
- The family is personally exposed for any gap between that coverage and Dana's damages.
- Buying a delivery/rideshare endorsement (available in most markets now) would have preserved coverage; so would having the employer confirm its business auto policy covers non-owned autos.
The lesson for the exam: never assume the listed-vehicle answer differs from the newly-acquired-vehicle answer. The exclusion analysis and the eligibility analysis are separate hurdles, and this loss fails both.