By Irene Morrill, CPCU, CIC, ARM, CRM, LIA, CRIS, CPIW — VP of Technical Affairs, MAIA
Accolades to your clients who are looking for ways to be their own boss, or to just “make a few extra bucks.” Great! They have many new ways to do so through Grubhub, DoorDash, Uber Eats, Amazon Flex, and other delivery-for-hire opportunities.
But... does their CURRENT insurance program cover this new and exciting activity?!
What does each online business delivery partner require?
Each site has its own vehicle and driver requirements. The driver must have a valid license and insurance. Some online partners merely require the driver be of legal driving age, while others prefer the licensed driver be 18 or 21 years old. Some online partners do more extensive background checks for driving record and/or criminal record than others.
The type of vehicle allowed is certainly more varied than that for carrying passengers. If the town/city allows it, one can deliver on a scooter! Amazon Flex involves the delivery of packages, so at least a four-door sedan is required.
So … Will there be coverage if the driver has an accident while delivering for any of the online delivery businesses?
Let’s look at the MAP.
The MAP and Business Exclusions
The MAP has three business exclusions that remove coverage for liability, medical payments, and possibly collision and comprehensive:
- “Auto Business”
- Public or Livery Conveyance
- Business Use
The “Auto Business” Exclusion
Whether the 2008 or 2016 MAP, we can rule out the “auto business” exclusion that applies to Part 4 (Property damage to others), Part 5 (Optional Bodily Injury), and Part 6 (Medical Payments), as it is essentially the selling/servicing/repairing of automobiles. The exclusion applicable to Parts 4 ,5, 6 states:
While any auto is being used by anyone in the course of his or her employment in the business of selling, servicing, repairing or parking autos. This exclusion does not apply to the ownership, maintenance or use of your auto by you or a household member.
The Public or Livery Conveyance Exclusion
The 2008 MAP excludes this activity in Parts 4-12, which means property damage to others, optional bodily injury, medical payments, collision, limited collision, comprehensive, substitute transportation, towing, and underinsured motorists coverage.
If the accident happens while your auto is being used as a public or livery conveyance. This does not apply to the use of your auto in a share-the-expense car pool arrangement or in an expense reimbursement program either as a volunteer or at work.
The 2016 MAP excludes the public or livery conveyance activity in ALL MAP coverage Parts 1-12, which includes Statutory BI, PIP and Uninsured Motorists Parts 1,2,3, in addition to the parts stated above under the 2008 MAP discussion. The exclusionary language applicable to the 2016 MAP is:
If the accident happens while your auto is being used as, or is available for use as, a public or livery conveyance, including a vehicle for hire through a ride-sharing program, car-sharing program, and transportation network service which operate under an agreement and for compensation. This does not apply to the use of your auto in a share-the-expense car pool or an expense reimbursement program either as a volunteer or at work. This does not apply to the use of your auto in providing volunteer transportation service at the direction of a charitable group.
Remember, there was an endorsement to the 2008 MAP that expanded the public or livery conveyance exclusion to language similar to the above by including the car-sharing language, so this wording is not new!
The 2016 MAP exclusion STILL applies to “public or livery conveyance” while confirming that online companies connecting drivers to riders or people to rental cars ARE considered in the public or livery conveyance restriction.
Is getting paid to pick up or deliver something (not someone) for a restaurant or other business a public or livery conveyance activity? It could be. Some online research (to credible sources, of course) provided a definition of “public or livery conveyance” from:
The publication International Risk Management Institute (IRMI):
The transporting of people and/or goods for hire, such as by a taxi service, motor carrier, or a delivery service. This coverage is excluded under the personal auto policy (PAP). Incidental use in an insured's sideline business can be an exception to this exclusion.
The website USLEGAL.com defines “livery conveyance law and legal definition” as:
The term livery of conveyance refers to the transporting of people or goods for hire. It includes conveyance by taxi service, motor carrier, or delivery service. The term “livery conveyance" means a vehicle used indiscriminately in transporting the public and not limited to certain persons and particular occasions or governed by special terms. [Stanley v. American Motorists Ins. Co., 195 Md. 180, 186 (Md. 1950)]
For those of you or your clients who “swear by” YouTube... the news isn’t any better. View:
What is a Public or Livery Conveyance?
Payment for delivery
Each online partner seems to have their own way of compensating drivers. There appears to be a “delivery fee” and then some way of compensating the varying distance driven. One organization calls it a “service fee” and another calculates mileage. The online partners allow the driver to reject jobs or work as much as they possibly can for various delivery partners. Could these payment types and indiscriminate delivery activity be construed as “public or livery conveyance” activity?
So, as an agent I should ask my carriers NOW whether they consider this activity a “public or livery conveyance” activity before the client who is just trying to supplement his/her income gives you a call.
The Last Business Exclusion – “Delivery”
The 2008 MAP excludes the following under Parts 4 (PD) and Part 5 (OBI).
While anyone is using a vehicle in the course of any business other than the business of selling, servicing, repairing or parking autos. This exclusion does not apply to private passenger autos, or to pick-up trucks, vans, or similar vehicles not used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.
The exclusion begins excluding ALL types of business activity (other than auto business which was previously excluded) in ANY type of vehicle. This is a usual approach in an insurance policy – get rid of everything and then give back what little one wants to give!
The exclusion does NOT apply to (which means there IS coverage) for business use of:
- Private passenger autos
- Pickups and vans and similar vehicles NOT used for delivery
Years ago when AIB wrote this language, the intention was for all business activity including delivery in a private passenger autos to be covered, as long as it was not used as a “public or livery conveyance” — such as a courier business. Currently, some carriers have disagreed, stating that the lack of grammatical punctuation allows them to apply the delivery exclusion to private passenger autos.
Any type of business activity in any other type of vehicle (such as dump truck, box truck, etc.) is excluded.
So, even if one gets “around” the public or livery conveyance exclusion there is STILL a PROBLEM with the delivery exclusion. Plain old delivery in a pickup or van (and possibly a private passenger auto with some carriers) means that there is NO coverage under Part 5 Optional BI to Others or Part 4 Damage to Someone Else’s Property when conducting that activity.
Even if the public or livery conveyance exclusion does not apply, the delivery issue can be a problem for finding coverage under Parts 4 and 5.
The 2016 MAP business exclusion for Parts 4 and 5 is written a little differently. It states:
While anyone is using a vehicle in the course of any business other than the business of selling, servicing, repairing or parking autos. This exclusion does not apply to private passenger autos. It applies to pick-up trucks, vans, or similar vehicles not used for the delivery or transportation of goods or materials unless such use is incidental to your business of installing, maintaining, or repairing furnishings or equipment.
Like the 2008 MAP, the beginning of the 2016 MAP exclusion removes coverage for ALL types of business activity (other than auto business which was previously excluded) in ANY type of vehicle. The 2016 MAP exception to the exclusion is broader than the 2008 MAP. This business exclusion does NOT apply (which means there IS coverage) for business use of:
- Private passenger autos (there is a period after private passenger autos so the delivery restriction does NOT apply!)
- Pickups and vans and similar vehicles NOT used for delivery
Good news for private passenger autos: There is no “delivery” exclusion, but there is still the “public or livery exclusion.” Alas, like the 2008 MAP, pickups and vans CANNOT be used for delivery, whether one considers it “public or livery conveyance” or not!
WHEN your client needs any type of proof of insurance for conducting this activity, I wouldn’t provide it without a discussion with my insurance company.
Online Delivery Businesses Not Subject to MA TNC Law
These types of “online partners” are NOT included in the MA law MGL 159A1/2 Transportation Network Companies, and therefore are NOT mandated to provide liability insurance to the driver or innocent public for this delivery activity.
Some organizations do provide liability insurance and others don’t. If the organization does not provide insurance for your clients when operating as a driver, is your client covered under his/her MAP?
It is vitally important that you talk to your insurance company about their interpretation of this business activity. Do they interpret it as “mere delivery” or as “public or livery”? Remember, either way, delivery in a pickup or van is NOT covered! And, if the carrier does consider the activity “public or livery conveyance,” is there an endorsement to buy back the exposure?
National Personal Auto Policy (PAP) – Does it Address the Issue Differently?
FYI – Some carriers use the national PAP, so it's important to understand the differences.
The PAP Public or Livery Conveyance Exclusion
The national 2005 PAP has a public or livery conveyance exclusion similar to the 2008 language that applies to all coverages. The Insurance Services Office (ISO) created a “TNC” endorsement for the 2005 PAP, expanding the exclusion to online partners and enabling ride sharing, car-sharing, etc., just as AIB did for the 2008 MAP. ISO has a 2018 PAP that includes this exclusionary language into all the coverages, just as the 2016 MAP now does. Everything said about the MAP public or livery conveyance exclusion is applicable to the PAP.
The PAP "Business" Exclusion
What IS different about the PAP is the “business” exclusion. The 2005/2018 PAP business exclusion merely removes business coverage for vehicles LARGER than pickups, vans, private passenger autos. It does NOT remove coverage for delivery!
- Maintaining or using any vehicle while that "insured" is employed or otherwise engaged in any "business" (other than farming or ranching) not described in Exclusion A.6.
This Exclusion (A.7.) does not apply to the maintenance or use of a:
a. Private passenger auto;
b. Pickup or van; or
c. "Trailer" used with a vehicle described in a. or b. above.
So, if the carrier does not consider this online partnering for food or product delivery a public or livery conveyance, then there will be coverage. Having said this, some carriers have been known to add an exclusion for food delivery, so BEWARE!
A Last Caution
Massachusetts allows a competitive market where a company can write its own language or modify the AIB MAP. You’ve GOT to read the policy and look at any endorsements to see if the language has been modified. Modification can be good … or bad!
Is Writing the BAP an Option?
The Business Auto Policy does NOT include an exclusion for public or livery or delivery, but it is now more difficult to obtain a policy in Commonwealth of Automobile Reinsurers (CAR) when one is not a “true” Massachusetts-based business.
Also, ISO has created two endorsements to address a potential exodus of TNC and online delivery risks to the BAP:
- The CA 23 43 Public or Livery Conveyance and On-Demand Delivery Services Exclusion which effectively removes coverage for both TNC and delivery activities.
- The CA 23 43 Public or Livery Conveyance Exclusion which merely removes the TNC activity.
Ya just gotta love all the business opportunities provided by social media and the Internet these days!
Please remember that part of MAIA service is answering questions and providing information. Please feel free to email me when you have a coverage question, problem or issue. Perhaps I can help – at email@example.com
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