Written by Chris Boggs, originally published by Independent Insurance Agents & Brokers of America, Inc.
An agent’s client has their pickup truck insured on a personal auto policy, but uses it in a snowplowing business.
While PAP exclusions 6 and 7 apply to vehicles used in an “auto business” or any other business capacity, the form also states that the exclusion does not apply to certain vehicles included in the schedule as “your covered auto.”
Q: Where does the specific exclusion exist for this type of business exposure? Although I would never recommend a PAP for a vehicle used in this fashion, some of our insureds use their vehicles this way.
A: This answer is based on ISO's PAP. Since the insured is not in an “auto business,” we will ignore exclusion 6 and focus on exclusion 7, which states that the PAP excludes liability coverage for:
7. 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.
Initially, there is a total business use exclusion. However, as is often the case in insurance, there is an exception to this exclusion which reads:
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.
If the wording in the insured's policy is the same as the ISO wording, there is no exclusion for this particular business use of a pickup. In practical application, ISO's PAP extends coverage for the business use of "your covered auto," provided it doesn’t involve carrying people or property for a fee (as with Uber or Lyft).
Note, however, that if you are aware the insured is using the vehicle for commercial snowplowing, that constitutes material information which you have a duty to report to the carrier. Depending on your state, such a material change in risk may give the insurer grounds to cancel the coverage mid-term or make adjustments.
For more information, check out this article on the business use of a personal auto issue: “The ‘Business Use’ Exclusion in the Personal Auto Policy.” Lesson learned: Read non-ISO forms very closely.
Chris Boggs is executive director of the Big “I” Virtual University (VU).
This question was originally submitted by an agent through the VU’s Ask an Expert Service. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.