The Insurance Exclusion Twilight Zone
You’re a pizza delivery person, delivering pepperonis in your personal vehicle. You glance down to check a text (huge mistake) when suddenly, you clip the back heel of a jogger crossing at a crosswalk. You have just entered a fifth dimension, a bizarre, unexplainable dimension not only of sight and sound but of mind; a journey into a wondrous land whose boundaries are that of imagination. That’s the signpost up ahead – your next stop, the “Carrying Persons or Property for a Fee” Exclusion Zone.
Let’s start our exploration of this strange area with Prudential Property & Casualty Ins. Co. v. Sartno. The Superior Court ruled that Prudential did not have to cover a pedestrian’s claim because of a similar exclusionary provision. The Supreme Court reversed, holding that the use of a private vehicle to deliver pizza did not render it a “car for hire” and did not trigger the exclusionary clause.
Important to this holding were the facts of the delivery. Although Sartno received an hourly wage from the Pizzeria, it did not charge for delivery. It advertised “free delivery” and Sartno earned $6 an hour whether he was delivering pizza or sweeping the floor. Under these facts, the exclusionary clause was “ambiguous and capable of at least two equally reasonable interpretations.” That clause stated, “[w]e will not pay for bodily injury or property damage caused by anyone using a car covered under this part to carry people or property for a fee.”
The Court noted two reasonable approaches, one broad and one narrow: 1) Broad – Sartno carried the pizza for a fee since he made deliveries during the course of his employment for which he received pay. 2) Narrow – He did not carry property for a fee because there was no delivery charge. Because of this ambiguity, the exclusion had to be construed in favor of the insured and against the drafter of the provision. The second, narrower approach applied.
The Court was mindful of the many absurd results that a contrary holding could cause:
1) An attorney bringing a motion to court
2) A judge carrying briefs to the courthouse
3) Employees driving co-workers to a seminar
4) Teachers bringing exams home to grade.
In each of these situations, Sartno rightly works against application of a “car for hire” exclusion.
Contrast this result with the Third Circuit’s decision in Nationwide Mut. Ins. Co. v. Brophy. The Court affirmed summary judgment for Nationwide on the basis of a similar exclusion. Brophy claimed UIM benefits from her insurer after she was injured while operating her employer’s vehicle. Her primary purpose for driving was delivering mail for a fee. Unlike Sartno, the post office’s customers paid for mail collection, transport and delivery. There was only one reasonable interpretation of the exclusion. Thus, Brophy could not collect UIM benefits.
In Brosovic v. Nationwide Mut. Ins. Co., the Superior Court upheld a denial of PIP benefits based on a use for hire exclusion. Brosovic, a delivery driver, was injured while lifting a box in the back of his employer’s van. The Court rejected the driver’s argument that the exclusion did not apply because he did not directly receive a fee. There were no words in the policy exclusion that supported this argument.
Similarly, the Superior Court rejected an insured’s claim that the exclusion did not apply when he was not carrying any passengers in his taxi at the time of a crash.
In a non-precedential 2004 decision, the Third Circuit held in Progressive Northern Ins. Co. v. Edmunds that Progressive could not avoid coverage under a vehicle for hire exclusion. Edmunds was using his personal vehicle to deliver two cases of beer while heading home from work (what was his job?). This was done as a favor for a personal friend and there was no delivery fee. The Court determined that this was an isolated incident and it did not trigger the exclusion for carrying persons or property for compensation.
The bottom line: When you enter “The Insurance Exclusion Zone”, you need to read the policy exclusion carefully. Think about the facts to see if you can apply them so as to create an ambiguity in the exclusion. Alternatively, you can also prevail if the facts show an isolated incident.
1 903 A.2d 1170 (Pa. 2006).
2 371 Fed. Appx. 302 (3d Cir. 2010).
3 841 A.2d 1071 (Pa. Super. Ct. 2004).
4 Ratush v. Nationwide Mutual Ins. Co., 619 A.2d 733 (Pa. Super. Ct. 1992).
5 118 Fed. Appx. 619 (3d Cir. 2004).