Using Your Personal Car For Work: Insure The Business Use Exclusion To Sleep Nights

We would like to bring to your attention an important automobile insurance issue.  If you use your personal vehicle for business purposes, you may not have full liability coverage if you cause an accident. If you use your car or truck to drive a client to lunch, drive with a co-worker to meetings, run a few errands for work, drive a time-sensitive business mail to the post office, the standard Massachusetts insurance policy may exclude your optional liability insurance coverage. Some auto insurance carriers may view these activities to be “business uses”. Under the standard Massachusetts auto insurance policy, “business uses” are excluded from coverage under your “Optional Bodily Injury” limits - unless you have purchased a separate business use endorsement for your policy. (It is called a Class-30 or R-30 business use endorsement.) As a result, if you have not purchased a “business use” endorsement and you are found to be at fault for an accident while doing something for work, even if you do this just occasionally, your insurance carrier may disclaim and limit your bodily injury coverage to the statutory minimums provided under your “Compulsory Bodily Injury” coverage.[1] While these statutory minimums do provide some coverage, they only apply to accidents that happen within the Commonwealth of Massachusetts and they may very well be insufficient to adequately protect you in the event of an accident involving serious injuries. Statutory minimums are currently only $20,000 per person and $40,000 per accident. Those coverages are insufficient to compensate serious injuries.

This liability exposure is a surprise to most employees and business owners whose cars and trucks are owned personally. They feel secure knowing that they have a policy, not suspecting that their insurance carrier may (but not always) disclaim coverage in the event of an accident.  But there is good news. First, the cost of a business use endorsement on a personal auto policy is typically minimal (less than $100) and you do not have to wait until your next renewal period to add a “business use” endorsement. Your insurance agent should be able to evaluate your situation with a simple phone call. If a “business use” endorsement is right for you, your agent can likely add this coverage to your existing policy right away. This is a gray area, as there are few cases on point.  Moreover, different carriers approach the problem differently. Their analysis can be fact specific, and they can defend under a reservation of rights, which will leave you uncertain and anxious as the case goes through the settlement and litigation processes.

The risk benefit analysis in this situation dictates in favor of getting the coverage for a good night’s sleep, if you use your personal vehicle for business, even occasionally. Why take any chances when so little money is needed to eliminate the risk?

As always, we stand ready to advise you, your family, and your business should you need assistance in addressing these and other risks that you may face.

[1]   In Metropolitan Property & Casualty Insurance v. Santos, the Massachusetts Appellate Court held that the “business use” exclusion potentially applies to an insured’s “Optional Bodily Injury” coverage, but not to the “Compulsory Bodily Injury” coverage on an insured’s personal vehicle, stating:

“[U]nlike the optional BI benefits section, the compulsory BI section has no business use exclusion. As a result, for the purposes of determining coverage for compulsory BI benefits, we need consider only whether a covered accident has occurred.”

Metropolitan Property & Casualty Insurance v. Santos, 774 N.E.2d 1128, 1132 (Mass.App. 2002).