The requirements for car insurance for delivery drivers in Michigan are complicated. Delivery drivers must have auto No-Fault insurance, which includes liability coverage. But to be properly covered for a car accident, delivery drivers must also have commercial auto insurance or make sure there is no business-use exclusion that would void coverage.
Most carriers could be forgiven for not being experts on Michigan auto insurance. But unfortunately they are still at substantial risk. I’ve found that many of them do not realize there are differences in coverage between their personal auto No-Fault insurance policies and a commercial insurance policy – until it is too late. It’s too late after they have caused a motor vehicle accident where someone was injured or killed and they then find out their own insurance company is refusing to provide coverage or defend the carrier because he or she was in the course and scope of employment when the crash occurred.
This makes for a very dangerous trap for the carrier who is not aware of the requirements for car insurance for delivery drivers.
The danger stems from a common exclusion in many personal auto policies called a “business-use exclusion.” These are provisions that auto insurance companies have inserted into the personal auto insurance policies that we all buy. They are very common and they allow the insurance company to refuse to defend and pay damages to protect the policyholder/insured if he or she causes a car accident while using a personal vehicle on the job.
Delivery drivers do not learn about “business-use exclusions” in their personal car insurance policy and their devastating effects until after a crash has occurred and their liability coverage has been “excluded” due to their use of their vehicle for “business” purposes.
When we talk about car insurance delivery drivers in this blog post, we are talking are about people who are using their own, personal vehicles to deliver pizzas, food, groceries and products for businesses as well as people who work for delivery services such as:
- Uber Eats
No-Fault Coverage Is Mandatory
No-Fault coverage is a type of car insurance for delivery drivers that is required in Michigan if they are using their own vehicle to deliver goods and services. This mandatory auto insurance covers medical bills and lost wages and it provides liability coverage if you cause a car accident that results in death or injury.
Business use exclusions impact on the requirements for car insurance for delivery drivers in Michigan
Even if delivery drivers have the required car insurance mandated by Michigan’s No-Fault law, they may not be covered for a crash you caused while working if there is a “business use exclusion” in your personal auto liability policy.
A “business use exclusion” is a clause that insurance companies put in their policies to relieve them of having to provide liability coverage when a personal vehicle is used for a business purpose such as delivery of food or packages.
Auto insurance companies rationalize the inclusion of “business use exclusions” in their policies and the use of those exclusions to avoid having to provide coverage and pay benefits by insisting that business use of a vehicle involves a higher risk of accidents and claims and, thus, warrants the charging of higher premiums. (See Amerisure Insurance Company vs. Graff, Michigan Court of Appeals, July 22, 2003, #238478, published: “It is reasonable to conclude that a commercial vehicle would command a higher insurance premium because it would likely accumulate more mileage and be used in circumstances more likely to result in accidents.”)
Business-use exclusions are legal in Michigan and in other states. The Insurance Code provides that “[t]he underwriting rules that an insurer may establish for automobile insurance must be based only on the following . . . [u]se of a vehicle insured or to be insured . . . for commercial purposes.” (MCL 500.2118(2)(f)) In its 1999 ruling in Husted vs. Dobbs, the Michigan Supreme Court explained that “in this provision, the Legislature specifically permits insurance companies, in the course of underwriting, to base an exclusion from coverage on business use.”
The following is an example of the type of “business use exclusion” language that delivery drivers should watch for in their personal auto insurance policies:
“We do not provide liability coverage for an insured’s liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for compensation or fee, including, but not limited to, delivery of magazines, newspapers and food.”
What are the effects of the requirements for car insurance for delivery drivers in Michigan?
Below are examples of how the requirements for car insurance for delivery drivers in Michigan may leave them without necessary coverage if they are at-fault in a motor vehicle accident:
- A business-use exclusion in a personal auto insurance policy covering a delivery driver’s own vehicle excluded liability coverage when the delivery driver caused a car accident while driving her own car and “delivering newspapers for compensation.” (Bristol West Insurance Group vs. Butzbach, Michigan Court of Appeals, November 20, 2007, #275719, unpublished)
- A business-use exclusion in a personal auto insurance policy was used to deny liability coverage to a man who was using his own car to deliver pizzas – which had been recognized as a “business use” – and caused a car accident. (Bristol West Insurance Company vs. Tzortinis, U.S. District Court, Eastern District of Michigan, Southern Division, #06-CV-14158, Judge Paul D. Borman)
- A pizza delivery driver was denied liability coverage for a car accident he caused while making a delivery based on the business-use exclusion in his mother’s personal auto insurance policy that was covering the vehicle he was driving. (Amerisure Mutual Insurance Company vs. Farmers Insurance Exchange, Michigan Court of Appeals, May 4, 2004, #243085, unpublished)
- The business-use exclusion in a rental car contract resulted in a denial of liability coverage for a “permissive user” who caused a car accident while driving the rental car for his job as a pizza delivery driver. (Amerisure Insurance Company vs. Graff, Michigan Court of Appeals, July 22, 2003, #238478, published)
- The business-use exclusion in a driver’s personal auto insurance policy resulted in a denial of liability coverage for a motorcyclist’s death that the driver caused while operating his employer’s uninsured commercial truck. (Husted vs. Dobbs, Michigan Supreme Court, #104447 (1999))
Requirements for car insurance for delivery drivers in Michigan should include commercial auto insurance
The reality is that commercial auto insurance should be included in the requirements car insurance for delivery drivers in Michigan.
In light of the limits on liability coverage that can result from business-use exclusions in the personal auto insurance polices of delivery drivers, commercial auto insurance is the only way for delivery drivers to be certain they have the necessary liability coverage to protect them should tragedy strike.
Need help? Call Michigan Auto Law
If you are a delivery driver who was injured in a car accident and need help, you can call toll free (248) 353-7575 for a free consultation. You can also get help from an experienced Michigan car accident attorney by visiting our contact page or you can use the chat feature on our Michigan Auto Law website.