Delivery Exclusions, Landscapers and Valet Parking

PAP Delivery Exclusions

The current ISO PAP excludes the use of an auto as a public or livery conveyance. Older ISO versions excluded transporting property for a fee. However, some company forms exclude “delivery.” Depending on the precise wording of the exclusion and the interpretation of the word “delivery,” these policies may exclude far more than the ISO forms. For example:

“We do not provide Liability Coverage for…any insured while maintaining or using any vehicle while that insured is employed or otherwise engaged in any business of delivery including but not limited to the delivery of newspapers or magazines, food or any other products unless such use is incidental to your business of installing, maintaining or repairing furnishings or equipment, or for farming or ranching.”

An insured was a student who was working for a law firm. His duties involved handling the mail room, cleaning the kitchen and conference rooms, and delivering papers for the law firm when needed. He worked about 25 hours a week and averaged one to two deliveries a day. He was responsible for an at-fault accident which was denied by the insurer, citing the above exclusion.

We do not believe that this would be excluded by the current ISO “public or livery conveyance” exclusion because the insured is not holding his vehicle out to the general public for hire. If the carrier’s delivery exclusion above is read literally, there may not be any coverage. Which raises the question, if you’re an agent whose vehicle is insured under this policy, does it exclude an accident that occurs while you’re “delivering” a policy to an insured?

Read the complete ISO PAP analysis, including an argument that the insured’s loss is not excluded, on the Big “I” Virtual University.

The CGL and Damage Caused by Landscapers

A lawn maintenance company was hired to fertilize a residential client’s lawn. The lawn was damaged by the application of the incorrect fertilizer and needed to be replaced. The carrier denied the claim based on the determination that the lawn was part of “your work” and excluded. Is this correct?

Our “Ask an Expert” service has received two questions involving this type of loss. Since this is the season when much of this work begins, it’s important to be able to counsel your insureds as to what their CGL policies may or may not cover.

The CGL has several workmanship exclusions to avoid turning the policy into a warranty or performance bond. Most likely, one or more CGL exclusions apply to these types of losses.

For example, if the damage occurs during the application, CGL exclusions j.(5) or j.(6) probably apply. All they require is damage to the property of others caused by the insured or a subcontractor. Exclusion j.(6) specifically mentions work that is “incorrectly performed,” which would be the case when the wrong fertilizer was used.

If the damage takes place after the operation is completed, exclusion L. would apply. “Your work” is defined to include “work or operations performed by you or on your behalf.” The spreading of the wrong fertilizer was the insured’s work, and it resulted in property damage to a third party (their lawn) for which the insured is legally liable.

Read about these and other exclusionary policy provisions on the Virtual University.

PAP Coverage for Valet Parking

Normally, the PAP covers permissive users. However, there is an exclusion for anyone “employed or otherwise engaged in the ‘business’ of…parking…vehicles designed for use mainly on public highways.” So, does the PAP provide coverage for valet parking at a restaurant or hotel? Let’s complicate things: How about valet parking of a rental car?

Again, permissive drivers are generally covered under the ISO PAP. However, this only applies to “your covered auto,” which is primarily a declared or “temporary substitute” auto, not a nonowned auto rented on vacation or on a business trip. The valet’s ISO PAP would also not respond because of the “auto business” exclusion.

This exclusion in the owner’s PAP might or might not apply.

For a more complete review of the potential coverage gap presented by valet parking, including a look at an important exclusion for physical, go to the Virtual University.

Bill Wilson is director of the Big “I” Virtual University.​