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Vicarious Liability: Personal Exposure from Hiring a Personal Shopper

An insured pays an individual who uses their own car to shop and run errands. How can the insured acquire coverage for their vicarious liability from hiring the shopper?
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vicarious liability: personal exposure from hiring a personal shopper

Q: An insured pays an individual a monthly fee to shop and run errands. The shopper, a 1099 contractor, uses their own vehicle.

ISO's liability definition of vicarious liability includes “any person or organization legally responsible" for the acts of an insured. How can the insured acquire coverage for their vicarious liability from hiring the shopper?

Response 1: I can think of a couple of options, but all have complications. First, the individual should insist that the contractor provide evidence of personal auto insurance with liability limits high enough to protect both parties—$1 million would seem a reasonable minimum. 

Next, if your client has a PAP, that policy should cover liability arising from the contractor's use of that non-owned auto.

And finally, a personal umbrella policy might provide coverage, even if your client doesn't own and insure an auto. Since these policies are far from standard, you'll need to read the coverages carefully. Look at the exclusions for "furnished autos"—a claims representative might insist it applies—and the "public or livery" exclusion, also known as “business use" exclusion. It doesn't seem that any of these exclusions should apply, but you'll need to study the coverages carefully and confirm your understanding with the underwriter. 

Also, the business use exclusions might be found in the contractor's policy too, so you must look there as well. If you can't assure yourself that coverage already exists, or if the underwriter refuses to back you up, which is possible, the only other option is a business auto policy that includes non-owned and hired auto coverage.

Response 2: It is unlikely that the insured has coverage via any personal lines program. Read the PAP and PUP to determine if your client would receive coverage for an independent contractor's vehicle and other activity exposures. 

A commercial general liability policy with non-owned and hired auto coverage might provide coverage to your client for acts of independent contractors, but that coverage might be challenging to obtain. Underwriting appetite is low for a potentially high-risk, low premium account.

The client could request to be named as an additional insured on the CGL and business auto policy or PAP of the individual providing service. That then could provide coverage to your client—assuming the coverage is in force with high enough limits. And a service agreement with a hold harmless, defense and indemnity agreement in favor of the client could assist—assuming the service provider has insurance or financial means to support the obligations.

Response 3: I've not seen a way to insure this exposure. If your insured has a PAP it might cover the vicarious exposure, but PAPs typically exclude delivery. If your client doesn't own an auto, getting a PAP would be difficult because a named non-owned PAP would require the insured to be a licensed driver. 

Umbrellas might provide broader coverage but would generally require underlying auto liability or they would exclude the auto exposure. The only way to minimize the risk would be to use a commercial delivery service that carries adequate limits of coverage.

Response 4: If your insured has a PAP modeled on ISO's personal auto policy, it extends coverage to those who have vicarious liability for their use of the vehicle. The insured should confirm high limits.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

This article is intended for general informational purposes only, and any opinions expressed are solely those of the author(s). The article is provided “as is" with no warranties or representations of any kind, and any liability is disclaimed that is in any way connected to reliance on or use of the information contained therein. The article is not intended to constitute and should not be considered legal or other professional advice, nor shall it serve as a substitute for obtaining such advice. If specific expert advice is required or desired, the services of an appropriate, competent professional, such as an attorney or accountant, should be sought.