The Business Use Exclusion: How Most Auto Policies Exclude Coverage for Business Use

Perhaps one of the most common exclusions insurance companies use to exclude coverage in any given consumer claim is "the business use" exclusion. According to most personal auto insurance policies, an accident or loss in the process of business use is excluded. The rational behind this exclusion is that if a consumer is using a vehicle for business purposes, the risk of being in an accident is higher than if you are simply using the vehicle to go to work. Insurance carriers argue that they would have charged a higher premium, and therefore, the risk is outside of what was initially contemplated by the insurance underwriter and/or agent when the policy was sold.

The view is that if you have a family vehicle, you would drive to work in a normal eight to five or nine to five job. The family member would then be at work, may leave for lunch and come back to the work place, and then at the end of workday return home. There is, of course, the normal weekend use.

A business vehicle is usually on the road significantly more often than a family vehicle. Insurance carriers look at the "average" a family vehicle is used and often compare it to the average vehicle used in business. According to them, this time factor increases their risk.

The real issue for consumers is to show that the vehicle was being driven for private use while an accident occurred. Even if the vehicle is normally used for business purposes, if the insured can show that at the time of collision, the vehicle was being used for private purposes, then the claim may be covered. The issue of whether a vehicle is driven for a private or business purpose becomes a question of fact, which must be decided by a fact finder. Many factors will come into play to persuade the finder of fact whether business use exists by a preponderance of the evidence.

This is an important requirement that typically the insurance company must show so they can properly deny coverage. For most consumers, the fact that they are employees will likely eliminate any doubt as to whether they are engaging in business use. However, this exclusion becomes more prevalent if the insured is self-employed or has some sort of sole proprietorship or business structure. This mere fact may become a big headache when asking for coverage of a claim.

Most self employed consumers use their family vehicle to run business errands. Courts have differed on what facts will establish "use." They have, however, stated that a vehicle may be driven for one purpose on one trip, and then be driven for another purpose the next trip. All facts and circumstances must be looked at to determine the purpose of each trip.

To complicate matters, courts have held that a vehicle you take to an event may be a business purpose if you are supposed to be representing a business. Courts have also held that whether there is a payment of salary or wages, or the trip is "free" is not dispositive of whether the trip is for a business purpose.

Adjusters are trained to look for certain evidence to document business use. They look for lettering on vehicles. If a vehicle has a logo or a graphic, it may be considered evidence documenting the business use. This tends to be a problem for self employed parties who have a sign advertising their business.

If you have a business or you are self employed, it is a good idea to talk to your insurance agent about business use, and about what you can and cannot do. If you do not, you may end up with an exclusion of coverage problem.