One of the things we’re all supposed to do is read the policy before we part with our money. That way, we see the limits of what we’re buying. So, for example, if you live in a flood plain and there’s an exclusion for water damage to your vehicle, you can make the right decision. In most cases, it’s going to be clear where the problems are. With this understanding, you either accept and work around the problem, or you look for an alternate policy. More generally, you might run into ambiguous terms. If you do find one, here’s a note of reassurance. Courts tend to favor you as the consumer. So, if there are several ways of reading a policy, the judge will pick the one most favorable to you.
One of the more common terms where this applies is the work exclusion clause. Let’s take the obvious extremes. If you run your own business and need to drive a vehicle, you should buy a commercial policy. If you work in an office and only use your vehicle to drive to and from work, a personal policy works fine. But there’s a big grey area in the middle where your employer might ask you to drive your vehicle. The general rule would be that, if this only happens once in a blue moon, the personal policy will be sufficient. But if this is a regular part of your job, a commercial policy will be needed. In the best cases, your employer will provide a vehicle and insure it for you. But life’s not always so convenient. In a recent case decided in Minnesota, a man was working as an independent contractor, picking up work wherever he could. At the time of the accident, he was paid to deliver library books and used his car. There was a work exclusion term in his policy.
This is quite a common practice. During the recession and continuing today, people take whatever work they can find. Because the rates of pay are low, it’s uneconomic to buy a commercial policy, so people take the risk on their policies. Although they know they will be driving more miles and the risk of an accident increases, they believe “occasional” use for business purposes will be covered. Insurers want to price the risks separately and try to hold a clear line between personal and the more expensive commercial policies. The Supreme Court decided the exclusion term did not apply to this insured.
This decision is going to have a significant effect on car insurance rates in Minnesota. Now the exclusion clause has been struck down, insurers may find more employers instruct their employees to use their vehicles on private insurance. This is going to drive up the value of claims and the car insurance quotes must rise to cover those claims. So while this decision is good news for this particular insured, it’s probably going to end up costing everyone with a personal policy more money. Employers, however, may find their commercial rates fall as the risks are transferred to their employees’ policies. Remember, this is just one state, but the issue affects you no matter where you live.