Liability questions pertaining to car pools

Rough Notes, Oct 1999 by McCormick, Roy C

Auto insurance customers who enter into car pools and other arrangements to share driving expenses sometimes ask about the increased liability they may be taking on as well as the possibility of uncovered claims. They may have a vague recollection that there are restrictions in personal auto policies for such car use. The concerns of these customers warrant unequivocal and prompt response from insurance people. We have reviewed the exposure and pertinent policy provisions, and pass along the following conclusions.

Government at all levels is supportive of measures that contribute to the reduction in the number of vehicles on streets and highways. The stressful congestion in metropolitan areas during rush hours and the difficulty of making necessary road repairs are ongoing concerns. The Washington, D.C., beltway is a prime example of encouraging share-the-ride arrangements and car pools. Several lanes of the beltway are reserved exclusively for vehicles that are substantially occupied. This incentive is a strong one for people who have been stopped for long periods in other lanes during the "rush" hour.

Modern job requirements, home duties, children's school needs and other demands are mitigated when people band together into driver groups. They take turns driving or regularly ride in one car and pay the owner a reasonable sum to help pay for gasoline, oil and wear and tear.

Major employers in various metropolitan areas are encouraging their employees with cash incentives to double up in their commuting, in a cooperative effort with city officials to effectively reduce the rush hour traffic. Ozone studies this summer indicate a serious problem, contributing to smog buildup where controls had reduced it, and smog development in cities where it previously had been minimal.

When concerned insureds make inquiries about car pooling or other expense-sharing arrangements, their questions deserve informed and prompt reply from insurance people. Their concerns often stem from their having heard about an exclusion in personal auto policies, pertinent to liability coverage, for liability from ownership or operation of a vehicle while used as a public or livery conveyance. A similar exclusion applies to medical payments coverage under a personal auto policy.

Policies written by numerous insurers contain a qualification of the exclusion so that it does not apply to a share-the-expense or car pooling arrangement. This is a response to numerous questions and uncertainties that have arisen. Whether or not there is such a clarification in a policy, various rulings have established that the intent and effect are similar.

The case of Allstate Insurance Company v. Roberson, 5 CCH (Auto 2nd.) 389, is considered a leading one in the application of automobile liability insurance to circumstances under review. The court held that expense-sharing agreements do not constitute use of the automobile as a "public or livery conveyance." A public conveyance is a vehicle used to transport the public without being limited to certain persons or occasions. A livery vehicle is offered for rent. Courts in general have interpreted the pertinent policy language similarly.

Whether the car owner's protection is affected if an accident occurs while another member of a car pool is driving the car is occasionally a matter of concern. The answer is that coverage provided by the policy continues in full, provided the relief driver is operating the vehicle at the named insured's request or with his/her permission, as is invariably the case.

The Insurance Information Institute has affirmed that participation in a car pool does not void automobile liability insurance provided the pool is not operated for a profit. There is no problem with the popular arrangement when the members of the pool use their respective cars approximately the same number of times. If one (or more) of the members does not share the driving but pays a regular sum, the insurance protection of the owner of a car involved in an accident remains intact-when the amount paid is a reasonable share of the gas and oil expense and depreciation on the car.

The intent of the insurance company is the same when its policy, in pertinent part, excludes coverage for losses involving vehicles "used to carry persons or property for a fee" (instead of their use "as a public or livery conveyance"), followed by an exception for "shared expense car pools." The language of the exception must be taken literally. Payments by passengers must be limited to a fair share of the actual cost of vehicle use and not include profit for the car owner.

Substantial liability and medical payments limits clearly are needed by persons participating as drivers in car pools and by those who are the only drivers with whom the passengers share the expense. Vans and sport utility vehicles accommodate numerous passengers and, with their growing representation in pools, demonstrate the need for adequate insurance. Such use of passenger cars, large or small, is another reason for recommending personal umbrella liability insurance to many insureds.