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Business Use Exclusion in Motorist Insurance

Some motorist insurance policies exclude coverage for injuries and damages if they occur while a vehicle is being used for a business purpose. For example, if a driver is using his or her personal van to make deliveries for the driver’s home-based business and causes a collision with another vehicle, the driver’s insurance company would refuse to pay for the damage caused to the other vehicle and for any injuries to those riding in it. In effect, the exclusion causes a vehicle to drive in and out of insurance coverage depending on its driver’s particular mission.

A court may determine that an insurance policy’s business use exclusion is unenforceable because it violates public policy or the purpose of a state compulsory automobile insurance law. A state compulsory automobile insurance law is intended to provide compensation to persons injured by the use of an insured vehicle.

If alternate insurance coverage existed for the business-related use of a vehicle under a separate policy, some courts have decided that the exclusion for business-related activities in an insured’s insurance policy was valid and did not violate public policy. Other courts have found that a business use exception was valid because it excluded merely a specific risk from coverage and not a specific class of users.

Thus, the mere existence of a provision excluding business use in a motorist insurance policy does not automatically bar coverage. A state’s particular public policy considerations are important in these insurance cases.

Copyright 2012 LexisNexis, a division of Reed Elsevier Inc.