Insurance has traditionally been aggregated into two hemispheres: insurance for personal property and activities, and insurance for commercial property and activities. There has always been some use of commercial property for personal uses, i.e. a business vehicle used personally. However, coverage for the use of personal property or activities in a business or commercial manner has been very limited. So, personal insurance has always excluded business or commercial activities except for certain incidental activities. And commercial insurance has generally restricted coverage to activities arising out of business operations. The problem today is that there is not longer a clear distinction between these two hemispheres.
Uber, Lyft, Uber Eats, Air BnB, and Turo are just a few examples of activities where clearly business operations are being conducted with personally-owned property. While there have been traditional exclusions in the Personal Auto Policy (PAP) and the Homeowners Policy (HO) that excluded or restricted coverage for business activities, these exclusions have recently been strengthened. The PAP now has a specific reference in the Public or Livery Conveyance exclusion to Transportation Network Platform exposures. Transportation Network Companies (TNC) are internet companies that provide connections between consumers and independent providers of certain transportation services. Earlier this year, the HO policy has been amended to apply exclusions and restrictions to “home-sharing” activities. While some insurers may offer endorsements to buy back parts of these sharing business exposures, it is clear the personal lines policies do not intend to provide coverage for these exposures without additional underwriting and premiums.
Some of the TNC and home-sharing companies do provide certain insurance coverages. However, there can be limitations and exclusions including higher deductibles that apply. No one should engage in these sharing activities without understanding the coverage provided by the sharing network company and the coverage provided or not provided by their personal insurance.
How should agents handle these new specific restrictions of sharing activities? One possible action on the part of agents is to send a notice to each policyholder of these new restrictions, and the need to declare these activities to the agent/insurer for consideration of additional coverages. Without such declaration to the agent/insurer, there may be claims for which there is no coverage. Parents should be informed that sharing activities conducted by their children without their knowledge could expose the parents to vicarious exposures for which they would not be covered. Another precaution for agents would be to train account representatives to ask about these exposures whenever they are having a conversation with a personal lines policyholder so the conversation can be properly documented. Additionally, notices could be added to emails or text messages advising policyholders to the dangers of these exposures and the lack of coverage under their personal insurance.
Insurance has often lagged societal changes. It is the gap in the time social changes begin and insurance policies catch up with the changes that expose agents to E&O claims. It is important for policyholders to understand their insurance coverages. It is more important for policyholders to understand the limitations of their insurance coverages. The presence of coverage tends to diminish to probability of an E&O claim. The absence of coverage tends to exacerbate the probability of E&O claims.