Delivery Insurance

Sorry if this topic gets beaten to death but I’m curious about how delivery insurance is required by law yet many pizza places that offer delivery skip on the insurance.

Here is an article. It’s a bit dated, from 2004.

Non-owned, hired auto insurance is pricey but necessary
In the United States, delivery services whose employees use their personal vehicles must carry non-owned, hired auto insurance. The insurance protects the business operator from liability in accidents that occur while the employees are working.

According to insurance brokers, nearly every insurance policy for personal drivers prohibits the use of one’s vehicle for delivering goods for a business, and many policies specifically state no pizza delivery.

Jim Reichle, co-owner of Angelina’s Pizza in North Olmsted, Ohio, suspects that very few pizza delivery operations have non-owned, hired auto insurance. That not only endangers the public, he said, he believes it compromises his ability to compete fairly against those pizzeria operators.

When drivers apply at Angelina’s, Reichle follows his insurance company’s guidelines to screen each applicant’s driving record. If those applicants have more than two moving violations and one at-fault accident in a 36-month period, he can’t hire them to drive.

“What winds up happening is that those drivers simply walk down the street, get hired by one of my competitors and sometimes are put on the road the same day,” said Reichle. “I pay more than $15,000 a year to cover the drivers at both of my shops, and that leaves me with $15,000 less than another guy to use for marketing if I wanted. Basically I’m getting penalized for playing by the rules.”

Reichle said two issues are at work regarding non-owned auto insurance: [size=5]Many pizzeria owners aren’t aware they must have it, and many others who know it’s mandatory don’t buy it.[/size]

“Jim’s right,” said John Fink, Reichle’s representative agent at Leonard Insurance. “There probably are a lot of independent shops owners out there who are just crossing their fingers.”

And perhaps some insurance carriers, too. Brian Hall, vice president of Columbus, Ohio, insurance broker Berwanger Overmyer Associates, said he knows of only five insurance companies who will write the high-risk policy for pizza delivery stores.

“Typically pizza delivery drivers are younger, inexperienced drivers who are usually driving at night,” said Hall, who specializes in insuring pizzerias. “They’re sometimes looking at directions to a house while they’re driving and sometimes driving fast to get a delivery done.”

Unlike pizza delivery drivers, drivers for package couriers or flower shops use company vehicles. Those, Hall said, are often better maintained and safer to operate. That makes companies more willing to insure them.

“In an owned-vehicle situation, the operator knows exactly how many vehicles are out on the road at any time, and the insurance company knows, too,” Hall said. “But in a non-owned situation, the insurance company never knows how many are out there. There might be 10 autos out there one day, and then the next week, some of those guys quit their job, and they’re replaced by new drivers who could have cars with bad brakes.”

In other words, knowing the number of vehicles and their approximate condition, Hall added, allows the insurance carrier to have a “better handle on his actual exposure and risk.”

I just don’t quite understand how if it is required by law a pizza place can get away without having insurance legally. Seems like something that should easily be detectable by the IRS or some government agency. After all, like the article mentioned it can easily be a $15,000 dollar difference between having it and not having it.

Reread the article.

It doesn’t say anything about non-owned insurance being “required by law”. Because it’s not.

I guess they confused me with the bolded part then. “Must have” and “mandatory” make me think it is legally required. But you are right it doesn’t say it is legally required. But the article also makes it look like owners who pay thousands of dollars a year on driver insurance are getting penalized for playing by the “rules”. But if this insurance is not legally required then wouldn’t these be fictional rules?

Well, the article is certainly misleading.

To summarize:

  1. Delivery drivers personal insurance typically will not cover them while they are using their car for work unless they have specifically told their carrier they are doing so.

  2. If they are in an accident, and their personal insurance will not cover, the victim will go after you.

  3. Non-owned insurance will cover you if they go after you.

  4. Even if their personal insurance will cover, the victim could still go after you, and probably will.

  5. Even if you have non-owned, the victim could still go after your driver.

The article is trying to say that the public is “at risk” because if a driver causes and accident, and the employer does not have non-owned insurance - the victim could be left high and dry with medical bills, etc. But what is doesn’t mention is that most everyone has un/under insured coverage themselves, which would cover anyway.

The bottom line for the pizza owner is this - do you want to pay for insurance that would save your business if a driver gets into an accident? If you don’t care, then yes, you will save some money. If you want to continue to have a business after the accident, then you’ll have to spend the money on insurance.

A few years ago when my insurer jacked up my rate by 100% in one year (not one claim ever) I called the other stores in my town (small town and we all know one another) to see who they were using. The answer was that not one of them had coverage…

Personally I hate having it and jumping through all the extra hoops that we have to do to have it. But, I am more afraid of one of my driver’s getting in an accident. It’s already stressful enough having 15-20 drivers out there delivering. Luckily for us we’ve never had to use the insurance, but in this “sue happy” society, you have to do whatever it takes to protect yourself. We are not willing to take the risk.

I’ll play devil’s advocate here. Let me preface these ideas by saying that I do pay the non-owned insurance, but I grind my teeth everytime I write the insurance company a check for this policy which I will probably never use. I pay about $6000 a year for it, which covers from 350k-1 million in liabilities.

  • If you are incorporated and the business is not profitable/minimally profitable, I probably would not pay the non-owned insurance. If someone finds the company liable for damages and wants to sue you for, lets say $1 million, yet you are only profiting $10k a year and have 5 bucks in your store account, it will be impossible to pay them.

  • Also, I believe if you make your drivers have an insurance policy which allows them to use their car for delivery, they have a higher coverage limit. This will obviously piss off the drivers, but you could use half of the insurance savings to give them a raise to cover their added expense. Heck, you may even be able to afford to pay the drivers car insurance for them, it would be a bonus for you and them!

In my employee handbooks, I have the drivers sign a form stating that they agree to follow all traffic laws at all times and safety always comes ahead of store needs. Any violations that jeapordize safety can result in immediate termination… This way, in case of a lawsuit, I think it would be very difficult to prove how I, as an employer, would be liable in any way for any damages that the driver may have caused.

But these ideas may be worth nothing! I feel like I have all my bases covered, yet still write out that darn check! :roll:

Incorporation is all well and good. However, if there is a lawsuit you will be personally named as well. Count on it. You may “win” but defending yourself could quickly cost you 50K. Also, if, like many small business people you pay for some things through your business, the court may find that the corp is not a separate entity and allow the suit against you personally to proceed.

You have to be nuts not to be covered.

Always look at things through the eyes of the jury, rather than the letter of the law. Especially when you are dealing with issues that could end up being decided by a civil jury. Beyond that, you as company executive can always be found responsible both civilly and criminally for negligence.

If your business model was one that included pizza delivery, you attempted to profit from delivery which carries with it certain inherent risks, yet you the company owner felt that it was not important to insure yourself against these risks? - This is what I see attorney arguing against someone who did not carry any insurance on their delivery operation.

Now if we are talking a fender bender, not a life changing ordeal, but if you have a driver smash into a school bus and kill 5 kids not only will they be scrutinizing your insurance policy, but they will be looking over your drivers driving record, your screening process, training procedures, drug testing, safety of your vehicles owned or not, etc…

It isn’t a matter of if your drivers ever get into an accident, it is matter of when. In 14 years of delivery I have had 2 drivers have their cars totaled by other drivers, 3 at fault accidents by my drivers, and numerous dogs, deers, poles, and so forth hit. These are the ones they told me about.