Defense Digest

Free Delivery: The Enforceability Of "Cars For Hire" Exclusions After Prudential v. Sartno

Your friendly neighborhood pizza delivery driver should be more careful the next time he drops off your tomato pie. Following the Pennsylvania Superior Court's decision in Prudential Property and Casualty Insurance Company v. Ronald R. Sartno, et al.,2005 Pa. Super. 133; 874 A.2d 85 (Pa. Super. 2005), it is likely that his personal automobile policy will not provide coverage in the event he is involved in an accident while working as a delivery driver, even if the pizzeria provides free delivery.

Today, most personal automobile policies contain a coverage exclusion for use of an automobile to carry people or property in exchange for financial compensation. These exclusions are commonly referred to as "cars for hire" exclusions.

In Sartno, Robert R. Sartno ("Sartno"), a pizza delivery driver working for Frankie's Pizzeria and Restaurant, was allegedly responsible for causing an automobile accident while in the course of delivering pizzas. As a result, another party involved in the accident suffered injuries. Prudential Property and Casualty Insurance Company ("Prudential"), Sartno's insurer, maintained that it was not required to provide coverage because of its policy's "cars for hire" exclusion. According to the exclusion, coverage was barred for "bodily injury or property damage caused by anyone using a car covered under this part to carry people or property for a fee."

A declaratory judgment action was filed by Prudential in the Court of Common Pleas of Luzerne County seeking to exclude coverage for Sartno under the Prudential policy's "cars for hire" provision. Following discovery, the parties filed cross-motions for summary judgment. The court in Luzerne County denied Prudential's motion for summary judgment and granted Sartno's motion, thus ordering Prudential to provide coverage to Sartno for the injuries he allegedly caused.

Prudential appealed the order of the Luzerne County Court to the Superior Court of Pennsylvania. The appeal depended upon the court's interpretation of the policy's "cars for hire" exclusion. Prudential argued that its policy did not provide coverage to Sartno for the injuries he allegedly caused because the accident occurred while he was delivering pizza for a fee. However, Sartno argued that the "cars for hire" exclusion was ambiguous and, therefore, should be construed in favor of Sartno and against Prudential.

The Superior Court's opinion focused on the definition of the word "fee" as used in the policy's "cars for hire" exclusion. According to Sartno, since the pizzeria did not charge its customers a fee for delivery, he was not carrying property for a fee. Prudential argued that Sartno was receiving a fee for the delivery of pizzas, in the form of wages and tips. The precise issue of what the definition of the word "fee" is for such an exclusion was a matter of first impression in Pennsylvania.

The Superior Court agreed with Prudential's position and reasoned that its inquiry should not be centered on what a customer pays for delivery but, instead, should be centered on the benefit that the driver receives in exchange for delivering the pizzas.

In support of its opinion, the court cited its prior decision in Brosovic v. Nationwide Ins. Co., 2004 Pa. Super. 12, 841 A.2d 1071 (Pa. Super. 2004), in which it held that an identical "cars for hire" exclusion was not ambiguous and that the insurer of the delivery service driver had no duty to provide coverage under its policy. However, as Judge Johnson pointed out in his dissenting opinion, the court's decision in Brosovic relied on the fact that the delivery service's customers were paying a fee for delivery of property and did not focus on the financial benefit received by the driver for performing the deliveries. Judge Johnson found that the "cars for hire" exclusion had two different, reasonable interpretations and, therefore, was ambiguous.

Nonetheless, in its majority opinion, the Superior Court held that the "cars for hire" exclusion contained in Prudential's policy was not ambiguous and that Prudential was not required to provide coverage to Sartno for the accident. According to the court, the purpose of the "cars for hire" provision was to exclude coverage for an insured driver who gets paid to use his or her automobile in a commercial environment to carry persons or property. It was irrelevant to the court whether the delivery was free or for a fee, as long as the driver was receiving financial compensation for performing the deliveries.

The Superior Court's decision in Sartno upheld the enforceability of "cars for hire" exclusions in situations where a delivery charge is not paid. Following the Superior Court's decisions in both Sartno and Brosovic, other insurers should consider using the same "cars for hire" exclusion language upheld in those decisions. However, insurance companies may wish to heed the advice of Judge Johnson, contained in his dissenting opinion in Sartno, by clearly defining in their policies what constitutes a "fee" for delivery. By doing so, insurers may strengthen their position on the enforceability of "cars for hire" exclusions in the future.

*Patrick is an associate in our Scranton, PA office. He can be reached at (570) 496-4663 or pmattucci@mdwcg.com.