The exclusion of public or livery conveyances traditionally included in automobile policies has been a principal source of anxiety to insureds forming car pools.

Although court decisions have consistently held that car pools do not constitute public or livery use of an automobile, misunderstanding of the public or livery exclusion persists within and without the insurance industry. For example, one suggestion sometimes heard is that car pool participants should share the actual driving rather than share driving costs; otherwise the car pool may amount to public or livery use. This, simply, is not the case. The courts are in agreement that charging a car pool passenger for his or her reasonable share of expenses does not constitute public or livery use.

Also, the exclusion on the current personal auto policy states that it does not apply to a share-the-expense car pool. Whether the insured takes his or her turn at driving, say one day a week with four other drivers, or drives five days a week and collects a reasonable share of expenses from each passenger, the exclusion does not apply. It is only when the insured indiscriminately makes the car available to the general public or attempts to make a profit that he or she runs the risk of operating a public or livery conveyance.

This is in keeping with the legal definition of livery conveyance. That definition states that such a conveyance is a vehicle that is hired out and is used indiscriminately in conveying the public or objects without limitation or without being governed by special terms. In other words, a public or livery conveyance is open to the general public to deliver whatever or whomever pays the price; such a vehicle is also usually regulated by public laws governing the safety and sometimes the price. A car pool vehicle, on the other hand, is not open to the general public and is not subject to the same stringent regulations that apply to a bus or long haul truck for example.

The foremost concern of other insureds may be with the possibility of an increase in policy premium. Here, too, the insured's concern may be put to rest. In itself, car pooling does not increase premium. On the contrary, in some cases it may considerably reduce premium. For example, under the general rules of the personal vehicle manual of Insurance Services Office, a primary rating consideration is the one-way distance driven to work. Any one of three use classifications applies to most people who drive to work: pleasure use (less than three miles), work less than 15 miles, and work 15 or more miles. Cars falling in the second class are charged as much as an additional 25 percent of the rate that would be charged for pleasure use, and cars falling in the third class are charged as much as an additional 45 percent of the rate for pleasure use.

However, if the car is driven to work no more than two days a week or two weeks in a five week period, it may be assigned the next lower use classification. For example, a car driven more than 15 miles to work but only two times a week is rated for work less than 15 miles. Likewise, a car driven three or more miles but less than 15 miles is rated for “pleasure use” if driven to work two or fewer times a week.

Of course, each insured's potential savings will vary according to age, sex, marital status, geographical location, and other factors, but with little difficulty the alternate premiums can be worked out.

In some car pools, one automobile is used all or most of the time, with the participants taking turns driving. The question frequently arises whether liability for injury to the owner of the automobile is covered, should he or she be injured while someone else is driving, and whether it is advisable to show each participant as an additional named insured.

Under the provisions of most automobile policies, any person using the automobile with a reasonable belief of permission is, by definition, an insured. Hence, it is unnecessary to name each participant as an additional insured. As respects liability for injury to the owner of the automobile when someone else is driving, the situation varies according to the policy covering the automobile. Some independently filed personal auto policies, for example, may exclude liability coverage for any person for bodily injury to the named insured or any family member. The current ISO personal auto policy has no such exclusion and holds that damages for which any insured (this term includes any person using the covered auto) becomes legally responsible will be paid. However, if an exclusion relating to injury to the named insured or a family member is on the policy, and if the exclusion is interpreted literally, the result could be that the car owner's insurer would not respond, with either defense or damages, should the owner file suit against a guest driver who injured the named insured while driving the named insured's car. The client should therefore be warned of the existence of any such exclusion in his policy so that driving by guests can be avoided unless the guest driver has adequate insurance of his own. If the driver carries his own insurance, that may be a source of recovery for the injured car owner.

Note that if a guest drives another car pool member's car regularly or frequently, the guest driver's insurance may be inapplicable due to the exclusion (in the guest driver's policy) of use of vehicles furnished or available for the regular use of the insured. Thus, if the guest driver's own insurance is to be depended on—by either the owner of the car or the guest driver—the guest driver's policy should be amended to include extended nonowned liability coverage, which deletes the furnished or regular use exclusion found on the personal auto policy.

If the named insured is injured as a passenger and the guest driver is not liable, the named insured still has regular access to the policy's medical payments coverage and, if applicable, uninsured motorists coverage. In states having automobile no-fault laws, personal injury protection customarily covers the named insured while occupying any auto as driver or passenger. The policy in question, however, should always be checked.

Apart from a liability claim or, in no-fault states, a claim under personal injury protection, an injured passenger's most practical (or at least the quickest) means of compensation through automobile insurance is under the medical payments coverage of either the car owner or the passenger.

Under the personal auto policy and most others, the passenger's medical payments coverage is excess over the owner's medical payments coverage specifically applicable to the owned automobile. Thus, if all members of a car pool carry medical payments coverage, each passenger will have full access to the auto owner's insurance and, if needed, his or her own coverage beyond that.

Since many employers sponsor or encourage the use of car pools, there has arisen the question of their possible liability for accidents involving these automobiles. While the editors know of no court decisions on the subject, it seems reasonably possible that a court might hold that this sponsorship of group riding somehow creates a master-servant relationship, making the employer liable either to members of the public or (apart from workers compensation recovery) to employees who have accepted rides at the employer's suggestion.

In any event, there is at least a strong probability that employers will be sued under these circumstances, particularly if the owner or driver of the automobile is insolvent and uninsured. Even if a court of last resort should eventually absolve the employer from liability, defending the suit may be expensive, and there is always the possibility of an adverse judgment. This provides another reason why an employer needs nonowned autos liability coverage.

Some employers actually provide their own vans or other vehicles for the car pools they sponsor. In this case, the vehicles are insured as owned vehicles under the employer's automobile policy, which will insure both the employer's liability and, ordinarily, that of the employee driver at the time of an accident. Naturally, the particular policy should be reviewed to ascertain the scope of coverage.