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Judge Holds Auto Mechanic Not Covered by Insurance Policy When Test Driving Customer’s Vehicle

As a general rule in Georgia, your auto insurance policy’s liability coverage follows you rather than your vehicle. In other words, if you borrow a friend’s car and get into an accident that injures the other driver, your liability policy will pay for the damages. Of course, this presumes the vehicle you are driving is “covered” by the policy and not subject to any exclusions.

Progressive Mountain Insurance Company v. McCallister

One common exclusion is for vehicles operated as part of an “auto business.” What does this mean? A recent decision by a federal judge Waycross, Georgia, offers a helpful illustration. This case involves a rather complex accident that took place in 2016, which in turn led to litigation between a driver and his insurance company.

The driver is an auto mechanic. As relevant to this case, he owns a business that performs subcontract work for other auto repair shops. The shop tasked the driver with rebuilding the engine on a 1997 Camaro. After completing the repairs, the driver decided to take a “test drive” in order to make sure the rebuilt engine was not leaking oil. The driver also brought along his wife for the ride, as they planned to go to lunch.

In the course of the test drive, the driver rear-ended a Ford passenger bus. This collision forced the Camaro off the road and eventually into a second impact, this time with a parked Dodge sedan. No doubt alarmed by the number of potential liability claims arising from this chain of events, the driver’s insurance company filed a preemptive lawsuit in federal court, seeking a declaration that it was not responsible for coverage.

This brings us back to the question of what is an “auto business exclusion?” Here, the driver’s personal insurance policy contained language stating the insurer was not liable for covering any “bodily injury or property damage arising out of an accident involving any vehicle while being maintained or used by a person while employed or engaged in any auto business.” The policy contained similar language excluding coverage for the driver’s medical payments or collision damage to a “non-owned auto.”

In this case, there was no dispute that the accident involved a vehicle used by the driver while “engaged” in an auto business. Indeed, he was taking a test drive of a Camaro he just finished repairing. As the judge overseeing the case noted, “Test driving is explicitly part of the auto business,” as the policy itself defined it to include “testing.”

Now, the judge did note that the auto business exclusion does have a “carve out” when driving a “covered auto.” But this refers to situations in which auto business owners drive their own vehicles for business purposes. That was obviously not the case here. As the judge explained, the driver “did not own the Camaro, and it was not listed as a covered auto in the declarations page of the Policy.” Given these facts, the insurer was therefore not liable to pay for the damages incurred by the driver or the other drivers and car owners who suffered injuries as a result of the 2016 accident.