4 February 2021

Delivery Drivers and Commercial Coverage: Do Businesses Have What They Need?

Millions of Americans have changed their work, recreation and shopping habits due to the pandemic. Government stay-at-home orders, doctors’ instructions to quarantine and individual decisions to avoid spreading COVID-19 mean that more people are staying home than before.

With the decision to stay at home comes a change in the methods used to obtain food and other necessary supplies. Delivery drivers play an essential role in making wide-scale quarantines work, but they also face their own set of risks. Commercial insurance coverage for delivery drivers thus becomes a significant concern for businesses and gig economy workers.

Increased Demand for Deliveries

As the COVID-19 pandemic shut down schools and businesses in March 2020, people started exploring options for delivery of food and other essential goods. In mid-March 2020, for instance, companies that offer grocery delivery like Instacart, Walmart Grocery and Shipt saw record downloads of their delivery apps, writes Adam Blacker at Apptopia.

Increased interest in delivery services by customers, in turn, has increased demand for delivery drivers.

As Ride-Sharing Wanes, Delivery Demand Grows

The pandemic decimated demand for ride-sharing services, but demand for food and grocery delivery held steady, according to a poll by the University of Chicago Harris School of Public Policy.

About 40 percent of respondents to the poll said they used delivery services for food and groceries, and 16 percent said they were using these services more often than they did before the pandemic. While use of ride-sharing services dropped, 71 percent of respondents said they’d probably start using them again in a year.

Ride-sharing platform Uber saw its demand for passenger trips decrease during the pandemic. Demand for deliveries from its Uber Eats venture doubled, however, reaching $1.2 billion by August 2020. Given growing demand and Uber Eats’ acquisition of the shipping company Postmates, Uber expects Uber Eats to be profitable within the next few years, says Uber CFO Nelson Chai.

The shift from demand for ride-sharing to delivery services “is a clear example of the dynamism of the U.S. economy, and underscores an important challenge facing policymakers at they seek to address both the real safety concerns of gig workers and the benefits these services provide consumers,” says Dmitri Koustas, assistant professor at Chicago Univserity’s Harris School of Public Policy.

Delivery Options for Grocers, Farms and Food Banks

In response to changing demand patterns, some companies made a quick switch to a delivery-based model. Pale Green Dot, a U.K. company specializing in connecting restaurants to local farms, added a home delivery option in 2020, says Jo Farish, the company’s head of business development.

“We went from 100% commercial versus 0% domestic sales to 5% versus 95%,” says Farish. A website rebuild and the acquisition of more delivery vans helped Pale Green Dot transition to delivering produce boxes to homes in southeast England.

Restaurants, groceries and farmers aren’t the only ones who have had to adapt to delivery models in order to get their food to customers. Food banks and organizations that provide food assistance have adapted as well.

Due to COVID-19 restrictions, however, some charities are struggling to get donated food to the people who need it. For example, Detroit-based food pantry Auntie Na’s Village partnered with local churches and non-profit organizations to collect food. But the organization has struggled to find people who can distribute it to homebound and quarantined people.

Nevertheless, the will remains strong within these organizations to help their communities. “If we can get enough volunteer drivers to deliver [donated food] for us, then definitely, we’re going to do what we can to run it through the first of the year,” says Sonia Brown, founder of Auntie Na’s Village.

What Coverage Do Delivery Drivers Need?

Generally speaking, drivers don’t make deliveries in exchange for compensation, either through a platform coordinating drivers and deliveries or in the course of employment.

As a result, deliveries typically constitute a business use of a vehicle rather than a personal one, cautions Forbes editor Jason Metz.

“Car insurance companies see business use as a higher risk than personal use, and charge higher rates accordingly. Delivery drivers are more likely to get into accidents and file car insurance claims,” Metz writes.

Small businesses that rely on delivery drivers may also need additional coverage, says Metz. For example, these businesses may benefit from commercial auto insurance policies if they provide the vehicles their delivery drivers use. If employees only use personal vehicles for the occasional business task, the business may benefit from non-owned car insurance coverage.

Business Coverage for Delivery Drivers’ Needs

To respond to the sudden increase in delivery demands, some restaurants have turned to their own employees to handle deliveries. But this arrangement can result in coverage concerns as well.

“Since those restaurants were not previously set up for delivery, many are having their employees use their own, personal vehicles for delivery. That raises insurance coverage issues for the employee,” writes Heath P. Straka at law firm Axley Brynelson. It may also leave the business exposed to the costs and stress of a lawsuit.

To address lawsuit risks, some small businesses purchase the coverage they need in case of a lawsuit, relying on their drivers to find the coverage they need.

For example, Bill Siwicki, owner of Pizza Works, purchases additional coverage to address the risks of a lawsuit. While Siwicki’s drivers are expected to have their own auto insurance coverage, Pizza Works also has insurance “on the chance that someone wants to go up the ladder and start suing people,” says Siwicki. Drivers’ auto insurance policies cover their behavior; Pizza Works’s additional insurance provides assistance in the event of a lawsuit related to drivers’ behavior.

Delivery Platforms and Auto Coverage

Delivery drivers who obtain work through platforms like Uber Eats may have additional coverage through the platform, aimed at covering their risks while they are actually making deliveries.

In May 2020, for example, rideshare company Buckle received temporary approval in Georgia to add insurance coverage for delivery drivers carrying food and household supplies to customers. This coverage helped delivery drivers and small businesses distribute food and supplies without additional insurance risks.

“While the demand for rideshare services has dramatically dropped off due to COVID-19, rideshare drivers have stepped up to provide essential home delivery that many are relying on while in quarantine,” says Buckle cofounder Martin Young. Expanded coverage for these drivers can help protect both the drivers and the businesses that rely on them, preserving an essential supply chain for those staying at home.

For small businesses, the cost of additional insurance coverage can be a concern. Many small ventures weigh the risk of going without coverage against the cost of purchasing that coverage. Insurers who clearly communicate and educate commercial customers on the benefits of certain types of coverage can help these entrepreneurs make more informed decisions.

Changes in Delivery Driver Coverage

Many delivery drivers occupy a gray area between clear-cut personal and commercial vehicle use. This is particularly likely to be true if the driver uses the same vehicle to run their own errands and to ferry deliveries for businesses and their customers.

As a result, insurance companies will need to stay aware of state and federal regulatory demands, as well as changing demand for delivery drivers, in order to ensure customers have the coverage they need.

Legislative Responses to Delivery Coverage

Some states have required insurance companies to respond to delivery drivers’ need for coverage. In Wisconsin, for example, the Commissioner of Insurance required insurance companies to provide coverage for restaurant delivery drivers while the COVID-19-related public health emergency persisted.

The Wisconsin order required insurance companies to “cover delivery services for restaurants on personal auto insurance policies.” It also required them to “offer coverage for hired drivers and non-owned automobiles as a rider on a restaurant’s general liability insurance if it is requested,” according to a statement from the state’s Office of the Commissioner of Insurance.

Connecticut’s Insurance Department took a similar approach, requesting that insurers expand coverage of personal vehicles to include certain commercial purposes, including work as a delivery driver transporting food or medicine. Guidance from the Insurance Department outlined ways that insurance companies could treat such coverage as an endorsement.

“We all need to support our local businesses, especially restaurants, who have switched to food delivery to keep their kitchens open and employees working,” says Andrew N. Mais, Connecticut’s commissioner of insurance.

The Future for Delivery Driver Coverage

Demand for delivery drivers will persist beyond the current crisis, predicts Bentley Koup, a DoorDash driver. Not only have shoppers found delivery to be a convenient option, but many restaurants and other businesses have embraced the model as well.

“You had a lot of restaurants unsure if food delivery was going to work for them, but now a lot of them need us,” says Koup. As both customers and restaurants maintain their interest in food delivery, demand for drivers to deliver meals and groceries is likely to continue, as will the need for insurance coverage for these drivers.

A robust delivery system is necessary to enable communities to protect their individual and collective health during a pandemic. Such a system, however, also requires the support of insurance coverage to manage risks. Insurers who understand the changing dynamics of deliveries can better meet customers’ needs during this time.

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