Georgia Property & Casualty Practice Exam

What is the correct statement regarding Melissa's insurance policy when driving her co-worker Meghan?

1. The insurer may cancel Melissa's policy because she is car-pooling.

2. The insurer may cancel Melissa's policy because she is receiving payment for transporting a passenger.

3. The insurer cannot cancel Melissa's policy because she is using her car for a legitimate business purpose.

4. The insurer cannot cancel Melissa's policy because she is not carrying a passenger for payment.

The correct answer is: The insurer cannot cancel Melissa's policy because she is not carrying a passenger for payment.

The correct statement about Melissa's situation pertains to the nature of her carpooling arrangement with her co-worker Meghan. Since Melissa is not receiving any payment for transporting Meghan, the use of her vehicle for this purpose does not constitute commercial activity or a business use. Insurance policies typically have specific terms regarding coverage during personal use versus business use. In this case, because Melissa is merely offering a ride to a co-worker without any exchange of money, this activity is classified as personal use rather than commercial use. Most standard personal auto insurance policies allow for occasional carpooling with no impact on coverage or policy status. Thus, the insurer does not have valid grounds to cancel Melissa's policy simply because she is driving someone else in a non-commercial context. The options concerning cancellation due to payment for transporting a passenger or requiring a business purpose imply a misinterpretation of the policy's stipulations regarding non-commercial activities, which would not apply here. Therefore, the insurer's actions of canceling her policy based on these premises would be unjustified.