NEMT insurance exclusions: the policy clauses that leave a claim unpaid

Where do exclusions hide in a NEMT policy?

Exclusions sit in three places, and a NEMT owner has to read all three. The declarations page says who and what is covered: the named insured, the business description, the covered auto symbol next to each coverage, and the schedule of vans. The forms list names every endorsement attached to the policy, and endorsements are where most added exclusions live. The coverage form itself carries the standard exclusions; in the ISO business auto form (edition CA 00 01 10 13), liability exclusions are in Section II.B and physical damage exclusions in Section III.B. Your insurer may use a newer edition or a form of its own, so match these section numbers against your actual policy.

Read them before a claim, not after. The best time is renewal, when you can still ask for an endorsement to come off or a description to change; the renewal plan puts that review on the calendar. On a first policy, compare these sections across quotes as part of getting NEMT insurance.

When the driver is not covered

Under ISO’s business auto form, anyone driving a covered auto with your permission is an insured. Driver limits come from what is added to that form, and they come in two kinds.

The first is a named driver exclusion, which removes coverage whenever one named person drives. Not every state allows it on a commercial policy: New York’s insurance regulator ruled in 2003 that a commercial auto policy must still cover a named employee driving with the employer’s permission. The named driver exclusion entry covers how the endorsement works, and the driver approval guide explains why an excluded person must never drive a broker trip.

The second is a driver list: the policy covers only drivers named on the declarations or an endorsement. A Maryland taxicab case shows what that costs. The cab company’s policy covered the named insured and drivers named on the declarations, and excluded any vehicle driven by someone not named. The company insured 157 cabs and had 150 drivers listed. A driver it hired in August 1988 never appeared on any declarations page, and her passenger was hurt in August 1989. In 1996 the Court of Special Appeals held the exclusion void up to the state’s compulsory minimum but valid above it.

For a NEMT company, that split is the danger. Many broker contracts ask for limits far above state minimums (WellTrans’s Indiana agreement sets auto liability at $1.5 million per accident), so an unlisted driver can leave most of the required coverage unpaid. If your policy lists drivers, get written confirmation that each new driver is added before the first trip, and check every new declarations page against your roster.

When the van is not on the schedule

A policy written on symbol 7 covers only the vans described on it. A van bought mid-term picks up that coverage only when all your owned vans already carry it or the new one replaces a van that did, and only if you ask the insurer for it within 30 days of buying it. A spare left off the schedule has no coverage at all. The scheduled auto entry explains the symbols, and adding a vehicle gives the order of steps for a new van.

When the use is not what the declarations describe

Passenger work can fall outside a policy written for a different business. Massachusetts’ endorsement CR 99 06 (edition 02 22) is one example. It removes coverage for any covered auto while it serves as a public or livery conveyance for passengers, including time logged into a ride-hailing app, from liability, physical damage, and medical payments coverage. Its exception is narrow: business activities directly related to the named insured’s business listed in the declarations.

That makes the business description on your declarations a coverage term, not a label. A home care agency that starts driving clients, or a courier that adds passenger runs, needs the insurer to know about the new work and write it in. Brokers check for this. WellTrans’s agreement requires the certificate to describe the provider’s business as “for hire transportation.” Personal auto policies raise the same problem, covered in using your own vehicle for NEMT. Agencies starting rides should read adding rides to a home care agency.

Two related limits are worth checking:

• Coverage territory. The standard form covers accidents in the United States, its territories and possessions, Puerto Rico, and Canada. A trip across the Mexican border is outside it.
• Radius and operations on the application. These are rating facts rather than exclusions, yet a deliberate misstatement of a material fact voids the whole coverage form. Tell the insurer when long-distance trips, a new state, or stretcher service starts.

When your own worker is hurt

Auto liability is not where an injured driver or attendant gets paid. The business auto form excludes any obligation under a workers’ comp law, injury to your own employee arising out of employment, and injury to a fellow employee. An attendant hurt because the driver ran a light is a fellow employee, so the auto policy’s liability coverage does not respond. Workers’ compensation does.

If you have employees and no workers’ comp, nothing in the auto policy covers that injury. The headcounts that make coverage mandatory in each state are in the workers’ comp guide. The form also counts leased workers as employees but not temporary workers supplied to fill in, so staffing agency drivers need their own look; see staffing agency drivers.

When the damage is to a rider’s property

The business auto form will not pay for damage to property you own, property you transport, or property in your care, custody, or control. So when a rider’s power chair breaks during securement or in a crash, it is property you are transporting, and the auto liability coverage does not pay for it. Wheelchair damaged during transport covers who pays and the coverage that does respond. General liability will not fill the gap for incidents tied to the van either: the ISO general liability form leaves out injury and damage arising from the use of any auto an insured owns, operates, rents, or borrows, and its definition of use takes in loading and unloading.

When the van breaks, not crashes

Physical damage coverage on the van has its own exclusions, and three hit NEMT vehicles:

• Breakdown. Loss due and confined to wear and tear or mechanical or electrical breakdown is excluded. A wheelchair lift that simply stops working is a repair bill, not a claim; see wheelchair lift repair cost.
• Electronics. Equipment that receives or transmits audio, visual, or data signals is excluded unless it is designed to run only on the van’s own electrical power and is permanently installed (or sits in a permanently installed housing). A phone or tablet mounted on the dash is not covered with the van.
• Lost resale value. The form does not pay for diminution in value after a repair. Claiming it from the at-fault driver is covered in diminished value claims.

Abuse and molestation claims

Most standard insurers exclude abuse and molestation for whole classes of business or for every insured, by an endorsement on the policy, so a NEMT company cannot assume its liability coverage answers an abuse claim. The abuse and molestation coverage entry lists the form numbers to look for on your forms list. Brokers check for this: WellTrans’s agreement wants abuse and molestation covered under general liability with no sub-limit, and the certificate has to say so. Professional liability and abuse coverage covers the contracts that require it.

Promises you make in a contract

The business auto form leaves out liability you accept under a contract, with an important exception. It still covers liability assumed in an “insured contract,” a term that includes a business agreement in which you agree to carry another party’s tort liability for bodily injury or property damage to a third party. The injury has to happen after the contract was signed. Broker and facility agreements that make you indemnify them for injuries your service causes can fall within that exception for auto accidents. WellTrans’s agreement also requires general liability that covers contractual liabilities, so check both policies when a new contract arrives.

Punitive damages: a state-by-state exclusion

Even a fully covered crash can produce a judgment the policy will not pay. Whether insurance may pay punitive damages depends on state law:

• Ohio. Auto and other casualty policies from insurers licensed in the state, issued or renewed on or after October 31, 2001, may not cover punitive or exemplary damages.
• Virginia. Public policy allows coverage for punitive damages from death or injury caused by negligence, including willful and wanton negligence, but not intentional acts.
• Kansas. Coverage is allowed for punitive damages assessed because of the acts of employees or agents, intentional or not, that you had no actual prior knowledge of.

In a state like Ohio, the company pays any punitive part of a verdict itself. Claims that a company handed the keys to a driver it knew was unsafe, called negligent entrustment, are covered in the driver approval guide.

Conditions that work like exclusions

Three policy conditions can defeat a claim that no exclusion touches:

1. Late notice. The form makes prompt notice of an accident a condition of coverage, along with sending the insurer every legal paper as soon as it arrives. Report every incident, even when no one seems hurt; see after a NEMT van accident.
2. Promises at the scene. The insured must not assume obligations or make payments without the insurer’s consent, except at its own cost. A driver who tells a family the company will pay for everything has made a promise the insurer may not honor.
3. Misstatements. The form is void for fraud, or for intentionally concealing or misrepresenting a material fact about the coverage, a covered van, or a claim.

Trip records in HealthRide

Most exclusion questions start with who was driving which van, when, and on what trip. HealthRide’s trip record answers that: the driver and vehicle assigned, timestamps, GPS-recorded miles, and the rider’s signature, exportable as a trip log. It also tracks license and vehicle insurance expiration dates and warns dispatch before an expired credential is assigned. See fleet management for the credential side.