Baughman v. Merchants Mut. Ins. Co. , 87 N.Y.2d 584 (1996)

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A commercial auto insurance policy’s exclusion for vehicles not used “exclusively in the business of the named insured” is enforceable when a vehicle is involved in an accident during a purely personal trip, even if the driver is an employee of a company that leases the vehicle to the named insured.

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Summary

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Baughman leased a tractor to Schutt, who was insured by Merchants. A Baughman employee, Landwehr, after completing deliveries for Schutt, drove the tractor on a personal trip to Niagara Falls. An accident occurred during this personal detour. Merchants denied coverage based on a policy clause excluding coverage when the vehicle is not used “exclusively in the business of the named insured.” The New York Court of Appeals held that the exclusion applied, as Landwehr’s use of the tractor at the time of the accident was for a purely personal purpose, outside the scope of Schutt’s business, and therefore not covered by the policy. The court emphasized the importance of interpreting insurance contracts based on the reasonable expectations of businesspersons.

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Facts

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Donald H. Baughman and Donald H. Baughman, Inc. (collectively,