Non-owned and hired auto exposures

By Higginbotham on April 03 , 2019

Commercial auto edited 2

Your company doesn’t have to own a vehicle to be held legally and financially responsible for any accidents it’s involved in. If your employees are using a car that they own or that is rented, and they cause property damage or injuries, your company could be sued. This is why you need non-owned and hired auto insurance.

What does non-owned and hired auto insurance cover?

Non-owned and hired auto insurance can provide coverage for multiple scenarios in which a vehicle is used for business purposes but is not owned by the business.

  • The “hired” part of non-owned and hired auto insurance refers to vehicles you rent for business. For example, if an employee rents a truck for work, hired auto insurance will provide coverage.
  • The “non-owned” part of non-owned and hired auto insurance refers to vehicles that are not owned by company but may be owned by the employees. If employees use their personal vehicles to deliver goods, transport equipment or conduct other work-related activities, non-owned auto insurance will provide coverage.

But what about the employee’s insurance?

Personal auto insurance typically excludes commercial uses. This means that your employee’s personal policy may not provide coverage for an accident that occurs in the course of work. This can put both the employee and the employer in a difficult situation. To see how, let’s look at a hypothetical scenario.

An employee is using his personal vehicle to make deliveries for the company. He rear-ends a car, causing property damage to the other vehicle as well as injuries to the two people inside. He files a claim with his private auto insurance company, but the insurer discovers that he was using the vehicle for work and promptly cancels the policy and denies the claim. This is allowed because the insurance contract clearly states that commercial activities are excluded.

Meanwhile, the two people he hit have car repair bills and medical expenses. They sue the employee. Recognizing that the employee does not have the personal funds to pay up, they also name the company in their lawsuit. Because the employee was engaged in work for the company at the time of the crash, the company is found liable and has to pay a large award.

Another problem can occur when policy limits are too low. Many drivers only carry the minimum liability insurance required by their state. In Texas, this is $25,000 for property damage liability and $30,000 for bodily injury per person or $60,000 per accident.

It’s easy to see how property damage could exceed $25,000. Medical bills can also be much higher than the limits. A person seeking higher compensation might go after your company’s assets. To protect their assets, many business owners opt for higher limits in their hired and non-owned policies.

Do you need non-owned and hired auto coverage?

Commuting to and from work is considered normal personal use. Running errands for a company, delivering goods and transporting materials, however, can all fall under commercial use. Other activities that go beyond normal commutes can also be considered commercial.

If your business owns vehicles, those vehicles will be listed on a commercial policy. If your employees use other vehicles for business purposes, you need non-owned and hired auto coverage.

Higginbotham can help. Contact your local agent to learn more.

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Tags: Business Insurance


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