Business Insurance: Hired And Non-Owned Auto Liability Insurance

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Hired autos are vehicles that are leased, rented, or borrowed by businesses or their employees for commercial purposes. They’re typically associated with out-of-town business activities. 

Non-owned autos are vehicles that are owned by company employees but used for business purposes. For example, an employee may use their personal car to visit clients, travel to offsite conferences, or run office errands.

Businesses that used hired and non-owned vehicles regularly in the course of their operations should make sure their business owners insurance is endorsed to include Hired And Non-Owned Auto Liability to mitigate this risk.

What Is Hired and Non-Owned Auto Liability Insurance?

A company that regularly uses rented or employee-owned vehicles for business purposes is exposed to a specific risk that may put their business assets on the line. Here’s why:

If the rented or employee-owned vehicle gets into an accident, the company may be found to be vicariously liable if the other party files a claim or a lawsuit.The employee’s personal auto policy may not offer protection if the car is being used for commercial purposes.The company’s commercial auto policy only covers company-owned vehicles and will not cover rented, borrowed, or employee-owned vehicles.

Hired and non-owned auto (HNOA) insurance is a type of commercial auto liability insurance that covers costs triggered by accidents involving vehicles that the company uses for business purposes but doesn’t own. 

In many cases, Small Businesses do not have any business owned vehicles.  In order to get this valuable insurance protection, the business must make sure their Business Owners Insurance includes Hired And Non-Owned Auto Liability Coverage. 

The cost of an HNOA policy will depend on several factors, including the driver’s age and track record, the make and model of the vehicle, the number of vehicles being rented or borrowed, the level of risk involved in the company’s operations, and whether the car will be used locally, across state lines, or internationally. Limits usually range between $100,000 to $1,000,000 per event. 

What Does Hired And Non-Owned Auto Coverage Mean?

An HNOA policy covers the actions of full-time, part-time, temporary, and volunteer workers. It may cover independent contractors if the business doesn’t have any employees. It may also include executives. If you’re working with independent contractors, it’s important to indicate this in your application for HNOA coverage.

The policy also covers the costs of the following:

CoverageExplanationProperty damageHNOA covers the costs of repairing or replacing the other party’s car.Bodily injuriesThe policy covers the costs of the other party’s hospital bills, physical therapy, and rehabilitation. In some cases, it may also pay for the other party’s lost wages and pain and suffering.Defense costs and attorney feesThe policy pays for the costs of hiring and retaining a legal team should the other party file a liability claim or take the company to court.JudgmentsThe policy may pay for money judgments (the amount awarded to the other party) in court.SettlementThe policy may pay for the cash settlement (the amount agreed upon by the company and the other party to resolve the case).Other court costs if the business is sued following an accidentThis includes filing fees, court reporter fees for depositions, charges for serving subpoenas or summons, court transcripts, etc.Hired And Non-Owned Auto Liability Insurance Coverage & Definitions

What Does Hired and Non-Owned Auto Insurance NOT Cover?

An HNOA policy typically does not pay for the following:

Collision damages and repair costs for the rented or employee-owned vehicle (this is covered by the employee’s personal auto insurance policy)Damage to any asset, goods, or equipment being transported or placed inside the rented or employee-owned vehicle (this is covered by a business property insurance policy or an inland marine policy)The employee’s physical injuries (this is covered by workers’ compensation insurance)Damages sustained from an accident that occurs while the employee runs a personal errand during or outside business hoursDamages sustained from an accident that occurs during the employee’s commute

An HNOA may also not cover related costs if there’s a finding of negligence on the part of the employee or the company. Here are some examples:

The employee’s car lacks regular and proper maintenance.The amount of damages caused by the accident exceeds the limits of the employee’s auto insurance policy.The employee has a bad driving record.The employee’s insurance has lapsed.The company doesn’t have a policy or program designed to address any issues with employee cars that are being used for business activities.

Hired and Non-Owned Vehicles Liability vs. Commercial Auto Insurance

Commercial auto insurance covers all cars, trucks, and other vehicles that the business owns and are designated for business use. The policy typically covers the following:

Medical injuries sustained due to an accidentAuto liability when another party’s vehicle has been damagedPhysical damage due to storms, theft, vandalism, and accidentsUninsured drivers who cause accidents but don’t have coverage

On the other hand, an HNOA policy only covers vehicles that are rented or employee-owned and used for business purposes.

How Can the Business Minimize HNOA Risk?

Here are some preventative measures that companies should observe to minimize their risk exposure:

Require employees to maintain ample liability limits on their personal auto insurance policyCheck whether the employee’s personal auto insurance policy excludes claims arising from commercial or business useVerify their employee’s driving record and do pre-employment background checks to ensure that they’re unlikely to get into accidents

Any business that uses hired and non-owned vehicles for their company’s operations or activities needs to include HNOA coverage in their policy. 

This is a good investment and adds another layer of protection for the business, especially considering the highly litigious environment we all live in.

If you’re planning to invest in HNOA coverage for your business, you can purchase it as a standalone policy or add it to your existing general liability policy, business owner’s policy, or package policy. 

HNOA coverage may even be added for free to your small business insurance depending on how much insurance you’re buying for other areas. There are pros and cons to all these options, so make sure to do your research and get in touch with your insurance provider for assistance.