Does my business need hired & non-owned auto insurance?
What is hired & non-owned auto?
Both hired and non-owned auto insurance refer to liability coverage only and is often abbreviated as HNOA. Hired auto refers to rented vehicles or car services, such as a taxi or limousine. So if an employee, executive or volunteer of a business rents a car for a business trip, for example, the rented vehicle will have liability insurance through hired auto coverage. Similarly, if a business leases a or borrows a truck, liability coverage is provided through hired auto.
Damages to the leased, borrowed or rented vehicle isn’t included, nor are any injuries sustained by the company driver. Sometimes hired auto or non-owned auto can be purchased by itself but generally they come in a package.
Non-owned auto refers to liability coverage for vehicles owned by employees, executives or volunteers who use their vehicles to perform a task for the business they represent. Most of the times, independent contractors are also included as well as executives. The coverage is usually meant for incidental use of the vehicles but in some cases a business wants to be protected when employees or contractor use their personal vehicles for the business on a regular basis. For example, a property management company wants to make sure if their employee drives from one property to another, the business is protected.
It is important to keep in mind that non-owned auto covers an accident on an excess basis, not primary. What that means is that the employee has to have their own auto insurance with certain (high) limits for some non-owned policies to step in. For example, if your employee runs to grab coffee for a meeting and severely injures a pedestrian resulting in a $500,000 settlement, part of it might be covered by the personal auto policy and another by the non-owned auto.
The coverage is available for incidental or “if-any” exposures only.
- Regular use of unlisted employee vehicles is unacceptable. “Regular” may be defined as more than two times per week.
- Usually must be written in conjunction with primary liability coverage through either a commercial auto or general liability policy.
- Some companies will not write this coverage for certain business types, including but not limited to: religious organizations, social services, visiting nurses, or pizza delivery.
Some common misconceptions:
- I don’t ever rent vehicles for the business so I have no need for hired auto coverage: We agree that hired auto is usually a less frequent need. Keep in mind that most insurance companies ask for the estimated “cost of hire” per year and if that number is close to $0, the premium impact should be very minimal. In fact, if you already have a need for non-owned auto coverage, hired auto might be included for free.
- I only have employees who work at my office so I don’t need non-owned auto coverage: While your business doesn’t require employees to use their own vehicles on a regular or incidental basis for the business, remember that all it takes is that one accident during that once-in-a-while errand your employee or a volunteer had to run for you.
- We require our contractors and employees to carry high liability limits on their auto, so we are well protected: There is no liability limit that covers anyone “fully.” Injuries or deaths caused by a motor-vehicle accident can always be worse than one can even imagine. In the litigious society we live in, the victims (or their surviving families) will go after the party that has most to lose and give. So while your employee’s limits were quickly exhausted, instead of going after her, their attorney decides to go after the business next.
- With non-owned auto, my employee’s car is covered if his drive is work-related: It’s important to remember that non-owned auto only refers to third-party liability. So damages to your employee’s vehicle and injuries to your employee are not covered through non-owned auto. Aside from adding an employee’s car to your commercial auto policy, there is no way to include those coverages otherwise.
- I am a landlord of a commercial property and only need insurance for my own personal vehicle: We have run into situations where a commercial lender requires hired and non-owned auto coverage even though seemingly no driving exposure existed at all. For example, if you have a property management company taking care of everything relating to your owned property, what’s there to be worried about? We found that the owner can be held liable if a vendor causes an accident on their property since the vendor was “hired” to perform the task/work (i.e. deliver supplies, make repairs).
As you can see, there are not only different instances of HNOA exposure, but a lot of grey areas exist as well. Unfortunately for individuals and business owners, fate of someone’s responsibility for an accident may come down to a judge or jury and you want to make sure you are defended during that process.
We believe that most, if not all, businesses should consider making HNOA a part of their risk mitigation strategy. We are here to help you make a decision.
Please do not hesitate to call us at 425-242-5252 to find out how you can better protect your business.
A: 1500 Benson Road South, Suite 201 Renton, WA 98055
Dominik was a German exchange student in high school before graduating from the University of Washington in Business Administration – Information Systems and Retail Management. His insurance career started in 2008 when he decided leave his retail management career behind to start his own business. His American Family Insurance agency quickly grew to service 700 clients and families. While the idea of becoming an independent broker started in 2010, a horrific car accident put that plan on hold. In 2014, Dominik and his wife Michele changed from a captive agency to become the independent agency that you see today.
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