Hired And Non-Owned Auto Liability Explained

Taking a business trip? Going on-site with a client? Sending an employee to pick up office supplies? If your business ever requires you or your employees to travel in a vehicle that is not owned by your company, it’s imperative that you learn about hired and non-owned auto liability.

In a nutshell, hired and non-owned auto liability is a type of insurance that covers accidents involving a vehicle that—as the name suggests—is either rented or not owned by your company. Depending on the nature of your business, this can range from a trip to go pick up lunch to frequent, long-distance trips to a client’s office.

Many of our clients have contracts that require hired and non-owned auto coverage. Yet despite how common this coverage is, there is much confusion about what it actually insures.

Let’s first break down the difference between hired and non-owned vehicles, as there are a number of situations that make require you or your employees to travel using one or both.

• Hired automobile refers to rented vehicles or car services, such as a taxi or limousine.
• Non-owned automobile refers to a vehicle that is not owned or registered to the business, such as an employee’s car used for business-related travel.

Vehicles owned by your company are a different story, but many businesses either cannot afford or have no regular need to purchase company-owned vehicles (and the insurance that goes with it). In that case, you may find yourself needing to rent a vehicle, hire a taxi or limo, or ask one of your employees to use their own vehicle.

Perhaps the most important thing to know is what hired and non-owned auto liability does and does not cover.

• It does protect your company if you are sued as the result of an accident.
• It does not cover the actual damage to the vehicle itself.
• It does cover the defense costs in the event that you are sued.
• It does not apply to the individual employee(s) involved in the accident.

If an employee of your company is driving to a work-related event in their personal vehicle or a rented car and has an accident, their insurance may not be enough to cover the claim. In this case, your company can be held responsible for damages. As mentioned above, this only covers liability claims against the business itself. It does not cover physical damage to the vehicle or any property that may have been transported therein.

If an employee gets into an accident and they are deemed at-fault, they can be sued as an individual and your business can be sued separately. That’s where hired and non-owned auto liability kicks in to protect your company. The employee should still have their own insurance policy that covers them for liability and physical damage. If the vehicle is rented, we strongly advise purchasing optional liability and collision insurance from the rental company.

Hired and non-owned auto coverage can be added to most general liability policies for a small increase in premium. When compared to the potentially catastrophic financial effect a lawsuit could have on your business, it’s absolutely worth it. And for small companies, sometimes there is no additional cost at all!

The bottom line is this: If you have employees using their personal vehicles for work-related purposes you should absolutely have this coverage in place. It will keep you at ease and prevent legal headaches down the road—no pun intended!