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PEYTON SMITH — Hired and non-owned automobile liability coverage

PEYTON SMITH

PEYTON SMITH

How many times do employees or business owners conduct a business activity while driving their own personal automobiles? Almost every business has to make deposits at the bank, pick up and drop off mail at the post office or pick up office supplies and materials for the business. Other businesses may require employees to travel out of town for meetings or conferences. What happens if an employee has a wreck while traveling for business? What happens if the wreck occurs while an employee is driving a personal car and not a car that is owned by the business? A simple trip to the post office or to a meeting could become very expensive if the business does not have Hired and Non-Owned Automobile Liability Coverage. A company could be legally liable and pay a significant amount of out of pocket money if an employee were to get into an accident while running an errand for their job and if the company does not have Hired and Non-Owned Automobile coverage. It is very important to understand exactly what your insurance policy covers. Many times  businesses assume they have coverage for something and have to find out the hard way that they don’t. Most companies face this exposure on a daily basis, but may not know that they aren’t covered for this exposure until it’s too late.

Whenever I am talking to clients about Hired and Non-Owned Auto Coverage, I usually get the following three questions: “Doesn’t my business auto policy cover this? What is non-owned auto coverage? And what is hired auto coverage?” The short and simple answers are that a typical business auto policy will only cover accidents that occur on automobiles that are owned by the business and listed on the policy.  Non-owned Automobile Coverage provides liability protection when an employee drives their personal vehicle for business purposes. Hired auto coverage provides liability protection when an employer or an employee is driving a rented, hired or borrowed vehicle but there could be exceptions to this depending on how the vehicle is rented.

An employee’s personal automobile insurance provides primary insurance for the employee, even if the employee is using their personal vehicle on company business at the time of the wreck. However, if the damages from an accident exceed the limits of the employee’s personal automobile coverage, then the remaining damages could be passed onto to the company if the employee was completing a job for the company and the employee was found to be responsible for the accident

For example, an employee is using their personal automobile to pick up office supplies for their employer. While doing this job, the employee has an accident with a car that has four people in the car and the employee was at fault for the accident. The employee’s personal auto insurance coverage has bodily injury coverage limits of $100,000 per person and $300,000 total per accident. In addition to bodily injury coverage, the employee also has $100,000 in coverage for property damage. The total amount of damages from the accident are $500,000 in bodily injury and $300,000 in property damage. This example exceeds the employees personal coverage limits by $200,000 for Bodily Injury and $200,000 in property damage. The employer could be held liable for the $400,000 total that exceeds the employees personal coverage limits and if the employer does not have Hired and Non-Owned Automobile coverage, the employer could be paying that amount out of pocket.

Depending on the insurance carrier, Hired and Non-Owned Automobile Liability Insurance can either be added to a business automobile policy or in some cases to the business’s general liability policy. It is very important to know whether or not you are covered for this exposure because depending on the severity of the claim, a company could be out hundreds of thousands, if not millions of dollars if not properly insured.

» Peyton Smith is a Risk Advisor with SouthGroup Insurance and can be reached at 601-326-5312 or peyton.smith@southgroup.net

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