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 email@example.com