Businesses typically purchase commercial auto insurance to cover for accidents caused while driving company-owned or leased vehicles. Accidents caused while driving non-company vehicles, however, are a different matter and require another type of business insurance called Hired and Non-Owned Auto Insurance. Hired and Non-Owned Auto Insurance is especially important if your company often rents or uses personal vehicles for business purposes.

What is Hired and Non-Owned Auto Insurance?

Hired and Non-Owned Auto Insurance protects your company from liability should you or your employees cause an accident while operating a hired or non-owned vehicle for business purposes.

A few examples of instances in which Hired and Non-Owned Auto Insurance would be helpful:

• Your administrative assistant often uses her personal car to pick up lunch for the executive team.
• Your top sales representatives often travel to meet clients and rent cars to get to business meetings.
• You rent a truck to move inventory between your office and warehouse.
• You’ve organized an employer-sponsored event at a local park, and your employees drive to the park in their own personal vehicles.

Hired and Non-Owned Auto Insurance are actually two separate types of auto insurance—Hired Auto Insurance and Non-Owned Auto Insurance—but many insurance companies group them together since the exposures they cover are quite similar in nature.

Hired and Non-Owned Auto Insurance can apply whenever an employee causes an accident with a vehicle that is hired (i.e., borrowed, rented, or leased) or not owned (i.e., an employee’s personal vehicle) by the company while fulfilling business purposes. In the event of such an accident, your company may be held liable for damages, in which case Hired and Non-Owned Auto Insurance would kick in.

Hired and Non-Owned Auto Insurance can cover bodily injury, property damage, and legal costs that arise as a result of an at-fault accident, but it’s important to note that only third-party vehicles and bodies are covered and not the employee or his vehicle. The employee involved in the accident may still be responsible for damages to his own vehicle and injuries, which may be covered by personal auto insurance or workers’ compensation insurance. The business, under Hired and Non-Owned Auto Insurance, would be protected from financial loss, liability, and possible bankruptcy.

Example:

• An employee needs to fly to a different state to meet an important client at their headquarters. The employee drives her own car to the airport, and on the way there, she ends up rear-ending and damaging another car and is found to be at fault. The other driver sues the employee and her company for damages. Because the employee’s company purchased Hired and Non-Owned Auto Insurance, the company is covered for any costs resulting from legal defense or damages. The employee’s personal auto insurance would cover the claims against her and damage to her own car.

What does Hired and Non-Owned Auto Insurance cover?

Hired and Non-Owned Auto Insurance covers liability expenses associated with car accidents that you or your employees may have caused when operating a hired or non-owned vehicle for business purposes.

It’s important to note that coverage only applies to expenses paid out for third-party injuries and property damage. The employee at fault in the accident is still responsible for first-party property damage and bodily injuries.

Coverage is applied on a secondary basis

Another important facet of Hired and Non-Owned Auto Insurance is that it is typically provided on a secondary coverage basis, meaning primary coverages would be applied first. If the accident involves an employee’s personal vehicle, his or her own personal auto insurance would be tapped first for a third-party claim. If the employee’s personal policy is not enough to cover the claim, responsibility would be placed upon the employer’s Hired and Non-Owned Auto Insurance policy. If the accident involves a rental car, any liability coverage that the rental agency provides would be applied first, followed by the employer’s Hired and Non-Owned Auto Insurance coverage.

Example:

• An employee causes an accident while driving an important client package to the post office. Luckily, no one is seriously injured, but the other driver’s car is totaled, and he sues for damages. The employee’s personal auto insurance only covers up to $40,000 in third-party property damage, but the totaled car is worth $100,000. The other driver files suit against the employee’s company, and the company’s Hired and Non-Owned Auto Insurance policy covers the remaining $60,000.

Hired and Non-Owned Auto Insurance typically covers liability up to a limit of $1,000,000. It does not cover for accidents that are not work-related, however, or when employees run personal errands with a hired, non-owned, or business vehicle. The insurance is only applicable when a hired or non-owned vehicle is being used for business purposes.

Do I need Hired and Non-Owned Auto Insurance?

While all businesses can experience financial difficulty if an employee causes an accident in a hired or non-owned vehicle, some companies are at greater risk than others. If any of the following situations apply to your business, you may benefit from Hired and Non-Owned Auto Insurance:

• You or your employees often rent, lease, hire, or borrow cars.
• You or your employees often travel on business trips via car.
• You or your employees often run business errands with personal vehicles.
• You or your employees often drive personal vehicles to meet clients.
• Your company relies heavily upon travel, whether domestic or international, to keep business and earnings afloat.

Small and medium-sized businesses are particularly at risk of financial loss and bankruptcy from an auto insurance claim. The more often these situations arise for your business, the more often you may need Hired and Non-Owned Auto Insurance should an accident occur. Generally, if you or your employees drive hired or non-owned cars for business purposes, you should consider Hired and Non-Owned Auto Insurance.

How much does Hired and Non-Owned Auto Insurance cost?

While the exact cost of a Hired and Non-Owned Auto Insurance policy varies depending on the insurance company, the factors that determine cost typically include:

• The number of employees in your company
• The number of employees that typically operate hired or non-owned vehicles
• How often these employees operate hired or non-owned vehicles
• The general demographics (i.e., age and gender) of these employees
• How often your company uses hired vehicles (e.g., rent, borrow, lease)
• The average costs associated with hiring non-company vehicles
• The number of miles driven with hired or non-owned vehicles on average
• The number of vehicles owned or registered with the business

There are quite a few factors that influence the premium and policy cost of Hired and Non-Owned Auto Insurance, and there may be more depending on the insurance company. In the end, though, it comes down to the general needs, risks, and circumstances for a company. If your company would likely suffer from an auto insurance lawsuit, it may be wise to look into Hired and Non-Owned Auto Insurance.

How do I purchase Hired and Non-Owned Auto Insurance?

Hired and Non-Owned Auto Insurance is commonly added on as an endorsement to a general liability policy or commercial auto policy. Some insurance companies do offer Hired and Non-Owned Auto Insurance as a standalone policy, though this is typically not the most cost-effective way to get coverage.

What are the key exclusions of Hired and Non-Owned Auto Insurance?

Generally, Hired and Non-Owned Auto Insurance cannot be applied to:

• Payments accrued through punitive or exemplary damages
• Bodily injury or property damage sustained through the use of a hired or non-owned vehicle for business or professional purposes not pertaining to your business specifically
• Property damage accrued when property is transported or held in care of the insured employee
• Bodily injury sustained by an insured employee or their family members
• Bodily injury or property damage committed out of fraud

To reiterate, Hired and Non-Owned Auto Insurance can only be applied to bodily injury or property damage accrued by a third party and the costs and liabilities associated therein. It cannot and does not take the place of any personal auto insurance.

Final Word

Most employers hope their employees never cause a car accident, but they can happen, and auto insurance claims happen to be fairly costly. If you or your employees often drive rented or personal vehicles for business purposes, it may be wise to invest in Hired and Non-Owned Auto Insurance. Hired and Non-Owned Auto Insurance will protect your business from unnecessary lawsuits, pay out necessary judgments to third parties, and keep your business financially sound, if or when an accident occurs.