Your company does not own any commercial vehicles. That means you don’t really have a commercial auto exposure, right?
Not necessarily.
Think about how often an employee might use a personal vehicle to:
- Pick up supplies.
- Make a bank deposit.
- Visit a customer.
- Drive to a jobsite.
- Pick up lunch for a company meeting.
- Deliver something for the business.
Those may seem like ordinary errands. But if an employee causes a serious accident while driving their own vehicle on company business, your business could potentially be pulled into the claim. That is where Non-Owned Auto Liability can become important.
The Employee’s Car Is Still Their Car
If an employee drives their personal vehicle for business, their personal auto policy may provide some protection. But that does not necessarily mean your business is fully protected. Personal auto policies can have different limitations regarding business use, and a claim against the business itself is a different exposure from damage to the employee’s own vehicle.
Travelers notes that a business can potentially be held liable when an employee is involved in an accident while driving a personal vehicle for work purposes. The Hartford gives a simple example: an employee uses her personal vehicle to pick up lunch for the company, causes an accident and the business owner is then sued.
That’s a surprisingly ordinary scenario.
What Is Non-Owned Auto Coverage?
Non-owned auto liability is generally designed for vehicles that the business does not own, rent or lease but that employees use in the business. That usually means employees’ personal vehicles. It is commonly grouped with Hired Auto coverage, which addresses vehicles the business hires, rents or borrows. Together, you will often hear them referred to as Hired and Non-Owned Auto, or HNOA.
Travelers notes that commercial auto policies do not automatically cover every vehicle the business does not own, which is why HNOA coverage may be necessary.
What Could Happen After an Accident?
Imagine an employee drives their own SUV to pick up materials for your company. They cause an accident that seriously injures another driver. The injured party may pursue the employee. Depending on the circumstances, they may also pursue the business.
Now the question becomes: What insurance responds to the business’s liability?
Non-Owned Auto Liability can help provide protection for the business when an employee is using a personal vehicle for business purposes and causes bodily injury or property damage to someone else. Exactly how the employee’s personal policy and the business’s coverage interact depends on the policies and circumstances.
What Non-Owned Auto Usually Does Not Do
This distinction is important. Non-Owned Auto Liability is primarily liability coverage. It generally is not designed to pay for damage to the employee’s own personal vehicle. If the employee wrecks their car while running a company errand, their own auto insurance may be the coverage that addresses damage to their vehicle, subject to that policy.
Likewise, HNOA should not be treated as a replacement for making sure employees carry appropriate personal auto insurance. The Hartford specifically notes that HNOA does not cover physical damage to an employee’s non-owned vehicle in the same way it covers the business’s liability exposure.
“They Only Drive Occasionally” Isn’t Much of a Risk-Control Plan
A business owner may say: “My employees don’t really drive for work. Maybe once or twice a month.” But occasional use is still use. One accident does not care whether the employee drives for the company five days a week or five times a year.
The better approach is to understand:
- Which employees drive for company business
- What they use their vehicles for
- How frequently they drive
- Whether they have valid licenses
- Whether they maintain personal auto insurance
- Whether their driving records are acceptable
Travelers recommends vetting drivers, verifying licenses, reviewing motor vehicle records and maintaining driver-safety standards even when employees use vehicles only periodically.
Don’t Forget the Umbrella
If the business carries an Umbrella or Excess Liability policy, it is also worth verifying how Hired and Non-Owned Auto fits into that program. A serious auto accident can create a liability claim far larger than many businesses expect. It is better to know how the primary auto liability and umbrella policies interact before a major loss rather than afterward.
The Question Isn’t “Do We Own Vehicles?” For many businesses, the better question is: “Does anyone ever drive a vehicle on behalf of this company?”
If the answer is yes, the auto exposure deserves a conversation. You may not own a single company vehicle and still have meaningful business auto liability. If employees occasionally use their own vehicles for work and you are not sure how your current insurance program handles that exposure, we can help review your Hired and Non-Owned Auto coverage and how it fits with the rest of your liability program.