While many employers are familiar with the owned vehicle portion of a Commercial Auto policy, there can sometimes be confusion about what the Hired and Non-Owned Auto portion entails.
There are two parts of Hired and Non-Owned Auto coverage to consider:
Liability coverage protects an employer from claims involving bodily injury and property damage caused by an employee driving for business purposes in a vehicle you hire (including rented) or a non-owned vehicle (employee owned vehicles).
If the company is named in a lawsuit due to an incident, the defense cost portion of the policy will pay for any cost relating to defending a lawsuit, even if the claims are groundless. The defense costs can be a separate limit, and therefore will not erode the liability limit on the policy.
An important aspect of this coverage to consider is what is not covered by Hired and Non-Owned policies:
Unlike company-owned vehicles, physical damage is not usually included for non-owned vehicles and it is important to note that the insurance purchased by the owner of the car is primary to any coverage provided by an employer's policy. If an employee were to get into an accident in their own car while on company business, the employee's personal insurance policy would respond initially, but any amount excess of the employee's limits would become the responsibility of the employer.
With hired and non-owned policies, coverage is provided for the company itself, but employees have no personal coverage should they be named in a lawsuit.
When an employee is transporting property, auto policies do not commonly provide coverage for any property within the care and custody of the employee. A property policy would provide coverage for transported property.
Companies often believe that they do not have exposure, but the following are a few common examples of when Hired and Non-Owned Auto coverage applies:
In order to obtain coverage, Hired and Non-Owned can be added by endorsement to an existing Auto policy. If no Auto policy is in place, coverage can usually be added to the General Liability policy depending on that insurance company's guidelines.
The premium for Non-Owned coverage is typically based on the number of workers employed by a company and Hired Auto coverage is based on the cost of hire. The cost of hire means the amount of money that is spent in a typical year on the rental of vehicles.
It is important to know whether or not proper coverage is in place prior to a loss, because depending on the severity of the claim, any company is at great risk of a large potential loss.
Shelley Wong - Associate - Property & Casualty
Shelley Wong joined Equity Risk Partners in 2011 as an Analyst. She is part of the San Francisco Property and Casualty team that serves the due diligence requirements of private equity firms and provides technical client advocacy, including analysis of client risk and exposure.
Mrs. Wong holds a bachelor's degree in English from the University of San Francisco.
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