What Is Hired and Non-Owned Auto Coverage?

Businesses face various risks, and managing vehicle-related exposures can be intricate. Standard commercial auto insurance policies cover vehicles owned by the business, but leave gaps when other types of vehicles are used for company activities. Specialized coverages address these unique situations, ensuring a business is protected regardless of who owns the vehicle.

Understanding Hired Auto Coverage

Hired auto coverage protects vehicles a business rents, leases, or borrows for short durations. This coverage extends the business’s liability protection to these temporary vehicles. For example, if a company rents a car for an employee’s business trip or leases a van for a short-term project, hired auto coverage applies.

This coverage addresses the business’s liability from accidents involving vehicles it temporarily acquires. While rental companies may offer basic liability insurance, it often has limitations. Hired auto coverage fills these gaps, protecting the business against claims for bodily injury or property damage to third parties caused by the rented vehicle. This protection is distinct from physical damage coverage, which protects the rented vehicle itself.

Understanding Non-Owned Auto Coverage

Non-owned auto coverage addresses situations where vehicles not owned by the business are used for business activities. The most common scenario involves employees using their personal vehicles for work-related tasks, such as driving to client meetings or making deliveries. This coverage protects the business from liability claims if an accident occurs while an employee is using their personal vehicle for company business.

An employee’s personal auto insurance policy may not adequately cover accidents during business-related activities. A personal policy might deny a claim if it determines the vehicle was used for commercial purposes. Non-owned auto coverage protects the business from vicarious liability, which is the legal responsibility a business can have for its employees’ actions. The business could still be held liable for damages even if the employee was driving their own car.

Scenarios Requiring Coverage

Businesses often need hired and non-owned auto coverages to mitigate liability exposures. Consider a sales team renting vehicles for an industry conference. If one of these rented cars is involved in an accident causing injuries, hired auto coverage would protect the business from liability claims. Without this coverage, the business could face substantial financial repercussions.

Another common scenario involves an employee using their personal car to pick up office supplies or deliver documents. If this employee causes an accident while performing such a task, the business could be named in a lawsuit. Non-owned auto coverage would protect the business from the financial burden of legal defense and potential damages. Even volunteer organizations benefit from this coverage, as volunteers often use personal vehicles to transport people or goods.

Placement within Business Insurance

Hired and non-owned auto coverages are not standalone policies but are commonly added as endorsements or extensions to a business’s existing commercial auto or general liability insurance policy. This integration allows businesses to tailor coverage to their operational needs without purchasing separate policies. These endorsements fill specific gaps that standard business policies might leave open, particularly concerning vehicle-related liability exposures.

A commercial auto policy covers vehicles titled in the business’s name. However, it does not extend to temporarily hired vehicles or those personally owned by employees. Similarly, a general liability policy provides broad coverage for business risks but excludes liability from automobile use, especially those not owned by the business. By adding hired and non-owned auto endorsements, a business ensures a more comprehensive insurance strategy, addressing potential liabilities that would otherwise remain uninsured.