What Is Hired Auto Liability Insurance?

Hired auto liability insurance provides specific financial protection for businesses or individuals who use vehicles they do not own, but have rented, leased, or borrowed for business activities. This coverage is important for mitigating the financial risks that can arise from accidents involving such vehicles. Without this specialized insurance, a business could face substantial financial burdens from damages or injuries caused by a vehicle it temporarily uses.

Understanding Hired Auto Liability

“Hired auto” refers to vehicles that a business or individual rents, leases, or borrows for business purposes. This includes vehicles obtained from rental agencies or those temporarily used under formal arrangements. It generally does not include vehicles leased, hired, rented, or borrowed from an employee, partner, or household member.

The “liability” aspect of this insurance addresses the financial responsibility for damages or injuries caused to other parties. If an accident occurs while operating a hired vehicle for business, and your business is found at fault, hired auto liability coverage can help manage the resulting legal and financial costs.

What Hired Auto Liability Covers

Hired auto liability insurance covers financial obligations if a business or its employees cause an accident while operating a rented, leased, or borrowed vehicle for business. This policy typically pays for bodily injury to third parties, such as medical expenses or lost wages. It also covers property damage to third-party assets, including repairs or replacement.

This coverage also extends to legal expenses, including defense and investigation costs. For example, if an employee driving a rented van for business causes an accident, the policy covers the costs of injuries to others or damage to their property.

However, hired auto liability does not cover physical damage to the hired vehicle itself. Coverage for damage to the rental car, such as from a collision or other perils, requires separate protection, often referred to as hired auto physical damage or collision/comprehensive coverage, which can be purchased through the rental company or as an endorsement to a commercial policy. This liability insurance does not cover injuries to the driver or occupants of the hired vehicle, nor personal property stolen from the vehicle.

Applicability and Common Scenarios

Hired auto liability coverage is relevant for a wide range of businesses, from small enterprises to larger corporations, as well as individuals who use non-owned vehicles for business purposes. This includes situations where employees rent cars for business travel, such as client visits or conferences.

Another common scenario involves a company leasing a vehicle for temporary use, like a van for a short-term project or a truck for a specific delivery. While not strictly “hired auto,” employees using their personal vehicles for company business, such as running errands or making deliveries, also create a liability exposure for the business, often addressed through a related coverage called non-owned auto liability. The defining factor for needing this type of coverage is the vehicle’s use for business-related activities, distinguishing it from personal use.

Hired Auto Liability and Other Auto Insurance Policies

Hired auto liability insurance differs from and complements other common types of auto insurance. It is distinct from “owned auto liability,” which covers vehicles titled and owned by the policyholder’s business. While commercial auto insurance covers vehicles registered under a business’s name, it generally does not extend to vehicles not owned by the company, even if used for business.

Hired auto liability is often discussed alongside “non-owned auto liability,” and together they are sometimes referred to as Hired and Non-Owned Auto (HNOA) coverage. In contrast, non-owned auto liability typically covers liability arising from employees using their personal vehicles for company business, such as running errands or making deliveries.

Personal auto insurance policies typically contain exclusions for business use, meaning they may not cover accidents that occur while a personal vehicle is being used for commercial activities. This exclusion highlights why specialized coverage like hired auto liability is necessary, as it fills a significant gap where personal policies would deny coverage. HNOA coverage often acts as excess coverage, meaning it applies after the employee’s personal auto policy limits are exhausted or if the employee lacks coverage.