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Understanding Non-owned Auto & Hired Auto Liability Insurance
Almost all General Liability policies have an element of “non-owned” and “hired auto” auto coverage. But does everyone, or anyone for that matter, truly understand the intricacies of that coverage?
First, you must ask yourself how many corporations have employees that jump in their cars to “run an errand” on behalf of their company (non-owned auto) or rent a car for business purposes (hired auto). I’m sure your answer will be that almost all corporations will find themselves in a similar situation at some point. The reality remains that most won’t suffer any accident during those times, but if indeed they do, what protects the company from liability once the injured parties realize the driver was on business duty?
The non-owned and hired auto liability coverage will kick in if there is an accident and your company is found legally liable. Typically, an employee’s personal automobile insurance will provide primary insurance to both the employee and the business if the employee is using his or her own vehicle on company business. But what if the auto is not insured for business purposes and the employee breaches the coverage? There is also a chance that the damages will exceed the employee’s policy limit. In each of these scenarios, the responsibility could very well be passed onto the organization.
Another scenario to discuss is the “frolic of the employee’s own”, in other words the situation where the employee is on a business trip but decides to take a couple extra days to visit Aunt Betty who lives in the area. Or let’s say the employee is attending a convention and they have a free night to go sightseeing. These would not be considered a business related event and thus the non-owned and hired auto liability protection for the company would not kick in should there be an accident.
Under the General Liability policy, one must be very careful with the wording within the clause relating to non-owned and hired auto liability. Firstly, let’s be clear: the non-owned auto liability coverage is there to protect the corporation and there are some key points to consider when placing this type of insurance to make sure it fulfill its purpose.
Typically, the following issues result from the common and usual wording:
- Under “Non-Owned Autos”, the Additional Insured clause does not allow for the officers, employees etc. to rent a vehicle in their name.
- Under “Non-Owned Autos”, the Additional Insured clause does not allow for incidental personal use.
- Under “Hired Autos Defined”, the clause must be written in the Company’s name and does not allow for incidental personal use.
Have a good look at the wording to make sure these clauses are addressed to suit your needs.