If you’re a business owner or general contractor with a fairly big company, you may well own a fleet of vehicles for you and your employees to use on the job. If so, your auto policy most likely applies to all your owned vehicles, with fairly comprehensive coverage. But, when your business is smaller and corporate vehicles are not a budget line item, Non-ownership Liability or Hired Auto Coverage could be the right fit for you—especially if you have a big project on the books.
Here, Builders Mutual experts Angel Lewis, middle market underwriter, and Tyler Abbott, commercial claims adjuster, define Non-ownership Liability and Hired Auto Coverage and explain when and why these policies make sense.
Employee vehicles for business use
Non-ownership Liability covers employees using their own vehicles for business purposes. For instance, if you need your framer to use his pickup truck for a project supply run, this would be a typical covered use. If that employee is using his/her own vehicle for a work-related purpose and an incident occurs, that claim will be covered under Non-ownership Liability.
This is specific to employees only—not the named insured or subcontractors. The vehicle use must take place during the course of their employment and must be a “voluntary” use. This coverage is not for the boss (or anyone else on the job-site) “borrowing” a vehicle for the job. Moreover, Non-ownership Liability is just liability. In other words, the policy covers damage done to another person or property if your employee is found liable. Damage done to their own vehicle would fall under their own personal auto insurance policy.
Covering more than you own
Hired Auto Coverage is broad coverage for when you use hired, loaned, leased, or furnished vehicles for less than six months. (More than six months requires the vehicle(s) to be scheduled on your policy.) But the vehicles in this case have to be under an actual contract—a verbal agreement is not valid. And this policy doesn’t cover an auto that is rented, borrowed, or leased from employees, business partners, or members of your household. If an incident occurs when “borrowing” a vehicle, it would fall under the driver’s own auto insurance.
This is a fairly common scenario for small- and mid-sized companies, so this coverage is ideal when you tend to rent vehicles for various purposes amid different projects. A good example would be renting a dump truck to move material to and from a project for a couple of months.
Hired Auto allows for liability plus physical coverage up to $50,000. (Note that the physical coverage is only good for 30 consecutive days of use for collision and comprehensive.) Good news: With this coverage, you do not have to take out the rental company’s insurance, which is typically very costly.
An additional auto enhancement that’s associated with Hired Auto Coverage is Employee Hired Auto. This enhancement allows your employee to rent a vehicle (with a contract) under his or her name for business purposes.
A good defense
One of the key aspects of solid liability coverage, especially with regard to these policy enhancements, is the legal defense it provides. When liability coverage is triggered, the attorneys’ fees (which can be steep) for the case fall under the policy.
The bottom line is to know your policy and be aware of what types of coverage and enhancements are available. Talk with your agent about the type of vehicles you own, use, and/or lease. He or she will help you decide the best plan of action for your policy.