Commercial auto insurance provides coverage for vehicles that your business owns. Unless specifically requested, it may not provide coverage for vehicles that your business doesn’t own but are used in connection with your business. The reality is that many businesses regularly use vehicles they don’t own – these are hired or non-owned vehicles.
What are Hired or Non-Owned Vehicles?
Vehicles that are used by your business but not owned by your business are generally referred to as ‘hired and non-owned’ autos.
- Hired autos are vehicles that the business leases, hires, rents or borrows for business purposes.
- Non-owned autos are vehicles that your business does not own, lease, hire, rent or borrow, but are used in connection with your business.
Some typical examples of non-owned vehicle usage are employees driving their personal vehicles to make food deliveries to your customers, dropping off bank deposits, or running various other errands all in connection with your business.
Some business owners don’t realize that the business can be held liable for a non-owned vehicle crash that happens in connection with the business. Hired and non-owned insurance does not pay for physical damage to hired or non-owned vehicles, so if your business is using hired and non-owned vehicles, it’s very important to work with your insurance agent to make sure that the proper insurance coverages are in place for your business.
Create Auto Fleet Safety Controls
Protect your business by ensuring that the proper fleet safety controls and best practices are in place for both your drivers and hired and non-owned vehicles.
Some basic fleet safety controls and best practices for all drivers of all vehicles used in connection with your business include:
Valid Driver Licenses
All drivers of vehicles used in connection with the business should have a valid driver license for all types of vehicles they will drive. A copy of the driver license should be obtained for each employee’s file at hire and/or initial assignment as a driver.
Motor Vehicle Records (MVRs)
To identify persons with poor driving records in your company, MVRs covering the last 5 years should be obtained for all drivers at least annually and prior to employment or assignment for all new driver applicants, and these records should be retained in the driver’s employment files.
Your company should carefully examine these records, and not permit drivers with poor driving records to drive any vehicles in connection with the business. Talk to your insurance agent about appropriate MVR screening criteria.
In addition to driver licenses and MVRs, you should have the following basic fleet safety controls and best practices in place for hired and non-owned vehicles that are used in connection with the business:
Certificates of Automobile Insurance
Certificates of automobile insurance should be obtained, reviewed and verified for all drivers who use personal vehicles for company business at least once every six months (many drivers have six-month policy terms). These drivers should be asked to obtain automobile liability limits as recommended by your insurance agent.
Since the non-owned drivers’ automobile limits are primary coverage for the vehicle and driver, it’s important to have adequate and sufficient coverage limits to help protect your business if there is a crash involving a non-owned auto that is being used in connection with the business. Talk with your insurance agent about determining the appropriate automobile liability limits for your business.
Business Use Exclusions
Review your drivers’ personal automobile insurance policies for business-use exclusions. It’s very important that the personal automobile insurance policies for all non-owned vehicles allow for business use, as applicable to how that personally-owned auto will be used in connection with your business.
If there are business-use exclusions, request that those exclusions be removed from the policy or the policy may need to be endorsed to allow for business use. Some personal automobile insurance carriers may not allow business use at all and if that is the case, the non-owned driver may need to obtain a policy from a different insurance carrier. Talk to your insurance agent about this very important aspect of using non-owned vehicles in connection with your business.
Additional Resource: The Network of Employers for Traffic Safety (NETS) has published some very helpful fleet safety best practices in their Comprehensive Guide to Road Safety.
Protect Your Business, Employees and Assets with Society Insurance
Properly implementing fleet safety controls and best practices for owned, hired, and non-owned vehicles is a very important part of managing your business risk. Contact your local Society Insurance agent to learn more.