This is a guest post by Geoff Gordon, principal at Gordon Insurance Agency, a Renaissance Alliance member agency. It is a post that was previously featured on Geoff Gordan's Commercial Insurance Blog.
This coverage is used to provide liability protection for autos used in your business that are not owned, leased, hired, rented or borrowed by the business. This includes autos of employees and subcontractors that are used on your business's behalf.
Here's an example. A salesperson is on his or her way to an appointment. They drive their own car, not a company car. But on the way to the appointment there's an accident. Somebody was hurt, and the employee was at fault.
Whether your employee has lots of personal insurance or not, the chance of the business being dragged into the lawsuit that is bound to follow is high. Even if you had checked your salesperson's personal auto insurance, but especially if they don't have high limits, the business is probably going to be sued.
Non-owned auto liability is the name of the insurance that will defend the business.
You don't need a fast driving salesperson to need this coverage: in our business there are no company cars. The president drives a personal vehicle, as does every employee. Thus it is for when employees are out there doing bank runs, picking up mail, dropping off papers to customers and other business tasks, while using their own cars and trucks. That is, in non-employer owned vehicles.
Because employees really are your business, and especially while they're driving on business, their driving can be your risk.
Hired Automobile Coverage is its cousin. This coverage is used to protect against liability claims arising out of the use of vehicles leased, hired, rented or borrowed by you, or your employees, while in the course of business. Bear in mind this is liability coverage, and distinct from coverage for damage to the rented or leased vehicle itself. (That is called hired and non-owned physical damage).
This coverage is generally included on a business auto policy when there are company-owned vehicles, but it can be added to most 'package' policies when no business auto policy exists. It is not needed for sole proprietor business owners with no employees, because the business owner is the vehicle owner, and there are no non-owned vehicles.
This coverage is commercial insurance and not available on a personal auto policy. The cost runs from $50 to $125 annually, depending on limits, number of employees, and whether it's part of a business auto policy or a package.
For more on arranging your insurance so that the little things aren't lost in the details, contact your independent agent!