Contractors frequently rely on rental vehicles and employee-owned cars or trucks. Hired and non-owned auto liability can help address part of the business exposure created by vehicles the company does not own.
What is hired auto liability?
Hired auto liability may protect the business against certain covered liability claims arising from vehicles the company rents, leases, hires or borrows.
Examples can include:
- Renting a pickup truck while a company vehicle is being repaired
- Renting a van for a temporary project
- Renting a vehicle during out-of-town work
- Short-term rental of a vehicle for company errands
The policy definition of a hired auto controls. Vehicles leased or furnished for extended periods may need to be scheduled on a commercial auto policy instead.
What is non-owned auto liability?
Non-owned auto liability may protect the business against certain covered liability claims arising when vehicles the company does not own, hire or borrow are used for business.
The most common example is an employee using a personal vehicle for a company errand.
Contractor examples can include an employee:
- Picking up materials from a supplier
- Traveling between jobsites
- Delivering plans, permits or documents
- Visiting a customer to prepare an estimate
- Taking deposits or paperwork to the office
- Driving to a required training or project meeting
An employee uses a personal pickup truck to collect materials for a project and causes an accident. The employee’s personal insurer may address the driver’s personal auto liability, but the injured party may also bring a claim against the contracting business. Non-owned auto liability may help protect the business, subject to the policy.
What hired and non-owned auto generally protects
The coverage generally focuses on the business’s liability to other parties. Depending on the policy and circumstances, this may involve covered claims for:
- Bodily injury to another person
- Damage to another party’s vehicle or property
- Legal defense of the insured business
- Settlements or judgments within applicable limits
Coverage remains subject to definitions, exclusions, limits, conditions and the specific facts of the accident.
What it generally does not replace
Hired and non-owned auto liability is not a replacement for all vehicle insurance.
- It generally does not replace the vehicle owner’s personal auto insurance.
- It does not replace commercial auto insurance for vehicles owned by the business.
- It may not protect the employee or vehicle owner in every circumstance.
- It does not automatically cover physical damage to the hired or non-owned vehicle.
- It does not automatically cover tools, materials or equipment inside the vehicle.
Physical damage to a rented vehicle
Hired auto liability and physical damage to a rented vehicle are separate issues. If a contractor damages a rental vehicle, liability coverage alone may not pay to repair that vehicle.
Depending on the available program, hired auto physical damage may be added or addressed separately. A rental company may also offer a damage waiver, but the terms and exclusions should be reviewed.
Before renting a vehicle, determine:
- Who is signing the rental agreement
- Which drivers are authorized
- Whether the business policy includes hired auto liability
- Whether hired auto physical damage is included
- Whether a rental damage waiver will be purchased
- Whether loss-of-use or diminished-value charges are addressed
Tools and materials inside a vehicle
Auto liability and physical damage coverage generally do not replace inland marine coverage for tools, equipment or materials carried in a work vehicle.
Contractors should separately consider tools and equipment coverage and review our guide to tools stored in work trucks .
Businesses without company-owned vehicles
A contractor can have auto liability exposure even when the business owns no vehicles. If owners or employees use personal vehicles for company business, non-owned auto liability may be important.
Depending on eligibility and market availability, hired and non-owned auto may be added to a business owners policy, package policy or other insurance arrangement.
The absence of business-owned vehicles should be disclosed clearly. The insurer may ask how employees travel, deliver materials or visit jobsites.
Businesses that already have commercial auto insurance
A contractor with scheduled company vehicles may still have hired and non-owned auto exposure. Commercial auto coverage symbols and endorsements determine which types of autos are covered.
The policy should be reviewed to determine whether it addresses:
- Owned autos
- Hired autos
- Non-owned autos
- Trailers
- Newly acquired vehicles
- Temporary substitute vehicles
Learn more about commercial auto insurance for contractors .
Regularly furnished vehicles
A vehicle regularly furnished or available to an owner or employee may not fit the intended use of hired or non-owned auto coverage. Examples can include a long-term leased vehicle or a vehicle supplied by another business for ongoing use.
These arrangements should be disclosed to the insurance agent. The vehicle may need to be scheduled or addressed through another policy structure.
Employee personal auto insurance
Employees using personal vehicles for company business should maintain appropriate personal auto insurance and disclose the vehicle’s use accurately to their insurer.
Employers may also establish procedures requiring employees who drive for business to provide evidence of insurance and maintain minimum liability limits.
Non-owned auto coverage generally protects the business’s interest; it should not be presented to employees as a substitute for their own insurance.
Driver controls still matter
The company can face liability even when an employee uses a personal vehicle. Contractors should apply sensible driver controls to anyone operating a vehicle for company business.
- Verify valid driver’s licenses
- Review motor vehicle records when appropriate
- Establish acceptable driving standards
- Prohibit distracted and impaired driving
- Require seat-belt use
- Limit driving to authorized business purposes
- Document personal vehicle insurance requirements
- Review accidents and violations consistently
Delivery and frequent driving operations
Occasional errands are different from frequent delivery or regular transportation operations. Contractors should disclose how often employees use personal vehicles and what those trips involve.
Frequent delivery, hauling, passenger transportation or the movement of hazardous materials may require a more specialized commercial auto solution.
Contract requirements and umbrella coverage
Customers and project owners may require commercial auto liability with specified limits. An umbrella may also require underlying hired and non-owned auto coverage before it will extend over that exposure.
Send the complete written insurance requirement to the agency. Requirements should be compared against the actual policy—not only a certificate.
Information needed for a quote
Hired and non-owned auto underwriting depends on how vehicles are used and how the company manages drivers.
- Whether the business owns any vehicles
- Current commercial auto or package policy
- Number of employees using personal vehicles
- Frequency and purpose of business trips
- Estimated annual mileage
- Geographic operating radius
- Minimum personal auto limits required of employees
- Driver-screening procedures
- Types and frequency of rented vehicles
- Typical rental duration
- Prior auto-related claims
- Requested liability limits
If your business rents vehicles or anyone uses a personal vehicle for company work, hired and non-owned auto liability deserves a specific review. Do not assume general liability or the driver’s personal policy fully protects the business.