Emerging Business Insights
Protect Your Business and Employees From Costly Auto Claims
FEBRUARY 4, 2025
Even if a company does not own any vehicles, it can have automobile liability exposures. Business auto policies frequently have coverage gaps, which can result in uncovered claims for use of vehicles not owned by the company.
Assessing how your company and employees use vehicles — whether company-owned, personal, or belonging to a third party — can uncover costly gaps in insurance. Once these exposures are identified, they can be addressed with specific coverages meant to protect your business and employees in the event they’re held liable for auto accidents.
The Benefits of Hired and Non-Owned Auto Coverage
Auto liability exposures vary depending on the nature of the business. Driving activities may be limited, such as when an employee uses their personal vehicle to run a quick errand for the business; or they may be extensive, such as when they use their personal vehicle on sales and service calls.
Many companies don’t recognize they have significant exposure to uncovered losses when employees use a hired or non-company-owned vehicle for work purposes.
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A “hired” vehicle is hired, rented, short-term leased, or borrowed by the named insured (the business). |
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“Non-owned” autos are vehicles owned by employees, volunteers, or others (rather than the business) that are used for company-related driving activities. |
Hired auto coverage can be structured to provide liability protection (e.g., claims for bodily injury and property damage suffered by a third party) as well as comprehensive and collision coverage. Non-owned auto coverage provides only liability protection.
Here are two claim scenarios that illustrate the value of this coverage.
At the request of his supervisor, Nick drives a company-rented box truck to a supplier to pick up parts. While en route, he hits a tow truck operator who was assisting a driver of a disabled vehicle on the side of the road.
The injured tow truck operator files a lawsuit against Nick and his employer. Nick’s employer is found to be 100% liable for the accident. Since the employer has hired auto liability coverage on its business auto policy, the insurance company settles the claim for $690,000. Without hired auto liability coverage in place, Nick’s company would have had no coverage, and the loss would need to be paid out of pocket.
Tabitha drives her own car to the bank to make daily business deposits. On her way back to the office, she runs a red light and causes a collision with another vehicle. Both vehicles are totaled, and the driver of the other vehicle suffers serious injuries.
The other driver hires an attorney and sues both Tabitha and her employer. Tabitha’s insurer pays $20,000, the limit on her policy. However, the total value of the claim exceeds $400,000. Since Tabitha had been driving for work purposes, her employer is held liable for the remaining damages. Without non-owned liability coverage in place, her employer would have to pay these costs out of pocket.
The Benefits of “Drive Other Car” Coverage
In some cases, employees who drive company-owned vehicles don’t have personal auto coverage because they don’t personally own any vehicles. Nevertheless, these employees can end up driving other non-company vehicles for personal use. Business auto coverage follows the vehicle, not the driver, and many companies aren’t aware of the potential uninsured exposure this creates.
The problem arises when these employees drive another person’s car, or they rent a vehicle for personal use such as while on vacation. Personal driving activities in non-company vehicles are not covered under business auto policies unless “drive other car” (DOC) coverage has been added to the policy. DOC coverage provides protection for liability, comp and collision, medical payments, and uninsured motorists.
Here’s a claim scenario that illustrates the protection provided via DOC coverage.
John owns a construction company and drives company vehicles insured on its business auto policy. He doesn’t carry a personal auto policy because he doesn’t own personal vehicles and believes the coverage provided by the business auto policy will cover him while driving a non-company owned vehicle.
John is staying with friends on vacation, borrows one of the friend’s cars to drive to the beach, and rear-ends a car at an intersection, injuring its passengers and damaging both vehicles. He is ultimately sued by the occupants of the other car.
The business auto policy carried by John’s company doesn’t include a DOC endorsement that names John as an insured, so coverage is denied when he files the claim, leaving him to pay more than $430,000 in damages out of pocket. If John’s business auto policy had included a DOC endorsement naming John as an insured, coverage would have been provided on this claim.
How USI Can Help
USI Insurance Services works with insured companies to:
- Evaluate all job functions that require driving
- Determine the company’s exposure regarding personal auto use and the company’s policy for employees to obtain adequate personal auto coverage
- Analyze potential exposure to personal auto use with hired or borrowed vehicles
In addition to the exposures discussed in this article, USI’s analysis of automobile liability can identify other opportunities to reduce uninsured exposures or create premium savings. To learn more about the risk management services available through USI, email select.business@usi.com.
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