Hired and nonowned auto liability insurance protects a business when vehicles it does not own are used for business purposes. It applies in two situations. Hired autos are vehicles a business rents, leases, or borrows. Nonowned autos are personally owned vehicles used by employees or others on behalf of the business. If there is an accident while those vehicles are being used for company business, the business can be held legally liable. This coverage steps in to protect the company.
Many businesses assume they do not need any auto insurance if they do not own vehicles. That is not the case. Anytime an employee uses a personal vehicle to run errands, visit a client, make deliveries, or travel on behalf of the company, the business is exposed to liability. The individual’s personal auto insurance is meant to protect the vehicle owner, not the company. If a lawsuit arises from the accident, the injured party’s attorney will likely include both the employee and the business in the claim. Without hired and nonowned auto coverage, the business may have no insurance protection.
Hired auto liability is important when your business rents a car for a meeting, training session, event, or temporary need. Rental car companies typically offer liability coverage at the counter, but it is often expensive and may not provide adequate limits. A business auto policy with hired auto liability provides broader coverage, often with higher liability limits, and applies automatically when the vehicle is rented for business use by authorized personnel.
Nonowned auto liability is triggered when an employee or owner uses their own car for business. Even simple tasks, such as going to the post office, picking up supplies, or visiting a customer, fall under business use. If the employee causes an accident, their insurance may respond first, but if the damages exceed their coverage limits, or if their insurer denies the claim because it involved business use, the injured party may pursue the business. Nonowned auto liability protection is designed specifically for that scenario.
This coverage does not pay to repair or replace the rented or employee-owned vehicle. It is liability coverage only, designed to protect the business if it is sued for bodily injury or property damage resulting from an auto accident involving a hired or nonowned vehicle being used for business purposes.
In today’s legal environment, businesses of all sizes face greater scrutiny in auto-related claims, even when they do not own vehicles. Courts and insurers look at whether the employee was acting on behalf of the employer, and if so, the employer is often pulled into the claim under the doctrine of vicarious liability. Hired and nonowned auto liability coverage is an affordable way to protect your business. It closes a common coverage gap and helps avoid potentially significant out-of-pocket defense and settlement costs.
In short, nearly any business can benefit from hired and nonowned auto liability coverage, especially if employees drive their own vehicles for business or if the company rents cars from time to time. It is a simple but important addition to your general liability or business auto policy and an essential layer of protection against unexpected lawsuits arising from auto use the business does not directly control.
