There seems to be a lot of confusion around this, since some form of it appears in personal automobile insurance and commercial auto insurance. Many clients of mine are also unaware that they have this risk exposure and how big it really is.
Hired and non-owned automobile liability is a type of commercial automobile exposure that is distinct from the liability that might arise from owning or operating commercial-use vehicles. To put it simply, it covers you for third party liability claims arising out of the operation of “non-owned” automobiles (learn more in Auto Liability Insurance: How Much Is Enough?).
Now, you might be wondering what exactly constitutes a “non-owned” automobile. Well, in general, these vehicles fall under three categories:
- The vehicle is owned by an employee and is used for business purposes
- The vehicle is hired for business use (a rental or a lease)
- The vehicle is operated under contract for the insured
Persons insured under this policy include the named insured (of course) as well as any employees and directors or officers of the company when operating a non-owned vehicle (find out Who Is a Named Insured?).
In some situations this insurance is purchased as a standalone policy. But more often than not, it is endorsed onto a business’ regular commercial general liability policy.
As mentioned above, many business owners are not aware that they need this type of insurance. But in most jurisdictions, an employer is generally liable for the torts of their employees. That means that even if an employee commits a tort (gets into an accident) using their own vehicle while in the course of their duties, you might be exposed to liability.
Bear in mind that this insurance is only used in commercial contexts. If you’re looking for insurance that covers you for private rental vehicle liability (while on vacation, for example), you should look to upgrade your personal automobile insurance to a package that includes rental vehicles (to learn more about those options, see Is Rental Car Insurance Worth It?).