Commercial Auto Insurance - Employer Non-Owned Car Liability Coverage

liability auto insurance

Protection When Your Employees Use Their Own Vehicles

Your business needs commercial auto coverage as a part of its business insurance plan if it operates any vehicles. Even if you operate a small business and your vehicle doubles as the "business vehicle," commercial auto coverage or a very close reading of your personal insurance policy is necessary. In most cases, your personal auto policy will not cover a loss when the vehicle is being used for business purposes.

Businesses often have employees operate their own vehicles for company purposes. This can happen on a regular basis. The secretary making a run up to the store for supplies. Perhaps a salesman running a sales call or a delivery to a client. When the employees make use of their own auto for work purposes, these are "non-owned" vehicles. These vehicles are not on the scheduled list of automobiles covered by your business insurance. Your commercial auto policy will not cover an accident and their personal policy will deny coverage because the vehicle was being used for business purposes.

Frequently, businesses and owners are under the impression that it is possible to leave it up to the employee to purchase insurance for the vehicle. Remember, however, a personal auto insurance policy and commercial auto business insurance are two different types of coverage and the employee's personal policy may not cover a loss when the vehicle is used for commercial purposes.

It may also be the case that the employee is driving uninsured without the employer's knowledge.

This can lead to uncovered liability for the business.

Without getting into deep legal theory, employers have what is called "respondeat superior" liability for the negligence of their employees. When an employee causes an accident that injures and/or causes property damage, the employer can be held liable. Many small business people I counsel fail to recognize this liability in the context of employee vehicles. One pizza shop owner believed that his business was "safer" if he just required delivery drivers to use their own vehicle. This is where working with a good, local, insurance professional could clarify potential risks and analyze the business as it operated.

Your business insurance can include in its commercial auto coverage employer non-owned auto liability coverage. Some commercial auto products include this coverage as a part of the policy (called ISO 9). However, in recent years a number of court decisions have led insurers to limit this coverage or to require it to be purchased as a rider or endorsement. When choosing commercial auto insurance selecting a good insurer with broad based coverage including this coverage can save money. Whether included in the business insurance policy or purchased as additional coverage -- it is critical coverage if your employees might use their vehicles for work.

Using an example is the best way to explain the coverage. You are on a job site and send an employee to a supplier to pick up a needed part. On the way, the employee hits a pedestrian. The pedestrian is injured with $50,000 in medical bills, lost wages, pain and suffering. Since the employee was driving for a business purpose, their insurer denies coverage. Your business has non-owned auto liability coverage and the $50,000 loss is covered. Had that coverage not been in place the employee would be uninsured (and probably uncollectible) and the damages would be sought from your business by the injured pedestrian.

What about the case when a vehicle breaks down and a replacement is leased or an additional vehicle is needed and the business rents a vehicle? These "non-owned" vehicles are typically covered automatically under the business' commercial auto liability policy. You need to read and review your commercial auto policy language. Most insurers recognize that a replacement vehicle put into fleet service by the company carries much less risk than relying on the employee's personal vehicle and include such coverage, but check with your insurance professional.

This coverage is typically added at relatively low cost and is a critical addition to your commercial auto policy.

liability auto insurance