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Breaking Down Hired & Non-Owned Auto Liability

February 29, 2024 Lisa Vranich

Hired and Non-Owned Auto Liability (HNOA) is crucial coverage for any company. It responds to third-party bodily injury and property damage claims filed against your company resulting from an accident caused by a vehicle you HIRED or a vehicle that your company does NOT OWN. This is an exposure that all businesses have if their employees rent cars, hire an Uber/Lyft while on company business, or if employees use their own vehicles while conducting company business.

What if your employee rents a car at the airport while on a business trip and gets into an accident while leaving the airport? The accident severely injures another driver and totals that driver's car, resulting in a third-party bodily injury and property damage claim against your company for $350,000. Imagine if one of your employees takes a client to dinner in their own car, and after several rounds of drinks at the bar, they drive the client back to the hotel and get into an accident, which leaves the client with devastating injuries. Your employee, acting on your company's behalf, is named in a multi-million-dollar third-party bodily injury suit. While not common, these situations highlight the need for a company to secure Hired & Non-Owned Auto Liability coverage to protect their business.

A common and logical question posed by Freight Brokers is whether their HNOA policy will cover the third-party liability exposure that exists when hiring a Motor Carrier. After all, their entire business model revolves around HIRING motor carriers to move freight on trucks that the Freight Broker DOES NOT OWN. The reality is that the intent of the HNOA policy is to cover incidental third-party exposure and conversely, hiring motor carriers is the focus of a Broker's business. To properly protect themselves, it is essential that Freight Brokers additionally procure a comprehensive Contingent Auto Liability policy to address the exposure associated with hiring Motor Carriers.

So how does a Freight Broker know if their HNOA Auto policy will or will not respond to third-party claims that stem from hiring a motor carrier? Check your policy for these three clues:

number 1 in circleWhat is your Cost of Hire?
Hired Auto Liability premium is typically based on a company's annual Cost of Hire, which is the annual amount your business expects to spend on "hiring" rental cars, Taxis/Ubers, etc. If your policy indicates that your "Cost of Hire" is only a couple of thousand dollars (and not the full amount you pay for hiring motor carriers annually) and your premium is only a few hundred dollars, then it is safe to say that your policy will not pick up the motor carrier exposure.

number 2 in a circle If Any?
Some policies may show the words "If Any" under the Cost of Hire which means that the hiring exposure is very minimal. Your policy may even have verbiage that indicates that "Cost of Hire" does not include charges for services provided by Motor Carriers. Be sure to look for this in the fine print.

Picture4Symbol 10
Check your HNOA policy to see what symbols are used. In Auto policies, symbols are used to designate certain types of Auto coverage. Instead of the standard Symbols 8 (for Hired) and 9 (for Non-Owned), some insurance companies may use a custom Symbol 10. This modified symbol may clearly define that a Hired or Non-Owned Auto coverage only extends to passenger vehicles under a certain gross vehicle weight, which would preclude any exposure of hiring a Motor Carrier.

Protecting your company from third-party bodily injury and property damage claims is important. It is equally important to ensure that you have the appropriate policies in place for your specific business activity to minimize your exposure and eliminate surprises.

Take the time to break down your policies to safeguard your business from claims that could break your bank.

Contact Avalon today if you would like to review your HNOA and Contingent Auto Liability coverages.

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The Quest Newsletter is designed to provide critical information in the transportation industry. Avalon Risk Management is not responsible for the accuracy or reliability of information contained in articles. The reader/user assumes all risk in the use of such information.