Hired and Non-Owned Automobile Liability
Whether your organization rents or borrows a vehicle, or simply asks someone to drive on behalf of your organization, you create a liability exposure for your organization. If the vehicle is involved in an “at fault” accident, your organization can and most likely would be named in the lawsuit. Your organization’s Hired & Non-Owned automobile liability coverage is the type of liability insurance needed to protect your organization from lawsuits that may arise.
Hired and Non-Owned Automobile Liability is two-part coverage:
- The “Hired” part of the coverage refers to autos your organization leases, hires, rents, or borrows. The Hired part of the coverage does not include any autos your organization leases, hires, rents, or borrows from an employee or members.
- The “Non-Owned” part of this coverage is liability coverage for a vehicle that are owned by an individual or organization (other than your organization), but is used on the organization’s behalf. It is intended for those “incidental” accidents such as those that might occur when the pastor goes visit an organization member in the hospital or an organization employee goes to the bank. Non-Owned auto coverage protects your organization in the event your organization is sued as a result of an auto accident that you or an organization’s employee or volunteer has in a personal vehicle while on organization business. Although most commercial Non-Owned Automobile coverage’s do not protect the employee or volunteer personally, but many of JPA’s insurance companies that specialize in insuring organizations, will provide excess liability coverage after the vehicles own liability insurance limit is used up.
The line between when someone who is driving on behalf of the organization verses driving themselves or others to an organization’s sponsored activity can (and often does) get blurred. In most cases if someone is driving themselves and others to an organization sponsored activity, they will not be covered under your organization’s “Hired and Non-Owned Automobile Liability.” For example, let’s say two members that happen to be neighbors decide to drive to the church together in order to save gas they will not be covered under your organization’s “Hired and Non-Owned Automobile Liability.” The reason they are not covered is because they are driving themselves and others to the activity and not driving on behalf of your organization for the event or activity.
Another situation that comes up from time to time with non-profits (especially churches and schools) is when a person agrees to chaperon a youth activity (for example) at a local theme park. However instead of driving with the group and taking any other adult or children (other than his or her own kids) the person drives his or her own vehicle to the event. That would not be a “Hired and Non-Owned Automobile Liability” because “Hired and Non-Owned Automobile Liability” does not cover when a person is driving themselves to an event or activity. Since they are driving themselves and no one else at the request of the organization, the “Hired and Non-Owned Automobile Liability” would not apply if they were to get into an accident. If the person stops at a family member’s house (or anywhere not related to the event) and gets into the accident, that would not be covered under “Hired and Non-Owned Automobile Liability.” Another situation that comes up from time to time is when a person drives themselves to the activity but on the way back if they took some of the miner’s home in their vehicle, then the Hired and Non-Owned Automobile Liability coverage would apply excess of their own automobile insurance limits.
Whether a non-profit or religious organization owns an automobile or has people drive their own vehicles to off premises activities, all non-profits should have Hired & Non-Owned automobile liability coverage. The following is the minimum recommended limits for Hired and Non-Owned Automobile Liability:
- Each Occurrence $1,000,000
- Annual Aggregate $3,000,000
It is also prudent to consider getting an Umbrella (excess) Liability policy with a (at minimal) of $1 million limit.
There is also another part of the Hired and Non-Owned Liability coverage and that is the physical damage coverage for vehicles your organization rents. This is not automatically included unless we are aware that your organization typically rents vehicles. This can be added at any time. If your organization rents vehicles often and wants this coverage included, we typically would move the Hired and Non-Owned Automobile Liability coverage from your CPP and issue an Auto policy, even if your organization does not own a vehicle. The premium is based on how much your organization spends in a year’s time on rental vehicles. Since the premium is based on how much an organization spends on renting vehicles, I can only estimate the cost of adding physical damage.
However, while renting any vehicle it is important to know that certain things may not be covered. Most commercial policies (whether the coverage it is under the CPP or a Commercial Automobile policy) there is typically an exclusion for “Diminished Value” & “Loss of Use” on rental vehicles. The following provides a detail explanation of the typical exclusions:
- Diminished Value is defined as that portion of a damaged vehicle’s pre-Loss Value that has not been restored through the repair process. There are actually three (3) basic types of Diminished Value.
- Immediate Diminished Value is the difference in resale value of a vehicle immediately before damage has occurred and immediately after damage has occurred (prior to repair). Most jurisdictions (courts) will use this standard as the primary measure of damage when courts are employed to seek reimbursement for damage from a negligent party. As courts are rarely the chosen venue for recovery of property damage, the standard of “Immediate Diminished Value” is rarely employed in resolving Property Damage claims.
- Inherent Diminished Value assumes optimal repair quality has been achieved and is defined as the amount by which the resale value of a repaired vehicle has been reduced simply because the subject vehicle now has a significant damage history. “Inherent Diminished Value” is the most widely recognized and accepted form of Diminished Value. It is also the basis upon which any supplemental form of Diminished Value would be added. A common “Supplemental” form of Diminished Value is “Repair Related Diminished Value”.
- Repair Related Diminished Value includes any additional amounts by which the resale value of a subject vehicle may be further reduced because of less-than-optimal repairs. This could include anything from minor cosmetic imperfections to major structural defects.
- Loss of Use is a fee imposed by the rental car company on the customer to cover its lost income while the vehicle is out of commission from an accident even when the accident may not have been the customer’s fault.
That said, we have found a few options to cover the exclusions of “Diminished Value” & “Loss of Use”:
- Your organization can add Auto coverage Symbol # 8 to your organizations Commercial Auto Policy. However, many companies do not like to offer this option. The reason they hesitate to add this symbol (“option”) is because it is almost impossible to track whether or not it is used for legitimate business purposes. That said, it can be added and at very little cost if any at all. When looking at the Business Auto Coverage Form you will feel like the symbols on the policy may seem like trying to learn a new language. That said, each symbol represents the type of protection the vehicle (or vehicles) have on the policy. The symbols on a policy are broken up into two categories, “Liability” and “Physical Damage.”
- Liability Symbols: Most insurers that provide commercial auto coverage utilize the standard ISO Business Auto Policy (BAP). The policy utilizes a set of numbers to designate the types of autos you have elected to cover under your Commercial Automobile Policy. These numbers are called “covered auto designation symbols”
- Physical Damage Symbols: The Physical Damage Symbols (similar to the Liability Symbols) utilize the standard ISO set of numbers to designate the types of physical damage coverage an organization has under their Commercial Automobile Policy. It is in this section of the policy that shows what vehicles have collision and comprehensive coverage, towing etc….One such symbol (symbol # 8) “Hired“ Autos ” includes “only those autos you lease, hire, rent, or borrow” An automobile policy that has “Symbol- 8” under the Comprehensive and Collision section of the policy would have coverage for Comprehensive and Collision for Hired and Rented vehicles. Which means they would have “primary” coverage for Physical Damage for any leased or rented (Hired Cars) vehicles!
Adding Symbol # 8 onto a commercial auto policy is not easy. The reason is it is often difficult for the company to know if the coverage is being abused and used by employees and volunteers in situations that are not truly within the scope of their duties on behalf of the organization. However, we have written it for larger organizations like one national office we insure.
- We have found a pretty good way to be sure you are somewhat covered while renting vehicles and avoid some of the “gaps” that most commercial Hired and Non-Owned policies with regards to rental vehicles. By using an “American Express Gold Card” you can get coverage for most of the above-mentioned gaps in the Hired and Non-Owned coverage provided by your organizations policy. Please understand we do not represent American Express, but we have learned about this during our own business travel. When you use an American Express Gold card your organization can decline the collision damage waiver at the rental car counter, you can be covered if the car is damaged or stolen. Each organization should read the important exclusions and restrictions. Not all vehicle types or rentals are covered. I have learned that coverage is not available for vehicles rented in Australia, Ireland, Israel, Italy, Jamaica, and New Zealand. Your organization should contact American Express to get a better understanding and specific details of the coverage that the American Express Gold Card provides.
Whether an organization owns a vehicle or has employees and volunteers drive, your organization should be careful and use caution when choosing drivers. Your organization should establish specific guidelines for non-owned vehicles being used for your ministry. The following are some examples:
- Establish a list of drivers from your organization; ensuring only approved drivers operate vehicles. Most companies will only let drivers drive if they are between the ages of twenty-five to seventy.
- If a driver is under the age of twenty-five and is a minister or youth minister leader many companies will allow them to drive.
- No one over age seventy, unless they have a physical from a doctor and approved by the insurance companies Underwriting Department.
- Your organization should want drivers of 15-passenger vans, to take a training course specific to 15-passenger vans. Our office can provide information on how this can be done online free of charge.
- Carefully screen drivers to make sure they don’t have more than one minor moving violation in the past three years. Have them fill out a criminal or motor vehicle consent form and our office can do the MVR or Criminal record check for you for eight dollars per check.
- Confirm personal insurance coverage on drivers who use personal vehicles for organization business or activities. Coverage should be obtained with a minimum of $100,000 bodily injury per person/$300,000 bodily injury per accident with $100,000 physical damage coverage.
I hope this letter and the related fact sheets help clear up what is covered under Hired and non-Owned Automobile Liability. As a reminder, in most case Physical Damage coverage for rental vehicles is not automatically on most organization’s policy, so your organization needs to request it be added to your agent if you would like that coverage included in your insurance program.
Should you have any additional questions about Hired and non-Owned Automobile Liability or any other area of your organization’s insurance coverage, please feel free to contact our agency and we will be happy to assist you in any way we can!