Auto Insurance When You Don’t Own Vehicles

When reviewing policies with new commercial clients, one question that often arises is: “Why does my policy include commercial auto coverage when my company doesn’t own any vehicles?” The answer is simple, even though most people don’t initially recognize the exposure: “Because there is a potential for claims against your business due to use of vehicles which you don’t own.”  Huh?

Yes, it’s true. If a vehicle is being operated as part of a business activity, whether it’s the owner running an errand in their own car, or an employee renting a vehicle on a business trip, the business itself can be held liable for bodily injury or property damage to a third party as a result of an auto accident.  On top of that, in our very litigious society, opportunistic attorneys often seek recovery from every possible source, regardless of whether those sources are culpable.  Therefore, it is imperative that every commercial insurance client have hired and non-owned auto liability coverage in place.

A perfect illustration of this exposure is an incident which actually happened to one of our clients, a pizza store franchisor. They have a number of franchisees (independent store owners that utilize the franchisor’s name and supply chain), which are bound by contract to follow company protocol in areas such as product, ingredients, store design, use of logo, and advertising.  However the franchisor (our client) has no control of the franchisees with regard to human resources and day-to-day operations.  One afternoon, an off-duty delivery driver hit and killed a pedestrian with her car.  Even though she was driving her own car, was not on the clock, and was an employee of a franchisee rather than our client, our client was among the parties sued for damages because their logo was on a sign affixed to her car.  Fortunately they had non-owned auto liability coverage in place, and their insurance company’s lawyers handled the settlement at no cost to our client.

So if you own a business, whether you have vehicles or not, make sure to check your policy to ensure that you have hired and non-owned auto liability coverage.