Hired or Borrowed Auto – Coverage for Temporary Vehicles
In plain language: Hired or borrowed auto insurance covers the business when its employees drive rented or borrowed cars for commercial purposes. This is especially relevant for businesses that do not own their own vehicles.
Technical definition: Hired or borrowed auto coverage is a feature typically found in commercial auto insurance policies. It extends the policy's liability protections to vehicles that the business does not own but are being used for the business, such as rented (hired) or borrowed vehicles. It is commonly seen in standard ISO business auto coverage forms and correlates with the symbols 8 (hired autos) and 9 (non-owned autos).
It's easy to assume that if an employee is using their own car for work purposes, their personal auto insurance will cover any accidents. But if that employee is doing something business-related and a collision occurs, the business could be held liable without proper coverage.
TL;DR
What Is Hired or Borrowed Auto in Insurance?
Hired or borrowed auto coverage is an essential component of a commercial auto insurance policy or can be included as an endorsement in a business owners policy (BOP). This coverage is specifically designed to protect businesses from liability arising from accidents that occur while an employee or someone on behalf of the business, is driving a rented, leased, or borrowed vehicle for business purposes.
This type of coverage fills the gap between a personal auto insurance policy, which typically excludes business use, and a commercial auto policy, which covers only company-owned vehicles. Hired and non-owned auto coverage steps in when your business has potential liabilities related to vehicles you or your employees use but do not own for business purposes.
This coverage is not limited to cars alone; it extends to vans, trucks, and other types of vehicles that your business may hire. Remember, this often varies by state and carrier; always check the specific policy form.
Key Related Terms to Know
Common Questions About Hired or Borrowed Auto
What is the difference between hired or borrowed auto and non-owned automobile liability?
Non-owned automobile liability covers vehicles that your employees own and use for business-related tasks. On the other hand, hired or borrowed auto insurance covers vehicles that your business rents or borrows for company use.
How does hired or borrowed auto coverage function within a business owners policy (BOP)?
Within a business owners policy (BOP), hired or borrowed auto coverage functions as an endorsement. This means it is an extra layer of protection businesses can add to their primary policy.
What does hired auto liability coverage actually cover?
Hired auto liability coverage provides insurance for rented or leased vehicles used for business purposes. It covers bodily injury, property damage, and legal defense costs related to such incidents.
Hired or Borrowed Auto vs. Owned Auto Insurance
Owned auto insurance covers business-owned vehicles, while hired or borrowed auto covers rented or leased vehicles.
Comparison Area | Hired or Borrowed Auto | Owned Auto Insurance
|
Primary use case | Covers rented or leased vehicles used for business purposes | Covers vehicles owned and used by the business |
Coverage / concept type | Liability protection for non-owned autos | Liability and potentially physical damage protection for owned autos |
Typical exclusions | Personal use of hired or borrowed vehicles | Certain high-risk activities, personal use exceeding stated limits |
Who is most affected by errors | Businesses with frequent rented or borrowed vehicles use | Businesses with owned vehicles |
Common mistakes | Assuming personal auto covers business use | Overlooking potential need for higher limits or additional coverage |
Real Claim Examples Involving Hired or Borrowed Auto
Scenario 1: An employee driving a rented van to deliver products ended up in a fender bender. The accident caused property damage and minor injuries to the other driver. Luckily, the company's hired or borrowed auto coverage covered the claim, saving the business significant costs and potential reputational damage.
Scenario 2: A manager used his personally-owned car to attend a business conference. On the way, he hit a pedestrian, resulting in serious injury. The employee's personal auto insurance denied coverage because he was on company business. But the company's non-owned auto coverage stepped in, protecting both the business and employee financially.
Scenario 3: An administrative assistant borrowed her husband’s car to pick up office supplies. On her return, she was involved in a car accident. The resulting property and bodily injuries were covered under the firm's hired and non-owned auto liability insurance.
Limitations and Common Mistakes
How to Explain Hired or Borrowed Auto to Clients
Personal Lines client "Hired or borrowed auto coverage is like an extra layer of protection for your business. If you or an employee has to rent or borrow a vehicle for work purposes, this helps make sure any potential bumps in the road are covered."
Small Business owner "Just as you'd insure your own business vehicles, it's important to have coverage for any cars or vans you might rent or borrow. This coverage takes care of that for you. It’s an addition to your standard policy that offers coverage if there’s an accident and your business is found liable."
CFO or Risk Manager "Adding a hired or borrowed auto endorsement to our commercial auto policy is a proactive step to mitigate the risk of unexpected liabilities related to non-owned vehicles. It provides us with peace of mind that our business is protected, regardless of whose vehicle is being used for company business."