The importance of non-owned auto insurance liability coverage

Non-Owned Auto Liability Coverage is an extremely valuable coverage for franchise businesses. Even though your franchise may not have any vehicles titled in its name, Non-owned Auto Liability Insurance provides coverage to your business for employees that drive while on company time. This becomes vital in the event that an employee is involved in an accident using a personal vehicle (theirs or yours) while on company business and severely injures another party.  In that case, your business and the individual can both be at significant risk.

Examples of employees driving their own car can include:

• Going to the Post Office, bank, or other errand for business purposes
  
  
• Traveling to and from a company meeting
  
  
• Driving a client to or from an appointment
  
  
• Making a delivery to a customer
  
  
• Driving to another franchise location

While the employee’s personal auto liability coverage would respond first, if that employee has insignificant limits and/or the other party sues, you can be certain that you are putting your business at risk. Non-owned auto would provide coverage for your business in this situation. This would also be the same for you, as the owner, if you have your autos listed personally and were involved in an accident. Plaintiff attorneys today are more aggressively going after the businesses of which the autos were used.

When employees use their personal vehicles for company business, there are a few risk management best practices you should follow:

• Insurance Coverage: Require that those employees maintain minimum levels of automobile liability insurance. Consult your state requirement and/or your insurance provider for minimum or recommended limits in your geographic area. Employees should provide the employer with a certificate of insurance at least annually. The certificate should indicate the period of coverage as well as the individual’s limits of liability. Maintain a copy of the certificate.
  
  
• Establish Driver Qualification Standards: You should establish guidelines around acceptable motor vehicle records (MVR) that employees need to meet in order to drive on company business. All employees that might use personal vehicles on company business should have a periodic review of their MVR record, at least annually, to determine eligibility. As the business owner, you open yourself up to “negligent entrustment” (being held liable due to your negligence in allowing an employee to drive) should you allow an employee with a substandard MVR to drive, or run an errand, while on company business.

For more information on Non-owned Auto Insurance Liability Coverage for your franchise business, or to discuss your insurance program, please contact your Marsh & McLennan Agency Franchise Client Specialist.