Nonowned and Hired Auto Liability for Nonprofit Organizations

Hired and nonowned auto liability is a confusing topic for a lot of business owners, not just nonprofits.

But human service nonprofits often have some additional risks that run of the mill main street businesses don’t.

Unique Exposure of Nonprofits to Nonowned or Hired Auto Liability Situations

Here are a few that jump to mind (feel free to add to the list on your own time):

  1. Volunteers driving their own cars
  2. Transporting children
  3. Transporting elderly
  4. Did I mention volunteers?
  5. The need to hire vehicles for special use or events (i.e. to pick up donated items or deliver donated items or for a special field trip or event)
  6. Route driving for donation pickup (by volunteers)

We could go on.  Simply put, nonprofits sometimes have additional driving concerns that regular businesses do not have.

What Is Hired and Nonowned Liability?

Let me define a couple terms.  When I speak to a client I almost feel eyes glaze over through the phone. I’ve learned that I can’t off-handedly toss out the term ‘hired and nonowned auto liability’ and expect someone to know what the heck I’m talking about.

Hired Auto Liability: This refers to liability derived from hiring, renting, or leasing a vehicle. I rent a car from Hertz, and thus assume a hired auto liability exposure.

Nonowned Auto Liability: This liability coverage refers to use of a vehicle that is NOT owned by your organization, but used by an employee or volunteer or anybody else doing work on behalf of your organization. The example is simply this: Your bookkeeper gets in his own vehicle and drives to the bank. That car is not owned by your nonprofit, but it’s being used for your business.

So, the incomplete shorthand is this:

Any car that is not registered and titled to your organization that is used to get work done for your organization is either a hired or a nonowned vehicle.

Car Wreck

An Example of a Nonowned Auto Claim Scenario

Let me explain how the insurance works by using my job as an example.

When I drive my vehicle to go visit a client, my car is a nonowned auto for my insurance agency.

Let’s suppose I cause an accident that results in roughly $1,000,000 in damages. The damaged persons sue both Brett Cohrs (who has personal auto liability limits of $500,000) and my insurance agency (who has a $1,000,000 hired/nonowned auto liability policy attached to their insurance package).  This is  how things should shake out:

  1. My personal insurance carrier would provide defense for me and and Hamby & Aloisio: It was my fault. My policy starts off.
  2. This would be defended up to the payment of my full policy limits of $500,000. At that point, my carrier is done. Good-bye.
  3. The Insurance Agency’s policy, with it’s nonowned auto liability coverage would defend The Insurance Agency Only if considered liable for any remaining damages of $500,000.
  4. If the court still considers me liable for any remaining damages, it’s time that I dip into my savings, sell my house, my baseball card collection, and start working some extra side jobs. Hamby’s poicy will not defend me or pay on my behalf on the basic auto policy that most organizations take out.

So, with the basic, unchanged commercial auto policy, an employee is NOT an insured when driving his or her personal car. If the car was rented by the employer/organization, then the employee would be covered. If the employee took the rental out himself, then he wouldn’t have coverage.  The devil truly is in the details.

What Hired and Nonowned Auto Liability Intends to Provide: Excess Liability

The nonowned and hired auto liability coverage is intended to act as an excess policy over a driver’s personal auto liability.In other words, it provides some additional liability limits over any policy that is in place already.

If it’s a hired vehicle and the rental car liability coverage was purchased, the hired auto liability would respond after that liability coverage was exhausted.

Is all of that as clear as mud?

What Should You Do Now?

Let’s just put it this way: If you are a business and people EVER drive their own cars on your behalf, you need to have hired and nonowned liability on your policy. You cannot control the insurance coverage one of your employees or volunteers has in place. And you cannot predict the severity of a potential auto accident.

In order to better protect your nonprofit, you should discuss these liability options with your agent.

I’ve seen costs as low as $150 to add this policy annually. Typically, it ranges between $150 and $500-600 to have the $1,000,000 limits. 

If you’re a nonprofit manager, it would make sense to have this policy quoted and presented to your Board of Directors to discuss. It’s a very inexpensive source for $1,000,000 in coverage should an employee or volunteer cause an accident while driving a car that your nonprofit does not own.

Questions and risk management checklist:

  1. Does your nonprofit allow employees and volunteers to drive their own car on your behalf?
  2. Do you ever rent vehicles?
  3. Do you require your employees and volunteers to provide proof of personal insurance?
  4. Do you require those personal liability limits to be at least $100,000/$300,000?
  5. What would happen if a large auto claim caused by your employee or volunteer resulted in a settlement demand on your organization?
  6. Discuss your use of any vehicles (or your employee or volunteer use) with your insurance professional as the content in this article is informational. Each situation is unique and different.

Please leave questions and comments below. I’m happy to bounce ideas around with you.

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  1. Ted Rogers says:

    I am an agent in FL and have a non-profit youth organization in need of Hired & Nonowned. Can you refer me to any markets for this?

  2. Dennis Hopkins says:

    I am treasure for an organization that has no employees, we do however have around 15 officers and memers who expenses are reimbursed for travel that is required as part of their duties. We have nonowed and hired auto liabilities that covers this category. However the question has come up rather we need to cover anyone who has voting rights in the Organization. This is a fairly large group (500+) and are not required to attend any meetings, but if they do attend they can vote on issues effecting the Organization . Should I get coverage for this group of members

    • Brett Cohrs says:

      A good question for your broker. I would tend to say “no” and perhaps you already do have it. The rating for HNO would be based on your main category of volunteers or board members. Beyond that, I would expect the personal auto to handle anything that would happen.

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