Commercial automobile insurance policies provide coverage for a variety of automobile exposures, one of which is for non-owned autos. A non-owned auto is generally defined as one that is not legally owned by the policy holder, but is used in conjunction with the policy holder’s business. The most common non-owned auto exposure has to do with those vehicles owned by the policy holder’s employees and used in the course of the policyholder’s business.
Commercial Auto Insurance
The standard commercial automobile policy produced by the Insurance Services Organization (ISO) allows for several types of automobiles to be insured under one policy. These autos are represented by numbered designation symbols from 1 through 9. The broadest symbol is "1," which covers any auto. Other symbols cover only owned autos or hired autos. Symbol "9" represents non-owned autos. Policy holders can select which auto(s) they wish to have covered under the policy, and the appropriate symbol is reflected on the insurance policy.
The non-owned auto is defined in the standard automobile policy as an auto that is not owned, hired or fitting any other type of auto definition within the policy, but that is also used in the course of the policy holder’s business. Because the policy holder derives benefit from the use of this auto, it possibly faces some liability in the event of a collision that causes bodily injury or property damage to third parties.
Employees who drive their personal vehicles in the course of their employment present a non-owned auto exposure to their employers. While it is commonly understood that insurance follows the automobile, there are times when the individual employee’s automobile insurance may be insufficient to fully cover bodily injury or property damage caused to a third party in a collision. It is this exposure that the employer seeks to cover by procuring non-owned auto insurance.
Omnibus Insured Clause
The employee’s personal auto policy commonly contains what is known as an omnibus insured clause, which extends coverage not just to the employee/owner of the vehicle, but also to all those who may incur liability as a result of using the auto. Employers rely first on the employee’s insurance coverage through this omnibus insured clause before the non-owned insurance is triggered. The non-owned auto coverage will only be utilized in the event the employee’s policy is exhausted through payments of claims. Employees should be aware that the employer’s non-owned auto coverage does not always provide coverage to the employee-- only to the employer as the policy holder.