Any commercial entity that uses (i.e. allows employees to operate) vehicles that are not owned by the company, but are leased, hired, or borrowed should consider the enterprise risk transfer strategy of insurance to address potential liabilities and losses.
Having a good understanding of the different types of hired and non-owned auto (HNOA) policies or endorsements to other policies available, which coverage is primary vs secondary, included exclusions and when coverage is triggered is a good first step in ensuring that the healthcare business’ needs are met and there are no gaps in coverage for this risk exposure. Insurance producers, insurance carrier underwriters and risk managers with experience in this type of coverage can help healthcare businesses navigate this often misunderstood coverage.
When a healthcare organization does not own or lease vehicles a business auto policy may not be required and often the HNOA endorsement is chosen to address this exposure. The HNOA endorsement to the General Liability coverage part is intended to cover the employer’s vicarious liability for employee conduct that occurs within the scope of employment. These endorsements do not contain standard wording so definitions and exclusions must be carefully reviewed. Our discussion here is based on standard business auto definitions and common language seen in industry HNOA endorsements.
A "hired auto" as defined in the endorsement will be any auto leased, hired, or borrowed by the insured. Autos leased, hired, or borrowed from employees or members of their households, partners, or executive officers do not qualify as hired autos. An automobile leased by an executive while traveling on company business is an example of a hired auto.
A "non-owned auto" is defined as an auto not owned, leased, or borrowed by the insured that is used by someone other than the named insured in connection with the insured's business. An employee's car used by the employee to run company errands or to travel to or from a business meeting is an example of a non owned auto used in connection with the insured's business. Non owned auto coverage protects the insured business against lawsuits arising from use of employee-owned vehicles on company business. However, employees do not benefit from this protection as the owner of the auto is not an insured for “non owned auto”. An employee (including a partner or an executive officer) using his or her own car on company business must rely on his or her personal auto policy, both for liability to others and for any damage to the employee-owned vehicle.1
Having adequate auto insurance coverage without gaps in place for healthcare entities that allow or require employees to operate vehicles that are not owned by the company, but are leased, hired, or borrowed is an important enterprise risk management strategy for protecting the company from losses and liability. This type of insurance coverage however, is not well understood in the insurance industry.
Following the selection of the type of insurance coverage(s) that the business needs, the next step in the enterprise risk management process is to develop organizational policies and procedures for employees driving on company business. Managing the ongoing risk exposures of employee drivers requires a thoughtful, multidisciplinary risk analysis and implementation of a risk control plan.
To accomplish both goals, partner with knowledgeable and experienced insurance producers, carriers and risk management professionals.
Information is provided for general informational purposes only and does not constitute legal, risk management, or other advice. Viewers should consult their own counsel or other advisors for such advice. OneBeacon Insurance Group, and its parents and affiliates (“OneBeacon”), and consultants, contractors, and vendors of OneBeacon assume no responsibility or liability for the discovery or elimination of risk that possibly could cause accidents, injuries, or damages. Compliance with any strategies or opportunities for improvement provided does not assure elimination of risk or the satisfaction of requirements of applicable law. Any reference to “insurance or insurance coverage” does not necessarily apply to the OneBeacon HNOA coverage. The client should consult with their agent/broker for questions on their policy.
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