When employees use their personal vehicles for work — whether delivering pizzas, running errands, or visiting clients — questions about who pays for accidents often arise. Misunderstandings about insurance coverage can lead to financial surprises, frustration, and even legal disputes.

So, how can you navigate the risks knowing personal vehicle use is becoming more common and is, therefore, increasingly important to insurance carriers in the challenging commercial auto marketplace? I’ve outlined the risks and realities, but also encourage you to reach out t us with questions!

What Does Hired and Non-Owned Auto Coverage Cover?

Hired and Non-Owned Auto (HNOA) insurance protects your business from liability when your employees use personal or rented vehicles for work. It covers liability claims against your business if one of your employees causes an accident during work-related activities; however, it does not cover damage to your employee’s vehicle.

This distinction is where confusion often arises. Employees may assume your company’s insurance covers their vehicle because they’re on the clock, but that’s not the case. Personal auto insurance is the primary coverage for employee vehicles.

Personal Auto Insurance is a Must

When your employees drive their own cars for work, their personal auto insurance must handle any vehicle damage and liability claims — up to policy limits. HNOA only applies if your business is held liable for damages exceeding those limits.

For example: If one of your employees is rear-ended while delivering pizzas, the employee’s personal collision coverage (if they have it) is responsible for repairs. Your company’s insurance does not cover the employee’s vehicle.

Ensuring your employees know they must have their own personal auto coverage is critical.

Common Gaps in Employee Coverage

Even if they have personal coverage, we’ve found many employees don’t carry sufficient insurance to protect themselves or the business.

Common gaps include:

• Low Liability Limits — State minimums often fall short with serious accidents.
• No Collision Coverage — Without it, the employee’s vehicle damage won’t be covered.
• Unreported Business Use — Personal policies may exclude claims if the insurer wasn’t informed the vehicle was used for business purposes.

For you as an employer, these gaps create risks, including financial exposure and potential lawsuits if accidents involve insufficient coverage.

Compliance Challenges

Setting expectations and ensuring your employees maintain adequate coverage can be difficult. Here are just a few of the reasons:

• Cost Concerns — Employees may resist increasing their coverage due to the higher premiums, especially in lower-paying roles.
• Lack of Awareness — Many employees don’t understand their policies or the implications of business use.
• Verification Issues — Your business may struggle to monitor compliance or face resistance when requesting proof of coverage.
• Varying Laws — State-by-state differences in insurance requirements complicate the process.

These realities highlight the need for clear policies and proactive communication between you and your employees who use their personal vehicles.

Best Practices for Employers

So, what can be done? To protect your business and reduce misunderstandings, I’ve outlined a few tips below.

1. Set Clear Policies

Provide your employees with written guidelines that explain:

• HNOA coverage limits
• The responsibility of personal insurance for vehicle damage
• Requirements for adequate liability and collision coverage

2. Recommend Adequate Coverage

Encourage your employees to maintain:

• Liability — This should be at least $100,000 per person/$300,000 per accident for bodily injury and $50,000 for property damage. Check with your auto insurance carrier for specific guidance.
• Collision — This will cover repairs or replacement of their vehicle.
• Uninsured/Underinsured Motorist — This should be equal to liability limits for protection against at-fault drivers with insufficient insurance.

Verify Coverage

Require your employees to provide proof of insurance following each policy expiration, including business-use endorsement if needed. Streamlining this process with software can help reduce administrative burdens.

Best Practices for Employees

On the flip side, your employees who drive personal vehicles for work should:

• Review their auto policy to confirm coverage includes business use.
• Check for gaps, such as missing collision or uninsured motorist coverage.
• Understand your company’s expectations and follow all prescribed safety policies.

Navigate the Risks Now

Misunderstandings about insurance coverage can lead to significant financial, legal, and relational consequences. By setting clear expectations, supporting compliance, and ensuring adequate coverage, you and your employees can steer clear of risks and avoid costly surprises when they get behind the wheel of their own cars.

If you’d like to talk about this, have questions, or would like us to review the program you have in place, we’d love to have a conversation. Remember, a little planning now can prevent big problems later. Just reach out; we’re happy to chat!