Hired and Non-Owned Liability Coverage: The Sleeping Giant

Author, Daniel Frazee, Vice President, Rancho Mesa Insurance Services, Inc.

Could your company have underlying Auto related exposures that you are not aware of?  Let’s assume you have taken several precautions to properly manage the safety of your fleet.  But has your management team contemplated potential losses arising from employees operating their own personal vehicles as they relate to your business?

Consider the following examples where an employer can be held accountable as a result of actions of your employees using their own vehicles:

• Field employees on the way to or leaving a jobsite 
• Administrative employees running errands to the bank, supply store or post office
• An employee runs out to pick up lunch and/or supplies for the team
• An owner or manager decides to rent a vehicle at an out of town conference
• Outside sales reps are provided a car allowance for business use of their personal autos
• A foreman leaves a jobsite and runs to Home Depot for some tools

If an employee in any of these situations is in an at fault accident while driving their own vehicle, the employer can be held responsible for all damages.  Typical Auto liability policies only cover employees while they operate company-owned vehicles that are being used for business purposes.  Since this coverage does not contemplate nor cover the use of a hired (rented) or non-owned vehicle, a gap in coverage is created.  This gap can be filled for a nominal additional premium, by adding hired and non-owned liability coverage. Specifically, these coverages respond when a company is found legally liable for damages after the employee’s personal auto insurance is exhausted.  The employee’s personal auto coverage will always be primary to both the employee and the business assuming it was found that the employee at fault while using their vehicle in the course of employment.  Without hired and non-owned liability coverage, a company remains exposed to significant costs depending on the degree of bodily and/or physical damage to the vehicle and other parties involved.

Many employers are simply unaware or unwilling to address this ticking time bomb that is non-owned liability.  Several “best practice” control measures can be implemented to reduce this exposure:

• Designate a person within the company that will oversee those employees with a non-owned vehicle exposure
• On a bi-annual or annual basis, require employees driving personal vehicles to provide the proof of valid auto insurance 
• Consider establishing company mandated minimum limits that are higher than the CA statutory minimum of $15,000/$30,000/$5,000.
• Consider reimbursing employees for any additional premium incurred for increasing limits on their personal policy to reach minimum limits set by the company
• Enroll all employees driving company and/or personal vehicles in the DMV’s employer pull notice program.

In summary, take time to learn more about hired and non-owned liability coverage and how it can impact your bottom line with exposure to severe auto losses.  As a National Best Practice Agency 11 years running, Rancho Mesa takes pride in thorough and exacting policy audits that uncover these and many other silent exposures.  Through their continually developing Risk Management Center, they offer clients unmatched support with topical safety resources, monthly workshops & trainings, and valuable content.

Contact Rancho Mesa if you have questions about your auto policy.

Taking Your Safety Program to the Next Level: Form a Safety Committee

Author, Daniel Frazee, ARM, CRIS, Executive Vice President, Rancho Mesa Insurance Services, Inc.

"The committee must be prepared to promote the #1 goal of any organization…accident prevention."

Establishing a safety committee within your company will enhance the effectiveness of your safety program by identifying hazards and appropriate controls, implementing specific measures, developing clear safe work practices and communicating clearly through all levels within your organization.  

As your company looks to build a new committee or perhaps re-build an existing committee, consider the following as some more specific responsibilities that the group can develop:

• Promoting the importance of accident prevention
• Setting attainable goals for safe work practice
• Building a safety program that is a constant work in progress with regular updates and performance evaluation among departments
• Learning root causes through accident investigation 

The committee must be prepared to promote the #1 goal of any organization…accident prevention. Employers want their employees to go home every evening to their loved ones. That goal has to permeate through all ranks and be maintained as the culture from the top down.  With that as a primary goal, reasonable expectations have to be set for safe work practices that allow the company to maintain their level of productivity.  Best Practices dictates that the safety committee must be willing to constructively critique themselves, the safety program and each department with an objective eye toward constant improvement. Establishing root causes for both “near misses” and accidents without prematurely assigning responsibility to a specific person, can build a more open approach to tracing claim frequency and severity trends. This is the critical piece to learning from mistakes or actions to ensure similar events do not recur.

Some final points to consider for a more effective safety committee:

• Participants should encompass all divisions, departments, and levels within an organization.  A minimum of one representative/member from each part of the company should sit on the committee.
• Consider having more employees than supervisors which will build a more ground up approach from those people who know the day to day operations and tasks the best.
• Rotate the safety committee chairperson on a regular interval, whether that be every year or every other year.  This will allow opportunity for more people to have a voice and continually change the committee in a positive way.
•  Identify a clear schedule and recurring time/day for meetings throughout the year.  The chairperson should provide an Agenda in advance of meetings so members can prepare accordingly.  That chairperson should also recap each meeting with notes, review of recommendations, previous incidents, and/or trainings that have occurred.
• Include a representative from your insurance company’s loss prevention department to help provide perspective, resources and analysis.

Accept the challenge of taking your Safety Program to the next level, reduce your exposure to claims and improve both your risk profile and bottom line.  

Learn more by sending follow up questions to dfrazee@ranchomesa.com.

Additional Resource
“Safety Committee Development: Consider the time required, the budget, needed, and the desired outcomes, and then facilitate the committee’s efforts using these triple constraints as boundaries,” by Michael E. Bingham, Occupational Health & Safety, www.ohsonline.com.