WHAT IS NON-OWNED AUTO LIABILITY INSURANCE?

Non-Owned Auto Liability Insurance covers liability for accidents caused by an employee or volunteer driving their own vehicle on a nonprofit’s behalf. The coverage is designed to protect only the nonprofit organization, not the employee or volunteer. Coverage applies above the liability limits of the vehicle owner’s personal automobile policy. There’s no coverage for damage to the employee or volunteer’s vehicle.

All standard personal automobile liability policies automatically cover anyone named in a covered lawsuit, including the vehicle owner’s employer.  Non-Owned Auto Liability therefore is excess coverage, designed to cover only when the nonprofit is named in a lawsuit and the damages are higher than the vehicle owner’s policy limits, or when the vehicle owner has no personal auto liability insurance in force.

CLAIM EXAMPLE

A volunteer for the Catholic Archdiocese of Wisconsin was driving her own vehicle, delivering a religious statue to a local school.  She accidentally ran a red light and crashed into an automobile driven by an 82-year-old man, causing him severe injuries including a spinal fracture, paralysis, and amputation of his right leg.

A lawsuit was brought against the driver and the Archdiocese.  The plaintiff’s attorney argued that the Archdiocese should be included in the suit because the volunteer was driving on its behalf. The court agreed.

A judgment of $17 million was rendered against the volunteer driver and the Archdiocese.

From Lawyers Weekly USA, March 24, 2005, copyright Lawyers Weekly, Inc.

ADDITIONAL CONSIDERATIONS:

• ‘For Hire’ Exclusion - Personal automobile policies exclude vehicles being used as a “public or livery conveyance”.  To avoid the possible enforcement of this exclusion, fees should never be charged for the use of employee or volunteer-owned vehicles.
  

§ Increased Personal Auto Premiums - There’s a possibility that a ‘Business Use’ classification could be applied to the personal auto policies of employees or volunteers driving their vehicles on your behalf, resulting in a premium increase. Usually the Business Use rate is charged only if the vehicle is used on a “regular basis” for non-personal purposes.

§ Underwriting Requirements - As a condition of coverage, underwriters may require all vehicles driven on your behalf to have personal auto liability limits of at least $300,000, or higher.  Underwriters may also require an annual review of Motor Vehicle Records for all drivers.