If your employees ever drive their own cars for work — even just to pick up supplies — you have liability exposure your commercial auto policy does not cover. Here is the fix.
Hired and Non-Owned Auto Insurance: The Coverage Gap Most Texas Businesses Don't Know They Have
Your office manager drives her own car to the bank to make a deposit. On the way back, she runs a red light and hits another vehicle. The other driver has $60,000 in medical bills.
Your commercial auto policy covers your company vehicles. Her personal auto policy covers her personal driving. Neither one covers this accident — because she was on a business errand in a personal vehicle.
You are now facing a $60,000 liability claim with no insurance to respond to it.
This is the hired and non-owned auto gap. It affects nearly every business that has employees, and most business owners have never heard of it.
What Is Hired and Non-Owned Auto Coverage?
Hired and non-owned auto (HNOA) insurance covers your business's liability when vehicles you do not own are used for business purposes.
It has two components:
Hired auto coverage applies to vehicles you rent, lease, or borrow for business use. If you rent a cargo van to move equipment and get into an accident, hired auto coverage responds to the liability claim.
Non-owned auto coverage applies to vehicles owned by others — typically employees — that are used for business errands. If an employee drives their personal car to pick up supplies, meet a client, or run any other business errand and causes an accident, non-owned auto coverage responds to your liability as the employer.
What HNOA Does Not Cover
HNOA is a liability-only coverage. It does not cover:
- Physical damage to the employee's personal vehicle
- Physical damage to a rented vehicle (that requires separate collision damage waiver or hired auto physical damage coverage)
- Injuries to the employee driving the vehicle (that is workers' comp)
- Accidents that occur during personal use of the vehicle
Why Your Commercial Auto Policy Does Not Cover This
Commercial auto policies cover vehicles listed on the policy — vehicles your business owns, leases, or has under long-term contract. An employee's personal vehicle is not listed on your policy, so it is not covered.
Some business owners assume that because they have a commercial auto policy, they are covered for any vehicle used for business. That is not how it works. The policy covers the vehicles on the schedule, not the activity.
HNOA is typically added as an endorsement to a commercial auto policy or a general liability policy. It is not expensive — often $150–$500 per year for a small business — and it fills a gap that can otherwise result in a six-figure uninsured claim.
Who Needs HNOA Coverage?
Any business where employees occasionally drive their own vehicles for work purposes. This is broader than most business owners realize.
Common scenarios that trigger HNOA exposure:
- An employee drives to the bank, post office, or office supply store on a business errand
- A salesperson uses their personal car to visit clients
- An employee picks up lunch for a team meeting (if it is a business function)
- A contractor's employee drives their personal truck to a job site to pick up materials
- An employee uses their car to transport company equipment
- Professional services firms (consultants, agencies, accounting firms)
- Contractors and trades with employees who use personal vehicles
- Nonprofits with volunteers who drive for the organization
- Real estate agencies
- Healthcare practices with staff who make home visits
- Any business with a sales team
The Employer's Liability Under Texas Law
Under the legal doctrine of respondeat superior, an employer can be held liable for the negligent acts of an employee committed within the scope of employment. Driving on a business errand is within the scope of employment.
This means that if your employee causes an accident while running a business errand, the injured party can sue both the employee and your business. Your business's liability does not depend on whether you own the vehicle — it depends on whether the employee was acting on your behalf.
Texas courts have consistently held employers liable in these situations. The size of the verdict depends on the severity of the accident, but commercial vehicle accidents routinely result in six- and seven-figure judgments.
How to Reduce Your HNOA Exposure
Beyond buying the coverage, there are operational steps that reduce your risk:
Establish a driver qualification policy Before allowing employees to drive for business purposes, verify that they have a valid driver's license and acceptable driving record. An employee with multiple DUIs driving on a business errand creates significant exposure.
Require employees to maintain personal auto insurance Your HNOA coverage responds after the employee's personal auto policy. If the employee has no personal auto insurance — or minimum limits — your exposure is higher. Require proof of personal auto insurance as a condition of driving for work.
Define what constitutes a business errand Clear policies about when employees are and are not authorized to drive for business purposes help establish the scope of your liability. If an employee makes an unauthorized detour for personal reasons and causes an accident, the "scope of employment" question becomes relevant.
Keep records of business driving Mileage logs and expense reports that document business driving create a paper trail that can be useful in both insurance claims and tax situations.
Rented Vehicles: The Other Half of the Equation
When you or your employees rent vehicles for business travel, the rental company's counter agent will offer you a collision damage waiver (CDW). This covers physical damage to the rental vehicle.
Your HNOA coverage handles the liability side — if you cause an accident in a rental car and injure someone, HNOA responds. But it does not cover damage to the rental vehicle itself.
Some business credit cards include rental car coverage as a benefit. Check your card's terms carefully — coverage varies significantly, and business rentals are sometimes excluded.
If your employees frequently rent vehicles for business travel, adding hired auto physical damage coverage to your commercial auto policy is worth considering.
How Much Does HNOA Coverage Cost?
For most small businesses, HNOA is one of the least expensive coverages you can add. Typical costs:
- Small professional services firm (5–10 employees): $150–$400 per year
- Contractor with field employees: $300–$700 per year
- Larger businesses with significant driving exposure: varies
Adding HNOA to Your Existing Policy
HNOA is typically added as an endorsement — a modification to an existing policy — rather than a standalone policy. It can be added to:
- Your commercial auto policy
- Your general liability policy (if you do not have a commercial auto policy)
- A business owner's policy (BOP)
Getting the Right Coverage
If you have employees who drive for work — even occasionally — talk to your agent about HNOA coverage. It is a small addition to your insurance program that closes a gap that most business owners do not discover until they have a claim.
McKnight Insurance works with businesses across Texas to identify coverage gaps and build insurance programs that actually protect against real-world exposures.
Call us at 817.277.6166 or get a quote online.
Key Takeaways
- HNOA covers your liability when employees drive personal vehicles for business errands
- Your commercial auto policy only covers vehicles listed on the policy — not employees' personal cars
- Employers can be held liable under Texas law for accidents caused by employees on business errands
- HNOA is typically inexpensive — $150–$500 per year for most small businesses
- Establish a driver qualification policy and require employees to maintain personal auto insurance
- HNOA can be added as an endorsement to your commercial auto, GL, or BOP policy