First of all, what is Non Owned Auto Liability? Non Owned Auto Liability protects the named insured (home builder) in the event that they are sued as a result of an accident involving a vehicle that is not owned by the company. For example, such accidents could arise from vehicles that are owned by employees such as executive supervisors to run errands on behalf of the company. Such errands could be a trip to the post office or supply house. Under the law, the home builder has vicarious liability under these circumstances.

In addition, it is possible that similar liability could arise from auto accidents involving vehicles owned by so called “subs” while running an errand for the home builder. It is possible that under some circumstances that the “sub” would be reclassified as an employee by a court resulting in vicarious liability for the home builder.

Even if the employee or so called “sub” does carry their own liability insurance, their limits of coverage may be inadequate to cover the amount of the damages and as a result the home builder may be shot gunned into the lawsuit.

It is important to note that Non Owned Auto Liability does not cover the driver himself. It only covers the business entity that is a named insured.

Second, what is Hired Auto Liability? A hired auto is one that is rented, leased, or borrowed by the named insured. For example, a home builder may fly into an airport for a business trip and may rent a vehicle from Hertz. If this is the case, the Hired Auto Liability will respond to auto accidents arising from the negligence of the insured driver. Unlike Non Owned Auto, Hired Auto Liability does cover the driver. Hired Auto Liability does not cover damage to the vehicle itself.

Another critical issue is whether or not the home builder should purchase the Collision Damage Waiver from the rental car company? This issue will be explored in a subsequent posting.