You own a small business. You don’t have company vehicles. Your employees use their own cars to make deliveries, run to Home Depot, pick up lunch for a meeting, or drive to client sites. Everyone assumes: their personal auto policy covers it, right?
Wrong — and it’s one of the most expensive assumptions a Michigan business owner can make.
The problem with personal auto policies
Personal auto insurance almost always has a business use exclusion. Read your declarations page — it’s in there, usually buried under “use” or “rating classification.” The exact wording varies, but the effect is the same: if the insurer decides an accident happened during the course of business, they can deny the claim.
“Business use” typically means:
- Making deliveries as part of your job
- Driving to and from job sites (not your regular commute)
- Hauling business equipment or inventory
- Driving clients or coworkers for work purposes
- Using the car in ways your policy wasn’t rated for
A normal commute to and from one workplace is usually fine. Everything beyond that starts getting exposed.
What happens when an employee crashes their own car on the job
Here’s the scenario: your employee is driving their own car to pick up supplies for you. They run a red light and T-bone another vehicle. The injured driver sues your employee — and sues your business. The lawsuit names both.
What happens:
- The employee’s personal auto carrier may deny the claim citing business use. Even if they don’t deny, their liability limit is usually $100K/$300K — not enough for a serious injury.
- The employee’s personal umbrella, if they have one, typically excludes business use and won’t respond.
- Your business liability policy (GL or BOP) does not cover auto liability by default. Vehicles are specifically excluded from GL.
- The injured party sues your business for everything the employee couldn’t pay. You’re personally on the hook unless you have the right coverage.
The fix: hired and non-owned auto liability
“Hired and non-owned auto” (HNOA) is a liability coverage that sits on top of a personal auto policy when an employee uses their own vehicle (non-owned) or a rented vehicle (hired) for business purposes.
HNOA covers:
- Liability to third parties injured by the employee while driving on business
- Legal defense costs for the business in the resulting lawsuit
It does not cover:
- Damage to the employee’s personal car (that’s their personal collision coverage)
- The employee’s own injuries (that’s their personal PIP plus workers’ comp)
- Incidents that happen outside the scope of business use
What it costs
HNOA is usually $100–$500/year as an add-on to a BOP or general liability policy. For something that can prevent a six- or seven-figure liability gap, that’s one of the best dollar-for-dollar coverages available.
If you don’t already have a BOP, you can add HNOA to a standalone GL policy too. Same coverage, usually similar price.
Who needs this
Almost every small business whose employees drive for any reason:
- Restaurants — especially if you do delivery
- Contractors — even if everyone has their own truck, if any employee drives to a site for you, HNOA applies
- Retail — employees picking up inventory, making bank runs, driving to other store locations
- Professional services — driving to client meetings, courthouse runs, etc.
- Home services — cleaning, lawn care, pool maintenance
The only businesses that usually don’t need HNOA: those that truly never have employees drive for any business reason. A retail shop where everyone just comes in, works their shift, and leaves might not need it. Almost everyone else does.
What to do if you have company vehicles too
HNOA is not a replacement for commercial auto. If your business owns or leases vehicles, those need full commercial auto coverage — liability, physical damage, PIP, the works. HNOA is specifically for the gap when employees use their own vehicles for business purposes.
A lot of small contractors end up with both: commercial auto on the company trucks, HNOA as a backstop for the times when a crew member takes their own vehicle.
A note on delivery drivers and gig work
If you’re specifically running a delivery operation — food delivery, courier, or similar — HNOA isn’t enough. You need a commercial auto policy that specifically covers delivery (delivery is excluded from most standard personal and commercial auto policies). This is a narrow and specialized coverage. Don’t assume a standard policy covers pizza delivery or DoorDash-style work.
The quick test
Ask yourself:
- Do any employees, contractors, or even owners ever drive for business purposes in a non-company-owned vehicle?
- If one of them caused a serious accident, is there a liability policy that would actually respond?
If the answer to #1 is yes and the answer to #2 is “I’m not sure,” call or text us. A quick review of your policy can tell us exactly what’s covered and what you’d want to add.