1. Forms
2. BP
3. BP-04-04

Form BP 04 04: Hired Auto And Non-Owned Auto Liability

1. What the form is:

The BP 04 04, Hired Auto And Non-Owned Auto Liability endorsement, is an additional coverage that can be added to a Businessowners Policy (BOP), specifically the BP 00 03 coverage form. Its primary purpose is to provide liability coverage for bodily injury or property damage arising out of the maintenance or use of "hired autos" and "non-owned autos" used in connection with the named insured's business. "Hired autos" are those that the insured leases, hires, rents, or borrows. "Non-owned autos" are vehicles the insured does not own, lease, hire, or borrow but are used for the business, such as an employee using their personal vehicle for company errands. This endorsement is typically used when the insured business does not own any vehicles and therefore does not have a separate commercial auto policy. A specific premium charge must be shown in the Declarations for these coverages to apply.

2. Classes of business it applies to:

This endorsement is valuable for a wide range of businesses that have incidental auto liability exposures but don't own a fleet of vehicles. Examples include:

• Consultants or Sales Professionals: Individuals who occasionally rent cars while traveling for business or use their personal vehicles to visit clients. For instance, a management consultant who flies to another state and rents a car to meet with a client would be an exposure covered under hired auto. If that same consultant uses their personal car to drive to a local client's office, that would be a non-owned auto exposure.
• Retail Stores or Restaurants: Businesses that occasionally ask employees to use their personal vehicles for small deliveries or to pick up supplies. For example, a bakery owner who asks an employee to use their own car to deliver a cake or pick up a forgotten ingredient.
• Contractors or Service Providers: Businesses that might rent specialized vehicles for specific jobs or have employees use personal vehicles to transport tools or travel between job sites. A plumber who rents a truck for a large job because their own van is in the shop would be an example of a hired auto exposure.
• Small Offices: Professional offices (e.g., accountants, lawyers, architects) where employees might occasionally use their personal vehicles for business-related errands like going to the post office, bank, or a client meeting.

Essentially, any business that relies on vehicles it doesn't own to conduct its operations, even infrequently, should consider this endorsement.

3. Special considerations:

• No Coverage for Owned Autos: This endorsement is specifically for businesses that do not own vehicles. If a business owns vehicles, it should have a standard Commercial Auto Policy.
• Employee's Personal Auto Insurance: For non-owned autos (e.g., an employee's car), the BP 04 04 typically provides excess coverage over the employee's personal auto insurance. The employee's policy would be primary. It's important to note that this endorsement protects the business from liability, not the employee personally for damage to their own vehicle or their own liability beyond what the business is responsible for.
• Definition of "Hired Auto": This includes autos leased, hired, or borrowed, but specifically excludes autos hired or borrowed from employees, members of their households, or, if the insured is a partnership, from a partner.
• Definition of "Non-Owned Auto": If the insured is a partnership, a "non-owned auto" does not include any auto owned by any partner.
• Interaction with other endorsements:
  • It should not be used if BP 04 89 (Liquor Liability Coverage) is used.
  • When combined with a "Limitation of Coverage to Designated Premises, Project or Operation" (e.g., BP 04 12) endorsement, care must be taken. A literal interpretation could restrict Hired and Non-Owned Auto coverage to only apply to accidents occurring on the scheduled premises, which could make the Hired and Non-Owned Auto coverage nearly illusory. It may be necessary to specifically note on the schedule of the BP 04 12 that coverage applies to the operation of autos covered by BP 04 04.
• Coverage Scope: The endorsement typically covers bodily injury and property damage liability. It does not cover physical damage to the hired or non-owned auto itself, nor injuries to the insured or their employees.
• Contractual Requirements: If coverage is required by a contract, the limit provided by the endorsement may be the lesser of the contractually required limit or the policy's limit of insurance.

4. Key information for agents and underwriters:

• Risk Assessment:
  • Frequency and nature of hired auto use (e.g., occasional rental for travel vs. regular short-term leases of specific vehicle types).
  • Frequency and nature of non-owned auto use (e.g., number of employees using personal vehicles, purpose of use – sales calls, deliveries, errands).
  • Types of vehicles typically hired or used (e.g., passenger cars vs. light trucks).
  • Driving records of employees who may use personal vehicles for business purposes (though the policy primarily protects the business, employee driving history can indicate overall risk).
  • Existence and enforcement of company policies regarding employee use of personal vehicles for business, including insurance requirements for those employees.
• Pricing: A specific premium charge must be shown on the Declarations for Hired Auto Liability and/or Non-Owned Auto Liability for the coverage to apply. The premium will depend on the assessed exposure.
• Coverage Gaps:
  • Ensure the client understands this endorsement does not replace a Commercial Auto Policy if the business owns vehicles.
  • Clarify that physical damage to the hired or non-owned vehicle itself is not covered by this liability endorsement. The business may need to purchase a loss damage waiver (LDW) or similar coverage from the rental company for hired vehicles.
  • Employees using their own vehicles must rely on their personal auto policies for damage to their vehicles and for their own liability. The BP 04 04 primarily protects the business.
  • If the "Limitation of Coverage to Designated Premises, Project or Operation" (BP 04 12) endorsement is also on the policy, underwriters and agents must carefully consider the potential for unintended restriction of the Hired and Non-Owned Auto coverage and ensure appropriate scheduling or clarification.
• Underwriting Guidelines:
  • This endorsement is generally for businesses with incidental auto exposures. Businesses with significant, regular reliance on hired or non-owned vehicles might be better suited for a full Commercial Auto Policy.
  • Verify that no vehicles are owned by the named insured.
  • Consider the scope of operations – a business with many employees frequently using personal cars for deliveries presents a higher risk than an office where an employee occasionally runs a bank errand.
  • Review the insured's contractual obligations, as they may dictate the need for this coverage and specific limits.