PP 03 23 - Named Non-Owner Coverage
1. What the form is
The PP 03 23 Named Non-Owner Coverage endorsement modifies the standard Personal Auto Policy (PP 00 01) to provide specific auto insurance coverages for an individual who does not own an automobile but has an exposure from driving borrowed or rented vehicles. Its primary function is to offer liability protection for bodily injury and property damage caused to others, and it can also be structured to include Medical Payments, Uninsured Motorists Coverage, and, in more recent versions, even Physical Damage (Collision and Other Than Collision) for non-owned vehicles. This endorsement is crucial for individuals who need to maintain auto insurance, perhaps for license reinstatement (e.g., SR-22/FR-44) or to satisfy requirements for a personal umbrella policy, without owning a vehicle.
2. Classes of business it applies to
This endorsement is specifically designed for personal lines clients and is not for commercial auto exposures. It applies to individuals in various situations, such as:
- Frequent Renters/Borrowers: Individuals who regularly drive vehicles owned by others or frequently rent cars and want their own consistent liability coverage.
- Urban Dwellers/Non-Car Owners: People who primarily use public transportation or ride-sharing but occasionally drive a friend's car or a rental.
- Corporate Car Users: Employees who are furnished a company car for business and personal use but do not own a personal vehicle. The Named Non-Owner policy can provide coverage when they drive other non-owned vehicles not covered by the company's commercial auto policy.
- License Reinstatement: Individuals required by the state to file proof of financial responsibility (e.g., SR-22) but do not own a vehicle.
- Umbrella Policy Requirement: Individuals who need to maintain underlying auto liability limits to qualify for or maintain a personal umbrella liability policy.
- Excluded Drivers Seeking Coverage: In some limited scenarios, a person excluded from a family auto policy due to a poor driving record might obtain a Named Non-Owner policy to have coverage when driving borrowed or rented vehicles, though this is subject to strict underwriting.
3. Special considerations
Several important factors must be considered when utilizing the PP 03 23 endorsement:
- No Owned Vehicles: This coverage is only for individuals who do not own any vehicles. If the insured acquires a vehicle, they must obtain a standard owner's auto policy, as the Named Non-Owner endorsement will not provide coverage for owned vehicles beyond a very limited newly acquired auto provision (e.g., typically 14 days for private passenger autos, pickups, or vans not used for delivery, and this coverage may cease if other insurance applies).
- Coverage for Non-Owned Autos: Coverage applies specifically to the use of autos not owned by the insured or furnished for their regular use. If a vehicle is regularly available to the insured (e.g., a household member's car they frequently drive), this endorsement may not provide coverage, or the policy may need specific tailoring.
- Excess Coverage: The coverage provided by the Named Non-Owner endorsement is typically excess over any primary insurance coverage that may apply to the non-owned vehicle being driven (e.g., the vehicle owner's policy or the rental company's insurance).
- Named Insured Specific: The policy primarily covers the individual named in the endorsement. Coverage for other "family members" may be available if specifically indicated in the schedule.
- Physical Damage Option: While traditionally focused on liability, newer versions of the Named Non-Owner endorsement allow for the addition of Other Than Collision and Collision coverages for damage to the non-owned auto the insured is operating, subject to chosen limits.
Real-world example: Sarah lives in a city and sold her car. She frequently rents cars for weekend trips. Her PP 03 23 provides her with liability coverage when driving these rentals, which is excess over the rental company's insurance. If she later buys a car, she must notify her insurer to switch to an owner's policy.
4. Key information for agents and underwriters
- Risk Assessment: Underwriting focuses heavily on the individual's driving record (MVR), claims history, and intended use of non-owned vehicles, as there is no specific vehicle to inspect or rate. It's crucial to verify that the applicant does not own any vehicles and does not have undisclosed regular access to a specific non-owned vehicle.
- Pricing: Premiums are influenced by the selected liability limits, chosen optional coverages (like Medical Payments, Uninsured Motorist, or Physical Damage), the insured's driving record, territory, and potentially the estimated frequency of driving.
- Coverage Gaps Awareness: Agents must clearly explain the limitations, especially that it does not cover owned vehicles or vehicles furnished for regular use (unless specifically addressed). Clients should understand how it interacts with other insurance.
- SR-22/FR-44 Filings: This endorsement is commonly used for financial responsibility filings. Ensure compliance with all state-specific requirements and that the limits meet the state minimums or court-ordered amounts.
- Newly Acquired Autos: While there's a brief period of coverage for newly acquired autos (e.g., 14 days for certain types), this is not a long-term solution, and the policy stipulates that if other insurance applies to the newly acquired vehicle, all coverage under the named non-owner policy ceases with respect to that vehicle. Agents should counsel clients to secure an owner's policy immediately upon vehicle purchase.
- Family Member Coverage: If "family members" are to be covered, this must be explicitly indicated. Underwriters will need to assess the risk presented by all covered individuals.
Real-world example for underwriters: An applicant with multiple past DUIs requests a Named Non-Owner policy for license reinstatement. The underwriter will scrutinize the application carefully, potentially offering only minimum statutory limits if approved, and will verify there are no owned vehicles or undisclosed regular use exposures.