The Auto Insurance Conundrum

By Crystal Jacobs, Program Lead at Security America 

Auto claims are one of the most common — and costly — ways businesses get hit with unexpected liability. Even without a fleet, business driving happens all the time through employee vehicles, rentals, or owner use. The key is knowing which policy actually responds, because Commercial Auto, Hired & Non-Owned Auto, and personal auto with business endorsements are built for different situations. 

As the Security America representative, my responsibility extends beyond placing individual policies. While commercial auto is not a primary line of business that we directly control, my role is to help members understand how these coverages interact, where gaps commonly arise, and how to navigate the broader insurance landscape. 

The Growing Risk of Business Auto Exposure 

Auto-related claims remain among the most expensive and litigated loss categories across industries. The central question is not simply who owns the vehicle, but how the vehicle is being used — and who may ultimately be held responsible when an accident occurs. 

The auto insurance marketplace has experienced a sustained period of loss severity. Accidents today are more expensive to resolve due to rising medical costs, higher vehicle repair expenses, and increased replacement values for newer vehicles equipped with advanced technology and sensors. What used to be a relatively straightforward repair has become far more costly because of the complexity of modern vehicles. 

At the same time, the legal environment surrounding auto claims has become more aggressive. Large jury verdicts, expanded theories of liability, and increased litigation funding have contributed to higher settlement values. This “nuclear verdict” trend has made auto losses one of the most unpredictable and financially volatile exposures insurers face. 

In addition, distracted driving, heavier traffic patterns, and post-pandemic changes in driving behavior have increased both the frequency and severity of losses. Insurers have responded by tightening underwriting standards, reducing appetite in certain classes, and pushing substantial rate increases simply to keep pace with loss trends. 

As a result, commercial auto is now widely viewed as one of the most challenging lines of coverage for insureds, brokers and underwriters alike.  

Commercial Auto vs. Personal Auto with Business Use Endorsements vs. Hired & Non-Owned Auto 

Commercial Auto coverage is specifically designed for vehicles titled, registered, or leased in the name of a business and used in the course of operations.  

It is structured to address the full scope of business liability, including protection for the business entity as the named insured, broader permissive driver coverage, and higher liability limits aligned with commercial risk.  It can also provide optional coverages such as comprehensive and collision, rental reimbursement, towing and roadside assistance, and certain trailer exposures. 

Unlike personal auto policies, Commercial Auto is underwritten with business operations in mind. For any business with owned vehicles, it remains the foundational coverage form. 

Personal Auto with Business Use Endorsements: Limited Solutions for Certain Professional Exposures 

In some cases, business owners may add a business-use endorsement to a personal auto policy to allow for limited work-related driving. This is most common for sole proprietors.   

While this approach may be cost-effective, personal auto policies — even with endorsements — often contain restrictions, such as exclusions for contracting or delivery, limitations on vehicles titled to LLCs or corporations, and liability limits that may not reflect true business exposure. 

If business driving exceeds what is considered “incidental,” claim disputes can arise quickly.  This option may work for minimal exposure profiles, but it should be approached cautiously. 

Hired & Non-Owned Auto Liability (HNOA): Closing the Gap for Vehicles the Business Does Not Own 

One of the most misunderstood exposures is the liability created when employees use their own vehicles — or when rental vehicles are used — on behalf of the business. 

Hired & Non-Owned Auto Liability provides coverage for the business when: 

• Employees drive personal cars for work-related errands 

• Vehicles are rented or leased short-term 

• Borrowed autos are used temporarily in operations 

Importantly, General Liability policies exclude auto-related liability. HNOA is designed to fill this critical gap.  However, it is essential to understand what HNOA is not. 

HNOA is liability-only coverage. It provides no physical damage protection for the vehicle, does not satisfy financial responsibility requirements for business-owned autos, and is not intended to replace a true Commercial Auto policy. 

More importantly, HNOA is typically not designed to apply to vehicles owned by principals or executives of the company. Increasingly, we see owners attempt to address their auto exposure through HNOA simply because the vehicles they use for business are titled personally rather than in the company name. 

This is a flawed approach. HNOA exists solely to protect the business from liability arising out of the use of autos it or its owners do not own — such as employee personal vehicles or short-term rentals used in the course of operations. 

Attempting to rely on HNOA in place of Commercial Auto or an appropriately endorsed personal auto policy creates a significant coverage gap, and claims involving owner-owned or regularly used vehicles may be denied. 

HNOA should be viewed only as a complementary extension for non-owned exposures, not as a substitute for foundational auto coverage. 

Why Proper Placement Matters: Auto Exposure Belongs in the Auto Coverage Structure 

While Hired & Non-Owned Auto Liability is sometimes carried as an endorsement under a General Liability policy (which we do offer at Security America), this structure is not always the best fit from a coverage and claims perspective.  We encourage you to first check with your auto carriers on the availability of this coverage. 

Our main concern is the if HNOA sits under General Liability, a severe auto loss may erode GL limits that were intended to protect the business against an entirely different category of risk. 

Given the greater hazard profile of auto exposures, protecting GL limits from automobile-related losses is a critical risk management consideration. 

The Commercial Auto Conundrum: Market Realities and Long-Term Stability 

Commercial Auto is widely regarded as one of the most challenging and volatile lines in the insurance marketplace. Insurers have significantly tightened their appetite, reduced capacity, and pushed substantial rate increases across nearly all industries – you are not alone! 

In this environment, packaged insurance solutions can appear attractive because they offer convenience and, in some cases, a path to securing coverage when standalone auto options are limited. However, these packages are not intended to provide you with any cost savings or to truly serve you as the insured.  Carrier-driven placement requirements — such as “we will only write your auto if we also place your General Liability” — are used as a mechanism for carriers to achieve premium volume, offset underwriting constraints, or justify participation in a line they may otherwise avoid. While these arrangements may provide a short-term solution in a difficult market, they are rarely durable long-term strategies.   

I am not saying that there isn’t a time or place for these packaged solutions.  What I am saying is for long-term program sustainability, it is more advantageous to evaluate auto coverage independently, ensuring it is placed with the appropriate underwriting appetite and risk discipline, rather than allowing one of the highest hazard exposures in the marketplace to dictate the terms and stability of your insurance.   

When a market inevitably decides they can no longer sustain the auto, they will non-renew your entire package.  We have seen it happen time and time again and you will be left with not only trying to find a new auto market, but a new market for your entire insurance portfolio. 

Finding the Right Auto Solution in a Difficult Market 

If you need Hired and Non-Owned Auto coverage and have been unable to place it with your auto carrier, we can certainly help under the Security America program.  If you have a small fleet, we can help through our marketing relationship with AmTrust so long as we place the worker’s compensation as well.  Sometimes, however, it is my job to tell you that you may be better served working with one of our preferred agents, who maintain broader access to the commercial auto marketplace. These preferred agents are trusted partners and strong proponents of both the program and the ESA, and they are well-positioned to help members secure durable auto solutions.  

While I would always welcome the opportunity to be a single source for your insurance needs, my priority is ultimately making sure you are placed in the right coverage structure and connected with the right resources for your business. 

Security America is always here as your trusted advisor – we put your business first.  Call Crystal Jacobs or Rhett Butler at 866-315-3838 for more information on the Security America Insurance programs or to be connected with one of our preferred agents.