Employees Driving Their Own Cars for Work: An Employer's Insurance Checklist

Many small businesses don't own a single vehicle, but their employees drive for work every day: picking up supplies, visiting clients, making bank deposits, delivering documents or driving between job sites. If an employee causes a serious accident while on a work errand, the injured person may sue both the employee and the business. Business owners are often surprised to learn that their general liability policy usually excludes auto accidents. This guide explains how coverage works when employees drive their own cars, and what employers should do. For the basics of HNOA coverage, see our page on hired and non-owned auto insurance.

Who pays first?

Insurance generally follows the car. When an employee drives their personal vehicle for work:

1. The employee's personal auto policy usually pays first, up to its limits, if it covers business use. Some personal policies exclude certain business uses, such as delivering goods for a fee.
2. The employer's hired and non-owned auto (HNOA) coverage may then respond as excess coverage for the employer's liability when claims exceed the employee's limits, or when the employee's policy doesn't apply.

HNOA protects the business. It generally doesn't cover damage to the employee's car or the employee's own injuries.

Why a business needs HNOA

• Vicarious liability: a business can be held responsible for an employee's negligence while acting within the scope of employment.
• Low personal limits: many drivers carry low liability limits. See our car insurance minimums by state table.
• General liability exclusion: commercial general liability policies typically exclude auto liability.
• Rented vehicles: HNOA's "hired" part covers liability when the business rents, leases or borrows vehicles, such as a rental car on a business trip.

HNOA can often be added to a business owner's policy or a commercial auto policy. Many contracts and landlords also require it.

Employee injuries and vehicle damage

• Employee injuries: an employee hurt in a crash while working is generally covered by workers' compensation, not HNOA. See our Spanish-language workers' comp guide.
• Damage to the employee's car: usually falls to the employee's own collision coverage. In California, though, employer reimbursement obligations may come into play.

California: reimbursing employees for vehicle use

California Labor Code §2802 requires employers to reimburse employees for necessary expenses incurred in performing their job, including the reasonable costs of using a personal vehicle for work. Many employers reimburse at the IRS standard mileage rate. Other methods can be lawful if they fully cover the employee's actual costs, which can include insurance, fuel and wear. See the California Labor Commissioner's Office for guidance, and talk to an employment attorney.

Write a vehicle use policy

A written policy helps manage risk:

• Who may drive: only approved employees with valid licenses
• Motor vehicle record (MVR) checks at hire and periodically, with consent as required by law
• Minimum personal auto limits you recommend or require, with proof of insurance on file, and compliance with reimbursement rules
• Safe driving rules: no phone use while driving, obey traffic laws, no alcohol or drugs
• Accident reporting: what to do and whom to call
• Mileage logs for reimbursement
• Rental cars: when to accept the rental company's coverage, and whether HNOA applies

California law bans holding and operating a handheld phone while driving. See California Vehicle Code §23123.5. Review the policy with employees each year, and get a signed acknowledgment.

Special situations

• Delivery and gig-style work: if employees deliver goods or food for a fee in their own cars, their personal policies may exclude it. Consider commercial auto coverage. See our rideshare and delivery driver guide.
• Company-provided vehicles: if the business owns, leases long-term, or regularly provides vehicles, you likely need a commercial auto policy, not just HNOA.
• Independent contractors: liability can depend on how the relationship is classified. Require contractors to carry their own auto coverage and get certificates.
• Owners driving their own cars: if you use your personal car for business, make sure your personal policy covers business use.

Common gaps we see

Businesses often assume their general liability policy covers employee driving, forget to add HNOA when they hire their first employee, or never ask whether an employee's personal policy excludes business use. Review these points at hiring and at each renewal.

Umbrella coverage

A commercial umbrella can sit above HNOA if the umbrella schedules it as underlying coverage. Check that it does. See our guide to follow-form vs. stand-alone umbrellas.

After an accident

1. Make sure everyone is safe and get medical help.
2. Have the employee exchange information, photograph the scene and report the accident as California law requires. See our California minimum car insurance requirements guide.
3. The employee should report to their own insurer.
4. Notify your business insurer about possible HNOA and workers' comp claims.
5. Don't admit fault; document everything.

Employer checklist

• ☐ Add hired and non-owned auto coverage
• ☐ Confirm your umbrella schedules HNOA
• ☐ Write a vehicle use policy
• ☐ Check employee licenses and driving records
• ☐ Reimburse vehicle use in line with Labor Code §2802
• ☐ Keep proof of employees' personal auto insurance on file
• ☐ Use commercial auto for owned vehicles and delivery work
• ☐ Carry workers' compensation

Contact Alishahi Insurance or call (877) 711-4545.

Frequently asked questions

Alishahi Insurance · 439 N Canon Dr, Penthouse, Beverly Hills, CA 90210 · (877) 711-4545 · CA License #4348151. General information only. This isn't legal, tax or financial advice or a coverage determination. Coverage depends on policy language and underwriting, and rules vary by state.