Understanding Auto Insurance: Borrowed, Loaned, Rented, and Non-Owned Vehicles Explained

Driving for a Cause: What Churches and Volunteers Need to Know About Vehicle Liability

We have all heard the horrors of loaning a friend a car only to experience the complexities of that friend wrecking a beloved vehicle. Many people are often shocked as to how the coverage plays out when borrowing, loaning, renting, or using a vehicle for someone else’s benefit. Let’s take a closer look at where the responsibility comes from.

Borrowed Vehicles

When a vehicle is borrowed, the precise definition is “to take and use something that belongs to someone else with the intention of returning it” (Oxford Dictionary). “Borrowed” is different than stealing a vehicle because there is an agreement from the owner that you will be using the vehicle to return. This is convenient in the event of a mechanical breakdown, or if there is a need for someone to borrow a vehicle on a short-term basis. The confusion is relevant only if there is a situation where someone other than the vehicle owner is involved in a claim situation.

The most accurate way to determine who is responsible for coverage for a borrowed vehicle is to look at who has ownership of the vehicle. In most states there are laws that govern Financial Responsibility for vehicle owners to maintain insurance coverage on their vehicles that are used on the roadways. That law puts the burden and responsibility on the owner for having coverage. So even if you have borrowed the vehicle and are using it with the owner’s permission, the financial and insurance implications are primary to the owner of the vehicle. There may be some situations where secondary coverage is necessary and that would be a time when the borrower could have some liability as well, especially from the Commercial Insurance side if two businesses are involved.

Loaned Vehicles

If a borrowed vehicle is the primary responsibility of the owner, then loaning a vehicle is also the primary concern for the owner. If you loan a vehicle to another party, you are giving that party permission to take that vehicle and so you become responsible for whatever that party may do in the use of your vehicle. We have all heard accounts of the young driver who takes the parents’ car for the first time and has an accident. The responsibility falls to the parents, but the same would hold true for anyone who has the use of your vehicle.

Most Commercial Auto insurance carriers have age guidelines and driving record requirements for driving privileges on a business vehicle. For that reason, business owners and non-profit organizations including churches are often discouraged from loaning vehicles. Without proper underwriting, an organization may not have important information related to the drivers and/or the use of the vehicle. Most parents would not give their child’s friend permission to drive one of their vehicles and this is the same concept. In loaning a vehicle, you are taking primary responsibility without having personal knowledge of the risks.

Non-Owned Vehicles

Many faith-based organizations often utilize volunteers in providing transportation for various church functions and special events. In that circumstance, most volunteers will use their own vehicles to pick up others for church services or may take a load of campers in their own vans on behalf of the church. In this situation, there are some special considerations that may go along with using volunteers for transportation. Churches and organizations that utilize non-owned vehicles and drivers should be certain that they have a special endorsement designed to provide a layer of protection for the business under a Hired and Non-Owned Vehicle Coverage.

The primary responsibility for insurance still rests with the owner of the vehicle, but the Non-Owned Coverage would provide protection for the organization after the primary owner’s coverage has been exhausted as a secondary layer. In the event of a serious or catastrophic accident, this extra level of coverage is often necessary. This endorsement is typically either added to an existing auto policy for the organization or as an extension of liability from the General Liability policy.

There are times when a volunteer may be using his or her vehicle for the benefit of an organization and experience damage to their own vehicle. One such incident in our area involved a collision with a deer. This is a common occurrence and usually results in various levels of damage. The organization may then call and ask that the damage be covered under the Non-Owned Vehicle endorsement. However, there are limitations and conditions on how this coverage applies. Physical Damage coverage such as Comprehensive and/or Collision coverage are options that are included in the personal auto policy. With that in mind, if the individual elects to forego these coverage options, then the Non-Owned Vehicle endorsement would also not respond with physical damage coverage. If the individual does carry Comprehensive and Collision coverage, then the Non-Owned Vehicle coverage may provide some limited coverage to take care of the deductible for this coverage. The important thing is to know how your policy would respond and to educate your volunteers on what they could expect to be covered for their vehicles.

Rented Vehicles

Perhaps the most frequent questions come from organizations and individuals renting vehicles. There are often questions on how the personal auto policy covers rentals, as well as how the Commercial Hired (Rented) and Non-Owned Vehicle Endorsement works. The personal auto policy provides an extension of coverage with most carriers to cover a rental car for the same coverage you carry on your vehicles. If you purchase and carry only liability insurance, then that is what would extend. If you carry Comprehensive and Collision coverage, carriers could extend that coverage with the same deductibles. On the Commercial endorsement, there would be a limit of coverage with a deductible for the rented vehicle. In either situation, there are some things to consider.

1.  Rental agencies typically offer coverage that can be purchased at the time of the rental. This coverage can protect a couple different ways. First, if you purchase their coverage, you usually have no responsibility for the vehicle. If you are involved in a vehicle accident, you would likely just turn the vehicle back in and your only responsibility would be for the deductible option you purchased. This would preclude any confusion or complexity with settling a physical-damage claim.

2. Utilizing the coverage that is offered by the rental agency is also a way to protect your claims history with your carrier, as the claim would not be reported to your insurance company. This is advantageous in preventing any accident surcharges or adverse action from losses. Most rental agencies offer this coverage for additional costs but the costs of accident surcharges over a three-year period when using your own coverage would likely more than make up for the extra expense of the additional coverage.

Coverage Chart

Liability Coverage	Non-Owned	Rented Vehicle Driven By Volunteer	Rented Vehicle Driven By Employee
Primary	Owner	Owner	Owner
Intermediary (Excess)	Driver	Driver	Church
Excess to All Else	Church	Church	Driver

**Based on Brotherhood Mutual’s Rented & Non-owned Vehicle Endorsement

As you can see, there are several things to consider in dealing with borrowing, loaning, renting, or using your vehicle for someone else’s benefit. We recommend that you have a good understanding of what each of these exposures represent as a risk and how you would be covered at the time of a loss. We are happy to be of assistance. Please contact us today.

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