Insuring Safe Delivery

Pizza is the ultimate delivery food item. Whether you deliver your own pies or rely on a third-party provider like DoorDash or Uber Eats, odds are that your business relies on pizza delivery.

However, if your vehicle insurance isn’t right, delivering pizzas can cost you a bundle – even your whole business. A gap in coverage can leave you holding the bag, and it can be a very expensive bag indeed.

Here’s what you need to know to ensure that your business is protected from financial liability relating to car accidents involving your delivery driver.

Specifically, we’re going to delve into the insurance product known as non-owned auto insurance, with the expert advice of Rob Hoover of Risk Strategies, a specialty insurance brokerage and consulting firm, where he’s vice president of business development, and director of the hospitality insurance program.

What Is Non-Owned Auto Insurance?

Hired and non-owned auto (HNOA) coverage protects the business and the business owner as an individual from liability when an employee or third-party contractor is driving a non-owned-by-the-business car for business purposes. If anyone (owner, employee, contractor) is driving a vehicle that is not owned by the business and causes damage or injury, the owner and/or the business may be held liable. (While “hired” and “non-owned” are two different coverages, they are typically bundled in a single product called HNOA.)

Hoover describes HNOA insurance as a second line of protection, designed to fill in the gaps that may exist in the constellation of insurance coverage that exists for non-owned cars, including employee-owned vehicles, owner-owned vehicles, and hired (rented or leased) vehicles. “It doesn’t cover the individuals, it covers the business. It covers the legal expenses which result when an employee is found to be liable for causing bodily injury and/or property damage.”

In terms of assigning financial responsibility, “most attorneys will first name the driver, then they’ll name the owner of the business, and then they’ll name the business,” says Hoover.

“They look to the personal auto policy first. If there’s not enough coverage, then they look to the non-owned auto policy, which fills in the gap.”

Covering Gaps in Insurance Protection

What kind of gaps are we talking about?

GAP: your employee-drivers use their own cars, and don’t have the business use coverage they should have. Personal auto insurance does not cover business use.

GAP: your employee-driver has insurance covering business use but the claim exceeds the limits of their commercial policy.

GAP: your employee-driver forgot to renew their regular or commercial auto insurance and is  driving uninsured.

The same gaps apply when the owner or an employee drives the owner’s personal car, which should also be insured for business use.

When you rely on a third-party delivery service, there’s some uncertainty about liability – more on that below. That uncertainty represents another potential gap.

Why You Need HNOA Insurance

HNOA covers your liability when your employee is driving for work purposes. Even though the driver’s insurance should be first in line, you need to cover unexpected gaps. If you don’t have adequate coverage, you risk being held liable for damage to other vehicles and property, and for medical bills for injured parties.

Many deliver drivers are young and inexperienced. The odds are high that they’ll fail to secure business-use commercial insurance; lose their insurance; neglect to pay their insurance; or have low coverage levels. It’s not fair and not wise to rely on them to protect your business.

The bottom line is that any time your employee is on the clock and involved in an accident, your business is exposed to risk. While having all employees exclusively drive business-owned vehicles resolves this problem, it’s not financially feasible for most operators.

Please note that HNOA does not cover:

• When your employee is off the clock, driving for personal purposes.
• Damage to your employee’s (or your privately owned) car.
• Your employee’s (or your, if driving) medical expenses.

Who Needs HNOA Insurance?

Hoover replies: “any business in which employees drive their own cars for delivery or other business purposes, ever. I include it on every policy that I write, because you never know when an employee or somebody uses their own vehicle in the scope of the business. I would rather they have the protection in place instead of going ‘oh, man, I should have included that’.”Even if you don’t offer delivery, you may occasionally send employees out on errands, so you should have this protection unless they use a company-owned car.

Who Doesn’t Need HNOA Insurance?

If your driver-employees drive business-owned cars 100 percent of the time, and you don’t use third-party drivers, you shouldn’t need it. However, Hoover still advises that every business owner get it anyway. If you send an employee out in their own car to buy ingredients or to pick up a co-worker, and they get in an accident, you’ll need this protection.

Third-Party Delivery

If you use a third-party or hire a driver as an independent contractor (IC), you are still potentially exposed to liability.

Hoover notes that “some litigation is potentially bubbling up related to third-party delivery. I think that’s evolving right now.” He asks “do you have an adequate contract releasing you from liability for their actions? What’s the contractual language you’re using to sign that responsibility off for the individual operator? I think the big nationals are getting that sign-off. But the reality is that the smaller operators” are not adequately released from responsibility in their contracts, says Hoover.

Your agreement with your third party/IC may include assuming responsibility to obtain and monitor employee insurance documentation. However, “the enforcement of the requirements is equally as important as the articulation of them. If you fail to collect proof of required coverage and monitor it for updates (such as when policies renew throughout the year) you are providing yourself little protection in a claim. Often, your corporate insurance policies require you to be doing this and failure to do so can negate coverage,” according to the Risk Strategies website.

Variables

Circumstances vary.

“It is truly carrier by carrier,” observes Hoover. Talk to your insurance representative.

State laws govern insurance coverage. While minimum insurance is mandatory for all drivers in most (but not all) states, the financial limits vary. If your business delivers in two states, make that part of the conversation.

Cost of coverage will vary. Ask your insurance carrier about hiring and employment best practices that will save you money if you adhere to them, such as documenting motor vehicle reports, driving records, insurance checks, and car checks.

Conclusion

It’s critical that every owner have a thorough and transparent dialogue with their insurance representative. Between property damage and personal injury, the potential liability in an accident can get sky-high fast.

“I don’t think most people read their policy enough to know that putting that sign on the top of your vehicle changes your own personal auto policy,” says Hoover. His own son got a job at a pizzeria, “and loved it. And I said ‘the one thing you can’t do, kid, is you can’t deliver pizzas with your own vehicle. I’ll support you in this job, but I don’t want to take that liability while you’re driving for work.’”

Annelise Kelly is a Portland, Oregon-based freelance writer.