Hired and non-owned auto insurance for pizza delivery

Who pays when a delivery driver causes a crash

When an employee uses a personal car for your business, the employee’s personal auto policy is primary. A Big “I” Virtual University analysis of the standard policy forms explains that the personal policy also covers the employer for its vicarious liability, and the business auto policy is excess over it.

That order matters because you are liable either way. The same analysis notes that an employer held vicariously liable must pay whatever the driver’s policy does not, even with no business auto policy. HNOA fills that gap.

Why the driver’s personal policy is the weak link

Under the standard personal auto form, the Big “I” analysis concludes that courts generally do not treat an employee delivering food for one restaurant as livery conveyance, so coverage often exists. It also warns that insurers may still try that exclusion when injuries are severe.

Many insurers go further and write delivery out of the policy. The Texas Department of Insurance lists accidents while “delivering food or other items for a fee” among the things most personal policies don’t cover. Michigan Auto Law cites court cases in which business-use exclusions were used to deny liability coverage to pizza delivery drivers.

Low limits are the other problem. Prestige Insurance Group notes that in Florida a driver with a minimum policy may have no bodily injury coverage at all, leaving an injured pedestrian to look to the restaurant.

What HNOA covers for a pizzeria, and what it doesn’t

HNOA is liability insurance for the business, not for the driver or the car. In practice it covers:

• Injuries to other people and damage to their property caused by an employee driving a personal car on a delivery or other errand.
• Your legal defense when the injured party sues the restaurant.
• Vehicles you rent or borrow for the business, such as a van for catering.
• Not covered: damage to the employee’s own car, which falls to the driver’s collision coverage, if their policy allows delivery.
• Not covered: the driver’s own injuries, which belong to workers’ compensation when the driver is an employee.
• Not covered: cars, scooters or e-bikes your business owns, which need a commercial auto policy.

Protect your drivers with the employees-as-insureds endorsement

Unendorsed, a business auto policy covering non-owned autos protects only the restaurant when an employee drives their own car. The Big “I” analysis points out that the policy’s definition of who is insured excludes an employee driving a car they own, so your insurer could even seek repayment from the driver after paying a claim.

The fix is the Employees as Insureds endorsement, form CA 99 33. It gives your drivers excess coverage under your policy and removes the insurer’s right to pursue them. The driver’s own policy still pays first. Daly & Alexander Insurance recommends getting this endorsement documented in writing and asking whether delivery operations are excluded before you buy.

Not every HNOA policy accepts delivery

HNOA added to a business owner’s policy is built for occasional errands and bank runs. Regular delivery is a different risk, and Main Street Partners notes that carriers differ on what counts as delivery, which drivers are eligible and which losses are excluded. Intrepid Direct Insurance reports that some personal lines carriers have pulled back from pizza delivery operators in some states, and that a pizza franchise risk retention group went into liquidation in 2021, leaving operators with unpaid claims.

Delivery restaurants often buy HNOA as its own policy instead. Amwins’ pizza and restaurant delivery program, for example, writes standalone HNOA for restaurants with 30 or fewer locations in every state except Louisiana, with primary limits up to $5 million. Primary HNOA is designed to respond before the driver’s policy rather than after it, which is worth asking about when you compare quotes.

Franchise agreements often set minimum HNOA, umbrella and workers’ comp limits and require the franchisor as an additional insured, Prestige notes. Deliveries made by app drivers are generally handled by the app’s and driver’s insurance, but you still need HNOA for any drivers of your own.

What it costs and how to keep it affordable

There is no published average for pizza delivery HNOA, because it is priced account by account. Insureon says HNOA is usually built into the premium of the policy it is added to and gives reference medians of $45 a month for general liability, $83 for a business owner’s policy and $245 for commercial auto; its customers’ average auto limit is $1 million. Delivery-heavy restaurants should expect a higher price than an office that runs occasional errands.

Complete Markets lists the number of drivers, claims history, delivery distance, vehicle types and safety controls as the main price factors. Amwins asks for a driver list, motor vehicle records for owners, managers and drivers and five years of loss history. To keep the price down:

• Check every driver’s motor vehicle record before the first shift and at least once a year.
• Require proof of personal auto insurance that allows delivery; the Big “I” analysis suggests limits of at least 100/300/50.
• Set a delivery radius and use driver training or telematics, which Intrepid Direct lists among ways to cut accidents.
• Keep clean loss runs and report every incident promptly.
• Compare standalone delivery programs with an endorsement on your business owner’s policy. A broker such as Florin can compare quotes from several insurers.