Non-owned Auto Liability covers the insured when an employee uses his or her own personal vehicle in the course of the insured's business. Exposures for this class can run the gamut from the benign (a single employee running to the bank once a week) to the severe (a large fleet of salespeople using their own vehicles). For certain classes of business, the exposure is significant, unwieldy and particularly difficult to price. In these cases, ISO is a difficult starting point for the exposure as there is little frequency in the class of business to make it credible for excess layers. Sound underwriting judgment is essential for this class of business.

Typical classes for this exposure are home healthcare/social service operations, pizza/food delivery and company salespeople. Each of these classes has different levels of non-owned exposure. For these types of accounts, two questions should be considered:

1. What is the proper conversion of non-owned units to owned units?

How many home healthcare nurses using their own vehicles would equate to an owned private passenger vehicle? How about food delivery operations? Does an operation with 100 salespeople using their own vehicles have the same exposure as a similar operation of 100 salespeople using a company owned vehicle?

Converting from non-owned units to owned units is an inexact science. While opinions will vary greatly from underwriter to underwriter, here are some thoughts and suggested approaches for determining a potential starting point:

• For home health nurses, one might divide the number of total annual visits of all home healthcare workers by the number of expected annual visits from a full-time home healthcare nurse to arrive at a full-time owned unit equivalent.
• For food delivery, one might take the total annual delivery receipts and divide by an estimated amount of receipts that a full-time driver would generate in a year to arrive at the equivalent.
• For company salespeople, is the exposure really that different for a full-time salesperson who is using his or her own vehicle or a company-owned vehicle? In this case I contend the conversion from non-owned to owned should be relatively the same.

2. What type of debit/credit structure should be used?

Presumably, the insured will require the employee to carry a personal auto policy that affords liability coverage for accidents arising out of "business use." The insured's Commercial Auto policy would therefore cover claims on a contingent basis in the event the employee's personal auto coverage does not respond or the limits are exhausted. The amount of personal auto limits required of the employee will determine the attachment point of the Commercial Auto policy in the event of a non-owned loss.

With this in mind, the answers to some key questions will help formulate a debit or credit structure for the risk:

• Does the insured require the employee to hold financial responsibility limits or something higher?
• Does the insured collect certificates of insurance (COI's)?
• Are procedures in place to assure the employee is maintaining his or her personal auto limits?
• Does the insured require copies of motor vehicle registrations (MVRs) for drivers? Are MVRs required at hire and/or annually?
• Does the insured require documentation of regular maintenance?

Sounds pretty simple, right? Figure out an owned equivalent for the fleet size, and then use a debit or credit to arrive at the final price. It is not that easy! The exposure on this class of business can be significant; the losses can become very vertical, and pricing can show wide variance. This is where the true art of underwriting comes into play.