A Sub's Truck Hit a Customer's Fence: How Subcontractor Commercial Auto Pays

When a subcontractor's truck damages a customer's property on your job, the customer calls you, because you're the one they hired. Who actually pays depends on whose vehicle it was, which policies are in force, and what you collected from the sub before the job started.

Example used below (an illustration, not a real claim): a framing sub backs his pickup into a homeowner's fence while leaving your jobsite.

Quick answers

• The sub's commercial auto policy usually pays first when the sub's own vehicle caused the damage.

• General liability doesn't cover auto accidents. Standard GL policies exclude damage from autos.

• Your hired and non-owned auto (HNOA) coverage is a backup, not a replacement for the sub's auto policy.

• Additional insured on GL is not the same as coverage on auto. They're different endorsements.

• A certificate of insurance is a snapshot. Confirm the sub's auto policy is active before they start.

1. Whose vehicle is it?

In commercial auto liability, the vehicle owner's policy normally responds first. If the sub owns the truck and carries commercial auto liability, that policy should handle the damage to the homeowner's fence. That's third-party property damage, which is exactly what auto liability is for.

So the first step is to get the claim opened with the sub's auto insurance company.

If the sub only has a personal auto policy on a truck used for business, the claim may run into trouble. Personal auto policies may exclude or limit business use. If that policy denies the claim, the problem starts moving toward you.

2. Why the sub's general liability won't help

The standard commercial general liability (GL) form excludes bodily injury and property damage arising from the ownership or use of autos. If the truck caused the damage, the sub's GL doesn't pay, no matter how high the GL limit is.

This is a common misunderstanding. "$1 million GL" doesn't mean $1 million for everything. GL handles things like slip-and-falls and damage from the work itself. Auto handles vehicles.

3. Your hired and non-owned auto is a backup

Hired and non-owned auto (HNOA) coverage protects your business's liability for vehicles you don't own, such as rented vehicles or employees' cars used for work. If a sub's truck damages property on your job and the customer comes after you, HNOA may respond for your liability.

It usually sits excess over other insurance. That means it steps in when the sub's auto policy denies the claim, isn't enough, or doesn't exist. It doesn't replace the sub's coverage.

If your only auto coverage is a policy on your own work truck, with no HNOA, a sub's accident that lands on you could be uncovered. We cover this in more detail in our post on hired and non-owned auto for contractors.

4. Additional insured: auto and GL are different forms

Many subcontract agreements say "name us as additional insured." That usually gets done on the sub's GL policy, with endorsements such as:

• CG 20 10 (ongoing operations)

• CG 20 37 (completed operations)

• CG 20 33 (automatic status when required by written contract)

None of these put you on the sub's auto policy. For auto, the usual form is CA 20 48, Designated Insured for Covered Autos Liability. If your contract requires it and the sub's auto policy carries it, you have a much stronger position when the sub's truck causes damage on your job.

The fix is in the contract: require the right endorsement for each policy. See our post on COI add-ons Minnesota general contractors are asking for.

5. What the certificate in your file actually proves

A certificate of insurance shows what policies existed on the day it was issued. It doesn't change the policy and doesn't add you as an insured. Before a sub starts, and again on longer jobs, check:

• Is the sub's auto policy listed and still in force?

• Are the auto liability limits high enough for your work?

• Are you on the auto policy through CA 20 48, or only on the GL?

• Does your contract require a waiver of subrogation, and is it endorsed on the policies?

If anything is unclear, ask the sub's agent to confirm it in writing.

6. If the sub had no insurance, or not enough

When the sub's auto coverage fails, the claim usually works through other policies:

• Sub's auto: denied (lapsed, or a personal policy that excludes the use).

• Your HNOA: may respond for your liability, depending on how your policy is written.

• Your GL: still excludes auto.

• Your umbrella: only sits on top of your own auto coverage. It doesn't fill a gap where you have no auto coverage underneath.

• The homeowner's own policy: may pay for the fence, then try to recover the cost from the sub, from you, or both.

When nobody's auto coverage responds, you can become the target of a lawsuit. Defense costs can be the most expensive part.

7. Indemnity clauses: what they do and don't do

Most subcontract agreements include an indemnity (hold harmless) clause, where the sub agrees to cover losses caused by the sub's work.

• Minnesota: Minnesota Statutes § 337.02 makes indemnity clauses in building and construction contracts unenforceable, except to the extent the damage was caused by the sub's own fault (or the fault of the sub's people). In plain terms, the sub can't be made to pay for damage you caused.

• Arkansas: Arkansas also limits indemnity clauses in construction contracts (Ark. Code § 4-56-104).

Have your attorney review the clause for the state where you work. And remember, an indemnity clause gives you a right to go after the sub. If the sub has no money and no insurance, that right may not be worth much. That's why the insurance requirements matter more.

FAQ

My sub says his GL covers his truck. Is that right?

No. Standard GL policies exclude damage arising from autos. Damage from a vehicle accident is an auto policy claim.

Do I need hired and non-owned auto if I already have commercial auto on my own truck?

Usually, yes. A commercial auto policy without HNOA may only cover the vehicles listed on it. HNOA protects your business when vehicles you don't own are used for your work.

The certificate lists my company as additional insured. Am I covered on the sub's auto policy?

Not necessarily. Additional insured on the GL doesn't put you on the auto policy. Look for CA 20 48 on the sub's auto policy.

Is requiring my subs to carry commercial auto enough?

It's a good start. Also confirm the policy is active before the job starts, and require the right endorsements in your subcontract.

Will a claim under my HNOA affect my rates?

It can. A paid claim shows on your loss history. Your insurance company may try to recover what it paid from the sub or the sub's insurer.

Want your contractor coverage and sub requirements checked? Call City Insurance and Financial Services at (763) 582-1888 or contact us. Related: commercial insurance.

City Insurance and Financial Services, Minnetonka, MN.