Quick answer: who pays, in order
1. The employee’s own auto policy usually pays first. Personal policies generally cover occasional work errands in a regular car, as long as the employee isn’t delivering people or goods for a fee.
2. If the damages go past those limits, the business can be sued too. Hired and non-owned auto coverage protects the business in that case.
3. Hired and non-owned auto coverage doesn’t fix the employee’s car or cover their injuries. Employee injuries are a workers’ comp matter.
The driver’s policy
The other driver
The driver’s own personal auto liability coverage usually pays first for the other driver’s injuries and car, when the trip is an occasional work errand with no fee.
The gaps
The employee’s car
Usually the employee’s own collision coverage, if they bought it. Hired and non-owned auto coverage does not pay for it.
The gaps
The employee’s injuries
Usually workers’ comp for an employee hurt while doing the job. Not the business’s auto liability coverage.
The business’s exposure
The business’s defense
If a claim reaches the business, hired and non-owned auto coverage is the policy built for it. Without it, the business may be paying out of pocket.
See who likely pays for each loss in your situation →
Rules verified . Not legal or insurance advice.
“Who Pays?” Work-Errand Crash Checker
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Who Pays First: The Order, Loss by Loss
Most of the time the driver’s own auto insurance pays first, the business’s coverage steps in if the claim reaches it, and two losses, the employee’s car and the employee’s injuries, have their own routes.
THE DRIVER’S POLICY is the employee’s personal auto policy. It usually pays first for most work errands.
THE BUSINESS’S EXPOSURE is vicarious liability, plus hired and non-owned auto coverage if the business has it.
THE GAPS are the employee’s car, the employee’s injuries, for-a-fee driving, and commutes.
| Loss | Usually first | Then | What HNOA does NOT cover |
|---|---|---|---|
| The other driver’s injuries | The employee’s personal auto liability coverage | The business, if it is found responsible and damages exceed those limits | The employee’s own liability. HNOA protects the business only. |
| The other driver’s car | The employee’s personal auto property damage liability coverage | The business, if it is found responsible and damages exceed those limits | The employee’s own liability. HNOA protects the business only. |
| The employee’s car | The employee’s own collision coverage, if any | Possible employer reimbursement under state law or the business’s written policy; otherwise the employee | Damage to the employee’s own car |
| The employee’s injuries | Workers’ comp, for an employee hurt on the job | The employee’s own health or auto medical coverage, for what comp does not pay | Employee injuries. Many policies exclude the employee and family members in the car. |
| The business’s legal defense | HNOA, if the business has it | The business itself, or an umbrella if it follows the claim | Claims outside the policy terms, and amounts above its limits |
HNOA protects the business, not the employee’s car
Hired and non-owned auto coverage responds to claims against the business. It does not repair the employee’s car and it does not pay the employee’s injuries.
“Usually” matters here. A company-owned or rented car changes the order, and so does a driver with no insurance or a lapsed policy. The checker above handles those cases.
Does the Employee’s Own Policy Cover a Work Errand?
Usually yes: most personal auto policies cover occasional work errands in an ordinary car, pickup, or van, and the line that matters is carrying people or goods for a fee.
The standard ISO personal auto form excludes vehicles used in any “business.” But that exclusion does not apply to a private passenger auto, pickup, or van.
In practice, that means business use of a listed auto is generally covered when the car isn’t carrying people or property for a fee.
One analysis of a denied errand claim concluded that a salaried or hourly employee running an errand with no specific fee, in a car not available for public hire, should be covered.
Every insurer’s form differs, so always check your own policy. Also confirm that any umbrella policy doesn’t exclude business use.
Most personal policies cover work errands — the line is “for a fee”
A bank run, a supply pickup, or a client visit is ordinary use. Delivering food, parcels, or passengers for pay is different, and that is where denials happen. Gig driving has its own rules; see the rideshare insurance gap.
| Use | Usually covered? | Why |
|---|---|---|
| Bank or supply run | Usually yes | Occasional business use of a private passenger car, pickup, or van, with no fee. |
| Client visits | Usually yes | Same reasoning, as long as no one is paying to be carried or to have goods delivered. |
| Delivering goods for a fee | Often not | Carrying property for a fee is the usual exclusion. |
| Carrying passengers for a fee | Often not | Carrying people for a fee is the usual exclusion. |
| A company-furnished car | Often not | Personal policies commonly exclude vehicles furnished for regular use. The company’s commercial auto policy usually applies. |
Tell the insurer. Employees should tell their auto insurer they use the car for work errands. Never hide business use from an insurer; a concealed use can turn a covered claim into a dispute.
If a friend or coworker was driving the employee’s car instead, that is a different question. See when a friend crashes your car.
When the Business Can Be Held Responsible
A business can be held responsible when an employee causes a crash while doing the job, even in the employee’s own car, under a rule called vicarious liability.
The key idea is scope of employment: was the employee doing something for the business when the crash happened? An assigned errand during work hours usually is.
The coming-and-going rule generally excludes the ordinary commute. As a general pattern, the exception is an employer-requested errand on the way to or from work. Courts often call this a special errand. State law varies.
| Trip | Usually work-related? | Note |
|---|---|---|
| Assigned errand during work hours | Yes | Within the scope of employment; vicarious liability is a real risk. |
| Travel between job sites | Usually yes | Generally treated as work travel. |
| Regular commute | Usually no | The coming-and-going rule generally keeps it outside employer liability. |
| Errand on the way in (special errand) | Often yes | An exception when the employer asked for the errand. |
| Personal errand on the clock | Usually no | A personal detour is usually outside the scope; the facts matter. |
| For-a-fee delivery | Yes, work-related | The business is exposed, and the driver’s personal policy may not respond. |
A business can also face claims in its own name, not just through the employee. Examples are negligent hiring or supervision, such as knowingly sending someone with a poor driving record on errands. Whether that applies depends on state law and the facts.
Independent contractors and volunteers may be treated differently for vicarious liability. Rules may differ, so ask a lawyer.
What Hired and Non-Owned Auto Coverage Does — and Doesn’t
Hired and non-owned auto (HNOA) coverage is liability protection for the business when someone drives a vehicle the business doesn’t own; it doesn’t protect the employee and it doesn’t fix their car.
“Hired” usually means rented, leased, or borrowed for business. “Non-owned” includes employees’ personal cars used on business errands.
What it usually does
It is typically excess over the employee’s personal auto policy. It protects the business, and it may pay for the business’s legal defense of a covered claim.
What it usually doesn’t
It doesn’t cover damage to the employee’s own car. The employee’s protection is only what the employee bought. Employee injuries are a workers’ comp matter, and many policies exclude injuries to the employee and family members in the car. Read the wording.
HNOA is usually an endorsement to a general liability policy, and sometimes a standalone policy. What it costs depends on the business, so ask your agent.
If the business owns vehicles, HNOA is not enough; see commercial auto insurance. For limits above your policies, see excess vs. umbrella, and for the wider picture, small business insurance.
Who Fixes the Employee’s Car?
The employee’s car is usually repaired through the employee’s own collision coverage, unless a state law or the business’s written policy says the employer reimburses.
With no collision coverage, the repair may fall on the employee. HNOA doesn’t help, because it protects the business’s liability, not the employee’s vehicle.
Some states make employers reimburse certain job-related losses. This guide reviewed California and Illinois statute text only. Neither makes the employer the insurer for every crash.
California
Labor Code § 2802 requires an employer to indemnify an employee for all “necessary expenditures or losses” in direct consequence of job duties.
The state labor agency (DLSE, 1993) treated a reasonable mileage reimbursement as covering accident and theft losses on a personal vehicle used for work, so the employer can’t shift that cost to the employee. Without a reasonable mileage agreement, the employer must reimburse actual operating costs, which include accident or theft losses.
DLSE (1998) said an employer may require coverage above the legal minimum if it reimburses the added cost and doesn’t dictate the insurer (Labor Code § 450).
The IRS rate is accepted as a reasonable measure but isn’t mandated.
Illinois
820 ILCS 115/9.5 (since 2019) requires reimbursement of reasonable necessary expenditures or losses within the scope of employment that primarily benefit the employer, if the employer authorized or required them.
It excludes losses due to the employee’s own negligence, normal wear, and theft unless the employer’s negligence caused it. So a crash the employee caused is generally outside it.
An employee who doesn’t follow an established written reimbursement policy may lose reimbursement. Requests are due within 30 days unless the policy allows longer.
Other states
Other states were not reviewed for this guide. Some have their own reimbursement rules, so check your state labor department. Reviewed October 18, 2026.
| State | Law | What it covers | Limits |
|---|---|---|---|
| California | Labor Code § 2802 | Necessary expenditures or losses in direct consequence of job duties. DLSE (1993): a reasonable mileage reimbursement generally covers accident and theft losses on a personal vehicle used for work; without it, actual operating costs, including accident losses, are owed. | Not “the employer always pays the deductible.” Reasonable mileage is generally treated as covering losses. DLSE (1998): an employer may require higher coverage if it reimburses the added cost and doesn’t dictate the insurer (§ 450). The IRS rate is accepted as reasonable, not mandated. |
| Illinois | 820 ILCS 115/9.5 | Reasonable necessary expenditures or losses required of the employee that primarily benefit the employer, if the employer authorized or required them. | Employee-negligence losses, normal wear, and theft (unless employer negligence) are excluded. Requests due in 30 days. Noncompliance with an established written reimbursement policy may forfeit reimbursement. |
| Other states | Not reviewed | Check your state labor department. | This guide reviewed statute text for California and Illinois only. |
If the Employee Was Hurt
An employee hurt while doing the job is usually a workers’ comp matter, no matter who caused the crash.
Employee hurt? That’s workers’ comp
The business’s auto coverage isn’t the route for the employee’s own injuries. Report the injury to the employer right away; deadlines vary by state.
The ordinary commute is often outside workers’ comp, while an employer-requested errand on the way in may be treated as work. State law decides. For each state’s rules, see workers’ comp requirements by state.
The other driver’s injuries are a different claim; workers’ comp doesn’t pay them. Contractors and volunteers may differ. Ask a lawyer.
The 2026 Mileage Split
The IRS standard business mileage rate for 2026 is 72.5¢ per mile through June 30 and 76¢ from July 1, so a 2026 mileage policy has to split the year.
2026 mileage: 72.5¢ through June 30, 76¢ from July 1
The IRS raised the business rate mid-year because of higher fuel prices (Announcement 2026-11, which modified Notice 2026-10).
Jan 1 – Jun 30, 2026: 72.5¢ per mile (Notice 2026-10)
Jul 1 – Dec 31, 2026: 76¢ per mile (Announcement 2026-11)
| Period | Business rate | Source |
|---|---|---|
| Jan 1 – Jun 30, 2026 | 72.5¢ per mile | IRS Notice 2026-10 |
| Jul 1 – Dec 31, 2026 | 76¢ per mile | IRS Announcement 2026-11 |
The higher rate applies to allowances paid on or after July 1 for travel on or after July 1. Travel before July 1 stays at 72.5¢, even if the reimbursement is paid later.
Under an accountable plan, a mileage allowance at the IRS rate is generally treated as substantiated. Employees still keep mileage logs.
The IRS rate is federal. State law doesn’t require you to use it, and it isn’t a state-by-state number.
What reimbursement settles, and what it doesn’t. Mileage reimbursement pays for the use of the car. It isn’t insurance, and it doesn’t decide who pays for a crash. In California, a reasonable mileage reimbursement is generally treated as covering accident losses. In Illinois, it doesn’t remove the written-policy rules.
Rentals and Company Cars
A rental car or a company-owned car changes the order, because the business’s own policies come into play.
Rentals. A car rented for business is “hired” auto. The rental company’s coverage, any damage waiver, and the business’s hired-auto coverage may all matter, so read the rental agreement and ask your agent.
Company-owned cars. A vehicle the business owns is normally insured on a commercial auto policy, not HNOA. See commercial auto insurance for fleets.
The Policy That Prevents the Worst Case
A short written personal-vehicle policy turns most of the worst outcomes into routine paperwork.
Copy this checklist and adapt it.
- List who drives for work and how often.
- Collect a current declarations page from each driver and set a minimum liability limit. In California, reimburse any required extra cost.
- Ask each driver to tell their insurer they use the car for work errands.
- Ban for-a-fee use (deliveries for pay, carrying passengers for pay) in personal cars unless it is covered.
- Check motor vehicle records at hire and periodically. State-law limits apply.
- Reimburse mileage in writing: 72.5¢ for travel through June 30, 2026 and 76¢ from July 1, or actual costs. Keep logs.
- Ask your agent about HNOA, and about matching umbrella coverage.
- Put a crash procedure in writing: safety, police report, notify both insurers, no admissions of fault.
- Review once a year, and whenever the IRS changes the rate.
Right After the Crash
Safety comes first, then the reports; the steps below are the short version.
- Get everyone safe and call emergency services if anyone is hurt.
- Get a police report and exchange information with the other driver.
- Take photos. Don’t admit fault.
- Report to both insurers, the driver’s and the business’s, and say the trip was work-related.
- If the employee was hurt, report it to the employer for workers’ comp.
For fault allocation, see partially at fault in an accident. For the full roadside checklist, see what to do after a car accident.
FAQ
My employee crashed their own car on a work errand — whose insurance pays first?
Usually the employee’s own auto policy pays first for the other driver’s injuries and car. If damages go past those limits, the business can be pulled in, and HNOA coverage, if the business has it, typically sits excess over the employee’s policy.
Does personal car insurance cover driving for work?
Often, for occasional errands in a regular car, pickup, or van when no fee is involved. Every insurer’s form differs, so check your own policy and tell your insurer about the work use.
What does “for a fee” mean in a personal auto policy?
It refers to carrying people or goods for payment, such as delivering parcels or driving passengers. That is the usual gap in personal coverage.
Can my business be sued for an employee’s crash in their own car?
Yes, in some cases. An employer can be held vicariously liable when an employee causes a crash while driving a personal car on work tasks. State law and the facts decide.
Does the commute count as work driving?
Generally not. The coming-and-going rule usually keeps the ordinary commute outside employer liability, with exceptions that vary by state.
What if I asked them to grab something on the way in?
That is the common exception. An employer-requested errand on the way to or from work may be treated as work, so the business may be exposed. State law varies.
What is hired and non-owned auto insurance?
Liability coverage for the business when someone drives a vehicle the business doesn’t own, such as a rental or an employee’s personal car on an errand. It usually comes as an endorsement to a general liability policy, sometimes as a standalone policy.
Does HNOA pay to fix my employee’s car?
No. HNOA typically doesn’t cover damage to the employee’s own car. That repair is usually the employee’s collision coverage.
Do I have to pay my employee’s deductible?
Not automatically. It depends on your state and your written policy. California and Illinois have reimbursement laws with limits, described above; other states were not reviewed here.
What does California Labor Code 2802 require?
Employers must indemnify employees for necessary expenditures or losses in direct consequence of job duties. Agency guidance treats a reasonable mileage reimbursement as generally covering accident losses; without one, actual costs may be owed.
What does Illinois law require?
820 ILCS 115/9.5 requires reimbursement of necessary expenditures or losses that the employer authorized or required. It excludes losses from the employee’s own negligence, and it lets an employer deny reimbursement to an employee who ignores an established written policy.
What if the employee was hurt?
For an employee hurt on the job, that is usually workers’ comp, not auto coverage. See our workers’ comp guide.
What if the driver was an independent contractor?
Rules for vicarious liability and workers’ comp may differ. Ask a lawyer.
What if a volunteer was driving?
Volunteers may be treated differently too. Ask a lawyer.
Is mileage reimbursement taxable?
Under an accountable plan, reimbursement at or below the IRS rate is generally not taxable to the employee. Without one, it is generally treated as wages. Ask a tax professional.
What is the IRS mileage rate for 2026?
72.5¢ per mile for travel through June 30, 2026, and 76¢ from July 1, 2026.
Should employees tell their insurer they drive for work?
Yes. Disclose the use rather than hiding it, and ask whether anything about it affects coverage.
Do I need commercial auto instead?
If the business owns the vehicles or drivers use them regularly, yes, ask about commercial auto. See commercial auto insurance.
Sources
ISO Personal Auto Policy (PP 00 01), the posted copy on your state insurance department’s website. California Labor Code § 2802 and DLSE opinion letters of February 22, 1993 and November 5, 1998. 820 ILCS 115/9.5, Illinois General Assembly. IRS Notice 2026-10 and Announcement 2026-11, Internal Revenue Bulletin 2026-29.
Last updated:
This guide gives general information and is not legal or insurance advice. Liability depends on state law and the facts, and coverage depends on the actual policy wording. Rules verified October 18, 2026. Consult a licensed agent or attorney about your situation.
Daniel Hayes is the founder and sole researcher at AdvoraHQ. He covers U.S. personal finance, insurance, and consumer law — working directly from IRS publications, federal and state statutes, court opinions, and SEC filings rather than secondary summaries. His focus is the gap between what readers think they know and what the source documents actually say. Daniel is not a licensed attorney, CPA, or financial advisor; his articles are educational and not personalized advice. Reach him at Daniel.Hayes@advorahq.com.
