Named nonowner coverage is appropriate for any person who does not own a car but drives nonowned autos, either borrowed or rented. One common application of named nonowner coverage is where an executive officer or other employee of a corporation is provided a company car for private use yet owns no cars and is ineligible for a personal auto policy. In this situation, the corporation's auto insurance customarily covers the officer's use of the company car but does not cover the officer's use of other autos. The named nonowner endorsement can be used to provide this coverage. Of course, this exposure can also be insured by extending the corporation's policy with a drive other car endorsement (see Drive Other Car Coverages).

Another use for named nonowner coverage is to provide underlying auto coverage to meet the requirements for a personal umbrella policy. Many companies will not issue such an umbrella policy unless the proper underlying coverage is in place. Umbrella insurers insist on proper underlying coverage even for those who do not own a personal auto or have one furnished to them.

Although the primary purpose of named nonowner coverage is to cover the named insured for the use of nonowned autos, the form also provides fourteen days' coverage on newly acquired private passenger autos, pickups, or vans. A newly acquired pickup or van must have a gross vehicle weight of less than 10,000 pounds and not be used for the delivery of goods and materials. (Exceptions to this exclusion are the incidental delivery of goods and materials, and farm use.) The named nonowner endorsement stipulates that if other insurance applies to the newly acquired vehicle, all coverage under the named nonowner policy ceases with respect to that vehicle.

Another point of general interest is that—as the title of the coverage suggests—the only person directly insured while using or occupying nonowned autos is the individual specifically named in the endorsement. Unlike the personal auto policy, the named nonowner endorsement does not automatically cover a resident spouse or family members. If a spouse, family member, or other additional person wants to be covered under the endorsement while occupying nonowned autos, he or she must be named in the endorsement.

Liability coverage applies to any person or organization with respect to vicarious liability for the named individual's use of “your covered auto.” This provision is the same as in the personal auto policy. Any person or organization is also covered for vicarious liability for the named insured's use of any nonowned vehicle (as long as that vehicle is not owned by the person or organization seeking vicarious liability coverage). For example: “A” and “B” work for the “XYZ Company.” “B” does not own a car, but has purchased a named nonowner policy. If “B” were to use “A's” car to run an errand for the company, XYZ would have vicarious liability protection under “B's” named nonownership policy.

The fourteen day limit is included in this endorsement for two reasons. It recognizes that someone who does not own a car may, at some time, purchase a car. It gives that person a little “breathing room,” a little time to secure a standard personal auto policy, but still provides that person with liability protection. It also keeps the nonownership just that—as the pricing of a nonownership policy is considerably less than a standard policy, the insurers cannot afford to give owner's coverage at nonowner's rates.

The same other insurance provisions govern named nonowner coverage as apply to the various parts of the standard personal auto policy. Named nonowner coverage, then, is virtually always excess over other like insurance. The only time it is not is when the auto involved is “your covered auto,” as narrowly defined in the endorsement. Naturally, if there is no “other insurance” on a nonowned auto, the named nonowner coverage provides first coverage.

The endorsement covers the named individual “for the maintenance or use of any auto or trailer.” (Trailer takes on the same definition as used in the standard personal auto policy to which the endorsement is attached.) Inclusion of trailers avoids the necessity of arranging separate insurance for an owned or nonowned trailer that the individual may use with a nonowned auto. The applicability of “any auto,” of course, is restricted by the exclusions of part A of the personal auto policy except as the exclusions are altered in the endorsement.

One of the most important exclusions eliminates coverage for any vehicle owned by the named insured, other than “your covered auto.” (“Your covered auto,” as explained earlier, takes a much more limited definition in this endorsement than in the regular personal auto policy.) This reinforces the purpose of the policy to cover only nonowned autos or certain autos acquired during the policy period. Note that there is no exclusion of an auto furnished or available for the regular use of the named individual. Thus, the named individual would have coverage, for example, on a company car furnished for regular use. As mentioned earlier, this coverage would be excess over any provided as to that car by the corporation's auto policy.

The endorsement also excludes the ownership, maintenance, or use of any vehicle, other than “your covered auto,” owned by any family member. An exception to the exclusion allows coverage for the named individual's maintenance or occupancy of vehicles owned by family members, however.

The usual personal auto exclusions regarding the use of an auto in an auto business or any other business are replaced with one exclusion in the nonowner endorsement. The replacing exclusion applies to any insured for the maintenance or use of any vehicle in the business or occupation of that insured. Because this exclusion is stated not to apply to an auto operated by the named individual, the intent is clearly to provide vicarious liability coverage for that “person or organization” for the named individual's use of an auto in the business of that person or organization. For example: the  named individual's employer is covered with respect to its employee's negligence, if the employee is driving a nonowned car other than a company car. Because of the deletion of the two regular personal auto policy exclusions of business use, a named nonowner policy covers the named insured for the maintenance or use in business—automobile-type or otherwise—of virtually any type motor vehicle with four or more wheels.

Under the current edition of the personal auto policy, the named insured has coverage for damage to someone else's car under section D, damage to your auto. If the individual named on PP 03 22 borrows or rents a car and becomes liable for damage to that auto while it is in his custody, the named nonowner endorsement will not respond. The personal auto policy does respond under these circumstances, but only if the insured carries physical damage on one of his or her owned autos.

The named individual is a covered person while occupying a motor vehicle designed for use mainly on public roads or a trailer of any type. He or she is also covered as a pedestrian, when struck by such a vehicle. Any other person is covered only while occupying “your covered auto”, as defined on the endorsement. There is no coverage whatsoever for anyone other than the named insured while occupying a nonowned auto.

As under named nonowner liability coverage, there is no exclusion of medical payments coverage while the named insured is occupying an auto furnished or available for his or her regular use. Medical payments coverage, however, does not extend to an auto owned by the named individual, other than “your covered auto” in its limited sense.

There is no exclusion of the named individual's occupancy (or being struck by) an auto owned by or furnished to a family member. And, the one medical payments exclusion relating to the occupancy of certain autos used in business is deleted and replaced as in the liability provisions of the named nonowner endorsement. In effect, the named individual has medical payments coverage while operating or occupying an auto in any business, including his own. However, if workers compensation benefits are available or required for an injury, then [IDL:PP 03 22 01 05pdf^PP 03 22^PP 03 22] would provide no coverage under these circumstances.

The named nonowner endorsement covers the following persons for uninsured motorists coverage: the named individual; any person occupying “your covered auto,” if applicable; and any person entitled to recover damages because of injury to the first or second covered person. This final category of insured is often called a derivative insured; examples of derivative insureds are: a husband claiming loss of consortium for an injured wife; a parent claiming medical expenses for an injured child, etc. As in other sections of the named nonowner endorsement, coverage centers on the named individual.

Other than for some largely editorial changes, the named nonowner uninsured motorists provisions are the same as in the standard personal auto policy. The current edition of form [IDL:PP 03 22 01 05.pdf^PP 03 22^PP 03 22] does contain the option for the purchase of uninsured motorists property damage. Thus, the holder of a named nonowner policy can be protected for loss to a nonowned car, if struck by an uninsured motorist.

The named nonowner policy rule of the personal auto manual outlines the rating procedure for this coverage. The charge for liability and medical payments coverages is 50 percent of the premium that would apply if the individual owned an auto. The charge for uninsured motorists coverage is  what auto owners pay for their “first auto.” The rating information appears in the appropriate state rate or exception pages of the state in which the individual resides.

Named nonowner physical damage coverage—as to both rating and forms—is a “refer to company” risk. Since the ISO form does not provide for physical damage coverage, an insurer would need to manuscript such a provision.