Do you have a large subcontractor exposure when federal filings are not required?

Why Insurers Exclude Hired Auto Coverage in this Scenario and How to mitigate.

Courier and delivery companies that rely on independent contractors (ICs) using their own vehicles face a tough insurance market. Many insurers flat-out exclude “hired auto” or non-owned auto liability coverage when a business has a large subcontractor exposure with no federal filings. For example, RLI’s underwriting guidelines list “large subcontractor exposure when federal filings are not required” as ineligible for hired auto coverage​ – rlicorp.com. The rationale is rooted in risk:

• Uncontrolled Fleet Risk: If a company has dozens of drivers using personal vehicles that the insurer isn’t scheduling or controlling, the exposure is similar to a large fleet – but without the safeguards of a traditional fleet policy. Underwriters worry that they are insuring effectively an unsupervised, third-party fleet of cars.

• Lack of Regulatory Oversight: Federal filings (such as an ICC/MC number or DOT authority) indicate a regulated motor carrier. If no filings are required (because operations are intrastate with light vehicles), the business is not subject to federal safety regulations or proof-of-insurance requirements. Insurers see this as a gap – there’s no regulatory mandate forcing the company to carry primary auto liability on those vehicles. In the past, some courier firms tried to avoid full trucking insurance by operating without authority, but that left their hired auto insurer on the hook as primary in accidents – ​oforce.com. Without an FMCSA filing (and the accompanying MCS-90 endorsement), an insurer providing hired/non-owned auto coverage could unexpectedly become the primary payor in a serious accident.

• Personal Auto Limitations: These businesses often require IC drivers to carry their own personal auto insurance. However, personal auto policies typically exclude business use for delivery work. For years some personal insurers overlooked this, but today they are more likely to deny claims for accidents during delivery gigs – ​oforce.com​oforce.com. That means when an IC causes a crash, the driver’s insurance might not pay, leaving the courier company’s hired/non-owned policy to respond first. This “surprise primary” exposure makes insurers very wary. In short, a hired auto policy that was meant to be excess or contingent can turn into a primary commercial auto policy without appropriate premium.

• Adverse Loss Experience: The delivery and gig-driver industry has seen high accident frequency and severe claims, contributing to a decade of unprofitable commercial auto results – ​oforce.com​oforce.com. Insurers have suffered increasing HNOA losses in these sectors, with nuclear verdicts and social inflation driving up costs​oforce.com​oforce.com. As a result, fewer than 10 carriers nationwide are even willing to write Hired/Non-Owned Auto for large delivery fleets, and those that do impose strict conditions​ – oforce.com. Many add high deductibles ($10k–$100k) and require detailed reporting of all drivers on the policy – ​oforce.com. Essentially, underwriters will decline or exclude hired auto coverage if they feel the business is trying to insure a de-facto delivery fleet as “non-owned” autos without proper controls.

Bottom line: The exclusion exists to prevent companies from skirting normal commercial auto insurance. If you have a big fleet of contractors’ vehicles but no official motor-carrier authority or filings, many insurers won’t extend hired auto coverage because they fear the uncontrolled risk and lack of oversight – ​rlicorp.com. They would prefer or require you to carry a full primary auto liability policy (as an admitted carrier would demand for a regulated trucking operation) rather than a contingent HNOA policy. In the absence of that, the risk falls outside their appetite.

Structuring Your Operation to Secure Hired Auto Coverage

Despite the challenges, there are ways to restructure or document your business such that insurers become more willing to offer hired auto (or at least some form of non-owned auto) coverage. Here are several strategies and structural adjustments that can help satisfy insurer requirements:

1. Obtain Operating Authority and Filings (If Feasible)

One option is to legitimize the operation as a for-hire carrier in the eyes of regulators. This can involve obtaining a U.S. DOT number and interstate Motor Carrier (MC) authority (or state-level operating authority for intrastate carriers, if available). Doing so triggers federal insurance requirements – for example, an interstate courier hauling goods for hire would typically need to carry at least $750,000 in liability coverage and file proof (Form BMC-91) with the FMCSA. From an insurer’s perspective, a company with federal filings on record is acknowledging it must insure its vehicles like a true motor carrier. In practice:

• You may need to have an MCS-90 endorsement on your policy, which guarantees payment to the public for any accidents under your authority, even if a vehicle wasn’t listed. This gives regulators (and insurers) confidence that someone is providing primary coverage for all those contractors on the road.

• Insurers might then issue a Motor Carrier policy (a commercial auto policy) with an “any auto” or hired autos liability provision covering your independent contractor vehicles while working for you. Essentially, you’d be insuring the contractors’ cars as “hired autos” under your authority. Some courier companies historically achieved this by nominally leasing a contractor’s vehicle onto the company (even transferring a vehicle title to the company name in extreme cases) to get a policy and filings​oforce.com. Once the filing is in place, the insurer is effectively covering the ICs as primary.

• Does this mitigate the exclusion? Yes – if you have to make federal (or state) filings, you no longer fall under the “no filings” taboo. Insurers like RLI indicate that the deal-breaker is large subcontractor fleets without filings​rlicorp.com, implying that with proper authority/filings, they would consider the risk (albeit likely as an E&S placement with high premiums). Essentially, you’d be treating the operation as a trucking company with owner-operators. The hired autos become part of a declared fleet under your authority, rather than an incidental exposure.

• Trade-offs: Gaining interstate authority just to insure an intrastate fleet isn’t a small step. It means higher minimum insurance limits, compliance with DOT safety rules, driver qualification files, etc. You’ll pay significantly more (closer to a true commercial auto premium). However, this approach formalizes the relationship and may open up more insurance markets. Some established couriers do get DOT/MC authority if they occasionally cross state lines or just to be eligible for certain contracts. If your deliveries involve interstate commerce (even indirectly, as part of a supply chain), this can be a natural step. In short, having an MC or state permit can legitimize your insurance placement, but you must be prepared to act like a regulated carrier.

2. Strengthen Contracts and Insurance Requirements for ICs

Whether or not you pursue operating authority, you should fortify the contractual arrangements with your drivers to make the risk more palatable to insurers. Key measures include:

• Require Adequate Auto Insurance from Contractors: Most courier companies already mandate that ICs carry personal auto liability insurance. It’s wise to raise the required limits above the bare minimum. Many require at least 100/300/50 or $300,000 combined single limit on the contractors’ policies​oforce.com. More importantly, insist on a commercial use endorsement or a commercial auto policy. Standard personal auto policies often exclude business deliveries, so from an insurer’s standpoint, an IC’s personal 50/100/50 policy is effectively no insurance during a delivery claim. If instead the driver has, say, a Business Use endorsement on their personal policy (or a rider specifically covering delivery work), there’s a better chance the driver’s insurer will pay first​oforce.com. Some insurance carriers offer special endorsements or policies for gig drivers (e.g. rideshare endorsements, or policies for Uber Eats/DoorDash drivers). In your IC agreement, spell out that the contractor must have insurance that isn’t voided by delivery work. Obtain certificates of insurance and even add your company as an additional insured on their auto policy if possible. (Not all personal insurers will add a business as AI, but commercial ones will.) This contractually pushes primary responsibility to the driver’s insurer. It won’t entirely relieve your company’s liability, but it’s a first layer of defense that insurers love to see.

• Verify and Monitor Coverage: It’s not enough to require insurance – you have to police it. Insurers are increasingly asking whether the company actively verifies that each contractor maintains coverage. Consider using compliance management services or platforms (some courier management companies or MGAs will track drivers’ insurance for you). If a driver’s policy lapses or their business-use endorsement is dropped, they should be taken off dispatch until fixed. From an underwriting perspective, showing that “we verify every IC’s insurance and require notification of cancellation” will make a carrier more comfortable. They know your hired auto policy is truly excess, not a substitute for lapsed personal insurance.

• Use Hold Harmless and Indemnification Clauses: Your independent contractor agreement should include strong indemnity provisions where the driver agrees to defend and indemnify your company for liabilities arising from their vehicle use. While this may have limited practical value (an individual IC might not have deep pockets to cover a big claim), it sets a clear expectation and can be cited to an insurer as a risk transfer measure. If the IC has a commercial policy naming you as additional insured, their insurer is on notice to defend your company as well in case of a lawsuit. These contractual risk transfers are looked upon favorably by underwriters (they might not eliminate your vicarious liability, but they strengthen the case that the IC’s insurance should kick in first).

• Establish Safety Criteria Without “Control”: One underwriting concern with IC fleets is the company’s limited ability to enforce safety (since too much control might jeopardize the contractor status). However, insurers will ask about driver vetting and training. You can implement non-mandatory or incentive-based safety programs. For example, offer optional training modules, or require certain credentials (like a clean driving record, no DUIs, etc.) as a condition of contract. Some companies use telematics or app-based monitoring of driving behavior – if you do, frame it as part of service quality, not as an employer mandate. The goal is to show the insurer that although drivers aren’t employees, you’re not just letting anyone with a pulse drive for you. Highlight any safety technology or screening you use. While you must avoid treating contractors like employees, you can set performance standards (e.g., drivers will be removed for excessive accidents or violations – as independent businesses they failed to meet contract standards). Demonstrating a commitment to safety can help counteract the insurer’s fear of an unruly subcontractor fleet.

3. “While Under Dispatch” Insurance Programs for Contractors

A newer solution in the industry is to arrange on-demand commercial auto coverage for the contractors themselves. One example is a “While Under Dispatch” (WUD) auto-liability program, offered by a few specialty brokers and contractor management firms. Under a WUD program, each independent driver is covered by a commercial auto policy during the time they are actively working (on a delivery or en route to a pickup)​oforce.com. When the driver is off the job, their personal insurance resumes primary responsibility.

How does this help? In effect, every contractor has primary commercial auto insurance while performing deliveries, which dramatically reduces the exposure that was previously falling to the company’s hired auto coverage. For instance, the platform Openforce (an IC management company) partners with insurers to provide usage-based coverage that a driver can opt into; the premium can be calculated per route or per hour and is often deducted from the driver’s settlement​oforce.com​oforce.com. This coverage might carry, say, a $1M limit during dispatch. If an accident happens on the delivery, the WUD policy pays first, protecting both the driver and the contracting company.

From the courier company’s perspective, enrolling all your IC drivers in a WUD program makes your own insurance much more obtainable. Your Hired/Non-Owned Auto policy becomes truly excess – essentially a second layer above the drivers’ coverage. Insurers are far more willing to offer HNOA (and at more reasonable rates) in this scenario​oforce.com. In fact, if you can show an underwriter that every driver is part of such a program, they may even apply a premium credit to your HNOA policy​oforce.com. You’ve addressed their key concern: that otherwise uninsured cars are out there delivering for you.

To implement this, you typically work with a specialty broker or MGA that has a WUD group policy. The drivers might be named insureds or added via endorsement when they sign up. The cost can be passed on to the contractors (often as a small percentage of each delivery fee or a per-mile charge). Some delivery companies choose to subsidize a portion of it because it ultimately protects the company from large losses. Keep in mind, you’ll need buy-in from your driver network; some contractors resist paying for additional insurance. However, framing it as protecting their livelihood (and possibly required to continue contracting) helps. In some cases, the economics can be designed such that the driver only pays for active time, which feels fair – they’re not paying a full monthly premium when they only drive part-time​oforce.com​oforce.com.

Overall, a WUD program is one of the most effective ways to bridge the gap in this IC model. It gives everyone proper coverage without converting contractors to employees. Many insurance experts view it as the future for gig delivery risks, keeping Hired/Non-Owned coverage sustainable​oforce.com​oforce.com. If you haven’t explored this option, discuss it with your broker or a service like Openforce or One80 Intermediaries – they can often set up the program and integrate the deductions/coverage with your contractor payment system.

4. Restructure as a Broker or Introduce a Contingent Liability Layer

Another structural shift is to consider positioning your company not as the carrier, but as a broker of the delivery services. In trucking, freight brokers do not haul cargo themselves; they arrange for motor carriers to do so, and contingent auto liability insurance is how brokers protect themselves. If your delivery drivers each operated as independent businesses (with their own commercial insurance), your company could be more of a logistics coordinator. You’d then purchase a Contingent Auto Liability policy which only kicks in if the contractor’s insurance fails or is insufficient​ajg.com. This is similar to how Amazon Flex and other gig platforms structure coverage – they require the driver’s personal policy to respond first, but they have a contingent/excess policy in case of a gap.

In practice, fully converting to a pure broker model for local couriers can be challenging (many ICs won’t have a true commercial auto policy or any authority of their own). However, you can move in this direction by treating each IC as a separate business entity in contracts. Some delivery companies require their drivers to form an LLC or sole proprietorship and carry a commercial general liability and auto policy under that business name. This way, the relationship is “company hires another company” rather than individuals. If you achieve this, your risk profile starts to resemble a network of sub-haulers or subcontracted delivery firms.

You could then secure a Contingent Auto Liability policy (or an Excess Liability policy) for your company. This would not be a standard HNOA endorsement but a special coverage recognizing you as a broker. For example, freight broker contingent liability covers the broker if a hired trucker’s insurance doesn’t cover a loss​mynewmarkets.com. Some insurers or MGA programs might offer a similar product for delivery networks. It may require that each contractor maintain certain minimum auto limits (e.g. $1M CSL). The contingent policy would sit above those – effectively acting as backstop if the driver’s insurance denies a claim or is exhausted.

Be aware that contingent liability policies often have strict conditions and require proof that you vetted the contractor’s insurance. (In freight brokerage, if the broker didn’t obtain a certificate of insurance from the carrier, the contingent coverage might not respond.) So this approach necessitates diligent admin work to collect COIs from every driver and keep them updated. It overlaps with the contract requirements mentioned earlier. If done right, though, it can make your company’s liability truly secondary, which is exactly what underwriters want to see.

5. Use Specialized Insurance Markets and Programs

If standard insurers are declining your hired auto coverage, look to the Excess & Surplus (E&S) market and niche programs. In recent years, specialty underwriters have developed programs tailored to last-mile delivery, couriers, and gig-driving exposures. These programs understand the independent contractor model and offer either primary or excess auto liability solutions to fill the gaps. Some options:

• Monoline Hired/Non-Owned Auto Programs: Certain carriers (often on a non-admitted basis) will write a standalone HNOA policy for delivery operations. For example, Hudson Insurance Group offers a monoline Hired & Non-Owned Auto program for food delivery and courier services (including those using independent contractors)​hudsoninsgroup.com. These programs typically provide a $1M liability limit (excess of the driver’s own policy) and are available through wholesale brokers in most states​hudsoninsgroup.com​hudsoninsgroup.com. They specifically target businesses like restaurant delivery fleets, third-party food couriers, and even cannabis delivery services where drivers use their own cars​hudsoninsgroup.com. Working with a knowledgeable wholesale broker or MGA, you might find a program willing to schedule all your drivers and craft a policy for you. Expect to furnish detailed info (driver lists, loss runs, safety practices) and possibly accept a high deductible. The premium will be higher than a standard GL endorsement, but far less than insuring an entire fleet of owned vehicles.

• Managing General Agents (MGAs) with Last-Mile Programs: Firms like Risk Placement Services (RPS), One80 Intermediaries, Amwins, and others have “hard-to-place” transportation programs. These can accommodate non-standard risks that admitted carriers won’t touch. For instance, RPS markets a nationwide HNOA product for “hard-to-place risks” such as food delivery and couriers with no delivery time guarantees​rpsins.com. Such MGAs act as intermediaries to Lloyd’s of London or specialty insurers who are comfortable with the independent contractor exposure (usually at a price and with strict conditions). Your retail insurance broker can access these programs via a surplus lines channel. The advantage is these MGAs understand the gig delivery model – you won’t have to educate them from scratch. They may also bundle in related coverages (cargo, excess liability, etc.) if needed.

• Group Purchasing or Association Programs: In some cases, industry associations or large platforms create group insurance schemes. If your business contracts for a larger entity (for example, you provide courier services to a major e-commerce company), find out if they have an insurance program you can piggyback on. Some big companies mandate that their independent delivery providers carry contingent insurance or participate in a master policy. Being part of a group program can leverage volume to get better terms. If no such program exists, you could band together with similar courier companies to approach the E&S market with a larger portfolio (this is more theoretical, but brokers sometimes aggregate risks to negotiate coverage).

• Occupational Accident and Contingent Liability Package: As a complement to auto liability, many IC-based delivery businesses purchase Occupational Accident insurance for their drivers, along with a contingent liability endorsement. Occupational Accident Insurance (Occ Acc) isn’t auto coverage – it covers medical bills and disability for independent contractors injured on the job (since they aren’t covered by Workers’ Comp). However, it’s worth mentioning because it protects the drivers and can protect you from being pulled into a workplace injury lawsuit. Contingent liability (in this context) means if a contractor tries to claim they were actually an employee and sues for work comp benefits, the policy will respond​blog.ryanspecialty.com. While this doesn’t directly enable hired auto coverage, it strengthens your overall risk management profile. Some insurers view the purchase of Occ Acc for all contractors as a sign that the company is proactive about IC-related risks. It may slightly soften an underwriter’s stance knowing that an injured driver won’t immediately turn around and sue the company (or at least there’s insurance to handle it). Additionally, if a severe accident occurs, the driver’s medical needs are taken care of by Occ Acc, which can sometimes mitigate the liability damages sought in an auto claim. In summary, maintaining an Occ Acc policy for your drivers is a best practice when using an IC model – and it could be one more checkbox for an insurer to say “this company handles its contractor exposures responsibly.”

Actionable Guidance for Brokers and Owners

Structuring insurance for an independent-contractor courier fleet is complex, but it can be done with the right approach. Here are some practical steps and considerations for securing Hired Auto coverage in this model:

• Engage a Specialist Broker: Work with a broker or agent experienced in transportation E&S markets. They will know which carriers or programs might entertain your risk. Share the full details of your operations (driver count, radius, commodities delivered, loss history, etc.) and the steps you’re taking to manage the exposure. A creative broker can approach specialty underwriters and negotiate terms if they can present your risk in a favorable light. Don’t expect a quick, cheap quote – but a specialist will know if, say, a Lloyd’s syndicate or MGA program is writing similar businesses and guide you accordingly.

• Consider a Hybrid Insurance Program: You might end up with a layered solution: for example, enrolling contractors in a While-Under-Dispatch primary program, and then purchasing an excess liability policy or HNOA policy for the company on top of that. Be open to carrying multiple policies to patch the coverage together. One policy alone might not give you everything (e.g. a WUD policy protects during dispatch, but you’d still want contingent coverage for off-dispatch scenarios or if a claim implicates your company directly). A knowledgeable broker can help design a program with multiple pieces (primary, excess, contingent, occ acc) that together provide comprehensive protection.

• Address the Exclusion Upfront: When approaching insurers, directly acknowledge the “independent contractor fleet” aspect and the lack of filings, and explain how you are overcoming those risk factors. For instance, you can write a brief narrative for underwriters: “ABC Couriers utilizes 50 independent contractor drivers, all operating personal vehicles intrastate. We require and verify each driver’s insurance (minimum 100/300 limits with business use endorsement) and have partnered with XYZ Insurance to provide a While Under Dispatch auto policy for all drivers at $1M limits. Thus, during any delivery, the driver has primary coverage. We are seeking an excess/hired auto policy for additional protection and true contingent liability.” By demonstrating that you recognize the exposure and have taken concrete steps (as outlined in this answer), you increase the chance an underwriter will make an exception to their exclusion or find a way to write the risk. In essence, show them you’re not the prototypical “large subcontractor, no-filings” account trying to game the system – you’re actively managing the risk.

• Leverage Federal/State Authority if Possible: If your operations could extend across state lines (even occasionally), obtaining a DOT number and MC authority can be a game-changer. It not only expands your business opportunities, but also gives you access to traditional trucking insurers who might write an owner-operator fleet policy. Even for intrastate-only businesses, some states have their own authority/filing requirements for couriers or “for-hire intrastate carriers.” Research your state’s laws – if there’s an option to get listed as a registered intrastate carrier with insurance on file, doing so could assuage insurers’ concerns. It tells them you’re willing to operate under carrier regulations and likely carrying proper coverage. Just remember, the moment you file as a carrier, you must have a compliant insurance policy in force – which likely means higher limits and no “escape” clauses. Make sure your insurance is lined up before pulling that trigger.

• Use Contractual Risk Transfer and Insurance Proactively: Don’t wait for an insurer to ask – go ahead and tighten up your IC agreements, insurance requirements, and safety protocols now. Implement an Occupational Accident plan for all drivers and contingent liability if available. These will not only protect your business in other ways but can be selling points during the insurance underwriting process. When an underwriter sees a delivery company that requires all drivers to carry business insurance, provides them with additional coverage while working, carries Occ Acc for injuries, and actively monitors compliance, it stands out. You stop looking like a high-risk “dice roll” and more like a partner who is sharing in the risk management. This can make a difference in getting to “yes.”

• Be Prepared for Cost and Deductibles: Even with all the right moves, the reality is hired/non-owned auto coverage for a large IC fleet will be expensive. Budget accordingly. Premiums could be on par with insuring a similar-sized owned fleet. Also, expect that the insurer may impose a hefty self-insured retention (SIR) or deductible – for example, the first $10,000 or $25,000 of any auto liability claim might be on you. This is a way to filter out frequent small claims and ensure the insured has “skin in the game.” Consider setting up a captive or self-insurance fund for these smaller losses if needed. As a broker/owner, set the client’s expectations that this is not a cheap line of coverage; it’s critical protection for catastrophic claims. In the long run, one large accident can bankrupt an uninsured courier company, so paying the premiums and absorbing a deductible is the prudent cost of doing business.

• Explore Alternative Carriage Models: Finally, re-evaluate if not owning any vehicles is a hard requirement. Some delivery businesses find that owning or long-term leasing even a portion of the fleet (and employing those drivers) can drastically simplify insurance. For example, you could maintain an internal fleet for the highest-risk routes (or as backup) and insure those under a normal commercial auto policy, while still using ICs for overflow or certain areas. This hybrid model might remove the “100% subcontractor” red flag for some insurers. It’s a business decision beyond just insurance, but worth pondering. Even one company-owned vehicle on the policy can sometimes allow an insurer to write the risk on a semi-admitted basis and then attach HNOA for the rest. Each insurer is different, but it’s a question to discuss: “Would having an owned auto on the schedule open up any markets?” If yes, compare the costs/benefits of that approach.

By implementing the measures above, brokers and business owners can improve their chances of obtaining Hired Auto coverage or an equivalent solution for independent-contractor delivery fleets. It often requires a combination of structural changes and layered insurance policies to satisfy underwriters. The key is to demonstrate real risk management: show that you understand the exposure and have taken concrete steps (authority, contracts, primary insurance for drivers, specialty programs) to tackle it. With that groundwork, you can usually find an insurer (often via an E&S program) to provide the needed coverage and keep your delivery business protected as it grows.

Sources:

• RLI Transportation – E&S Auto underwriting guidelines (ineligible classes include “Large subcontractor exposure when federal filings are not required”)​rlicorp.com.

• Openforce industry analysis – difficulties insuring courier fleets with non-owned vehicles, and the emergence of “while under dispatch” coverage solutions​oforce.com​oforce.com​oforce.com.

• Hudson Insurance Group – example of a monoline Hired & Non-Owned Auto program for food/cannabis delivery using IC drivers​hudsoninsgroup.com.

• Risk Placement Services (RPS) – description of a hard-to-place HNOA product for delivery and courier operations​rpsins.com.

• Discussion of contingent auto liability for logistics brokers and vicarious liability in transportation​ajg.com.

• Ryan Specialty (RSG) commentary on Occupational Accident and Contingent Liability as protection for IC drivers and contracting companies​blog.ryanspecialty.com.