Covering the gaps between their personal insurance and your business policy
It’s not uncommon for employers to require employees to drive their personal vehicles to conduct company business, whether it’s calling on clients or running to the post office. But what if they cause an accident and injure someone while on the job – or even headed to or from work? What is your company’s responsibility?
You could be liable for damages not covered by the employee’s personal policy.
In a recent California Appellate Court ruling, the employer was held liable – even though the employee was off the clock and had stopped on her commute home for frozen yogurt and a yoga class before causing the accident. Why was the company held liable? Because the employer required the employee to use her personal vehicle to conduct business.
According to the ruling, “the planned stops for frozen yogurt and a yoga class on the way home did not change the incidental benefit to the employer of having the employee use her personal vehicle to travel to and from the office and other destinations.”
If a loss incurred as the result of an accident exceeds the employee’s personal auto coverage, the liability – in some cases- can be assigned to the employer. However, an employer’s standard business auto policy will not cover costs if it is sued as the result of an employee’s actions. And, if you don’t have additional insurance to cover the gap, a lawsuit could put you out of business.
You can eliminate your exposure by prohibiting employees from using their personal vehicles while conducting business for your company. If that’s not possible, consider adding non-owned auto coverage to your commercial policy. While any liability caused by an employee’s actions will first be paid by the employee’s insurance, your non-owned auto coverage will cover the gap between what the employee’s policy pays and any additional damages should your company be sued as the result of an accident.
In addition to having appropriate insurance coverage and requiring your employees to have the same, take the following steps to protect your business and reduce the risk of your employees causing an accident.
- Vet employees who are driving personal vehicles for work purposes. Review driving records and require proof of insurance.
- Develop a policy and communicate it. Create written rules on drinking and driving, cell phone use and number of passengers allowed when conducting business.
- Create standards for safe vehicles, such as the age of the vehicle and how often preventive maintenance is required.
And while encouraging employees to work at home may seem like a smart idea to decrease your risk, they are still your employees and they still pose a risk. So take steps to keep your employees safe, and talk to your insurance company to ensure you are covered should your employees’ actions result in a damages claim against your company.