How to Protect Your Business if Employees Drive Their Own Vehicles for Company Errands

Employee Driven Cars on Business Errands

Scenario: You, a business owner, send your Receptionist on an errand to the store to buy supplies for the office. On her way she is in a car accident. Unfortunately, it is her fault. While speaking to the responding officer, she explains that she is running an errand for her employer. Other than the wellbeing of your employee, you think… do I have anything to be concerned about? She was driving and driving her own vehicle. Why would I be responsible or liable for any damages?

Will Your Business Be Liable?

Consider this: If an employee causes an accident while driving their own vehicle for the purposes of the company, their personal auto insurance will respond first for both liability and property damage. However, any injured person can claim that the driver would not have been in that place, at that time to cause the accident had it not been that he or she was driving at the request of the business. They could allege that the business had some level of responsibility.

What is at Risk?

Two commercial policies are at risk for a claim to be filed against them.

1. The driver could file a Workers Compensation claim for any personal injuries or disability sustained

Workers Compensation coverage is required in most states for employers with 1 or more employees (reference the laws specific to the state your business is domiciled or operating)

2. Any other injured party could file a liability claim for any injuries that exceed the limits of liability under the employee’s and at-fault driver’s personal auto policy

The coverage that will respond to such a claim is called Non-owned and Hired auto liability coverage. Typically, this coverage is included on your business general liability policy (or your commercial auto policy if the business has one)
Non-owned auto is defined as a vehicle that is owned by any party other than the named insured business. For example, an employee’s vehicle
Hired auto is defined as a vehicle that is hired to do a job. For example, rented or borrowed

Non-owned and Hired Auto Liability coverage is typically an optional coverage, therefore make sure you are selecting it for your business.

6 Ways to reduce your risk:

Require all employees who drive their vehicles for company errands to maintain auto insurance with bodily injury limits of at least $100,000 each person/$300,000 each occurrence and $50,000 property damage
Retain proof of such coverage on file at least annually or every six months to coincide with when employees’ policies renew
Have a written policy specifying that this coverage is required in order to drive on behalf of the company
Consider limiting the number of employees who are allowed to drive their vehicles on company business
Limit the number of trips to reduce the risk – can a single trip be made to the bank, the post office and to pick up supplies?
Review your policies and potential exposures with a licensed insurance agent, who is experienced in commercial insurance products

Desert Mountain Insurance specializes in insurance for businesses in professional services and the healthcare industry. To determine what insurance products are required or recommended, please contact us.

Photo Courtesy of FreeImages.com/cylonka Bsg