Hidden Risk of Employee Owned Auto Use
By Anthony Bevilacqua
Practically all businesses have some type of auto related risk. For those businesses that own cars and trucks, the risk is obvious. As the fleet grows, driver recruitment, training and monitoring along with fleet safety programs are essential to contain auto insurance cost.
Businesses that allow or require employees to use their personal vehicle for company business must also be cognizant of the risk the business assumes when doing so. Employees can be asked to run errands, make sales calls and deliver goods and products on behalf of the company. When doing so, the business is vicariously liable for the actions of that employee just as if they were driving a vehicle owned by the company.
Since the employer can be sued as a result of an auto accident, the employer should take several steps to assure that both they and their employee are properly protected.
Employers should clearly communicate to their employees they are not covered as an insured under the employers policy when they or anyone else in the organization uses their auto for company business. Employees should be advised their own personal insurance policy covering the vehicle stands first in line to cover any loss or lawsuit.
It is important to stress to employees they should be familiar with their own auto policy coverage if they use their personal car for the employer’s business, or are asked to rent or borrow a vehicle for such purpose. Coverage provided by a personal auto policy can vary from one insurer to another. Employees should be encouraged to contact their personal auto agent for advice before using their vehicle on company business. For example, some insurance companies might deny coverage for a lawsuit served against the employee driver because they indicated to the agent or on the insurance application the vehicle was used for a pleasure purpose instead of a business purpose.
To protect their own insurance or self-insurance program from loss, employers should require employees to carry a minimum level of liability insurance, $500,000 per accident is recommended, and the employer should require the employee to show proof of coverage. It is also wise for the employer to develop and disseminate an Automobile Policy Statement that outlines the responsibilities of each party for use of corporately owned or employee owned autos on company business. The policy statement should enumerate vehicle use that is not considered for business purpose, and include a statement concerning those family members or others that are not allowed to operate a company owned vehicle.
Establishing auto use policy guidelines for all to follow provides guidance and helps to eliminate misunderstandings, misconceptions and confusion. Eliminating or controlling risk is the easiest way to control cost. Consult with your professional insurance or risk manager about developing such a plan.
Anthony Bevilacqua, CPCU is President of Anthony & Company, an independent insurance agency with special insurance and risk management services tailored to the needs of the commercial and residential development community. You can reach Mr. Bevilacqua at (908) 806-8844 or email him at email@example.com.