Your business’s attorney called. She just got off the phone with legal counsel for the family that your employee rear-ended last fall on the way back from a client visit in his personal car. They claim your business was negligent in allowing him to drive as his license was suspended. The employee was allegedly talking on his cell phone at the time of the accident, and they are questioning the roadworthiness of his 21-year-old car, as the brakes and tires were worn. His insurance had lapsed after his license was suspended, so your business’s insurance is the only coverage available. To make matters worse, he is still out on disability from an injury occurring during the accident.
Auto accidents are the leading cause of work-related fatalities, accounting for roughly 22% of all deaths.1 Organizations also have significant liability risk if an employee or a volunteer is operating their personal vehicle on behalf of the organization and are involved in an accident.
A best practice to help minimize auto liability, as well as worker injury and death, when operating personal vehicles is to ensure adequate controls are in place. Generally, non-owned vehicle safety policies and procedures should be similar to those of owned vehicles. An organization’s duties are not diminished because they don’t own the vehicle. Key risk management steps include:
- Authorization: Organizations should designate who has permission to drive for work related purposes. Authorization should be in writing. For example, rather than allow any person to run to a store for office supplies, an office manager or designated assistant, who has been screened and approved, should perform these duties.
- Rules and policies: Clear expectations should be set for safe operation and maintenance of personal vehicles. These rules should be included as part of the authorization/approval process. Sample authorization and rules can be found here.
- Driver qualification: Screening should be conducted to ensure drivers have adequate driving experience, a valid license, and an acceptable motor vehicle record (MVR). If drug and alcohol testing is required of owned vehicle drivers, these same requirements should be in place for drivers operating their personal vehicles.
- Vehicle qualification: Only vehicles owned or directly leased by an employee/volunteer should be permitted. An organization should ensure all vehicles operating on its behalf are in safe operating condition. Many organizations prohibit the use of older vehicles or vehicles with extensive miles as they are more likely to have component failures. Older vehicles are also less likely to have new safety technology. Proof of annual inspection by a qualified mechanic is a best practice, as well as periodic inspections by organization staff.
- 13% of drivers do not have auto liability insurance2 and state minimum insurance limits, ranging from $15K to $50K, are woefully inadequate to cover an employee and your organization in a severe accident.
- Organizations should establish minimum auto liability insurance requirements for drivers to maintain on their personal vehicle and obtain proof that insurance is in place. Minimum limits of S100,000/$300,000/$100,000* are standard.
- Proof of insurance involves obtaining a certificate of insurance (COI) with your organization listed as the certificate holder. Having your organization listed as an additional insured (AI) is an additional step. Verify the policy does not have any exclusions for “business use”.
- Ask your insurance agent for guidance on these insurance requirements. Most organizations reimburse drivers for using their personal vehicles. This reimbursement covers expenses for operating the vehicle, including insurance costs. Note that higher limits provide added protection to the driver while driving for personal reasons as well. Most personal auto insurers will provide a COI and AI listing at no or a reasonable cost.
- Drivers should be made aware that they can be sued individually, and that their insurance is generally primary, in an accident while working. They should understand the importance of having adequate insurance, without any business exclusions.
- Safe driver training: Many drivers have forgotten safe driving techniques they learned early in life or have developed unsafe driving habits. Education and awareness are key to reducing accidents. Core training should be provided on the hazards and prevention of distracted driving, proper defensive driving techniques and seasonal driving issues. Training should be documented.
- Use this sample checklist to track the driver and vehicle qualification process.
When employees rent cars for business travel most of the aforementioned items would apply as well, with the exception of vehicle qualification and insurance. An organization should check with their insurance agent regarding the need to purchase rental car insurance.
Many organizations rely on volunteers to use their personal vehicle to further the goals of the organization. Using volunteers does not absolve an organization of the responsibility to ensure these drivers and vehicles are qualified and controlled.
Use of workers’ personal vehicles in a business varies greatly. Some employees may never use their personal vehicle, or rarely. Others may drive daily as part of their work responsibilities. As you look to develop controls for this non-owned vehicle risk, it may be appropriate to classify drivers into groups based on the level of exposure they have to driving; with the level of controls adjusted accordingly. Operations involving transportation of passengers should have higher standards in place and tighter controls. The following is a sample driver classification table.