Do Your Employees Drive Their Own Car for Work?
Driving a personal car in lieu of a company-owned vehicle may seem to minimize an employer’s liability, but companies can be held partially liable for damages in the event of an accident, and if an insurer discovers the individual was driving for business it may take action against the employer for subrogation purposes. When employees will be driving their own cars for work, there are several actions that you can take as an employer to reduce the risk for your company.
If the employee is making a work-related phone call or taking part in any business-related activity, the employer will be held accountable. When employees will be driving their own cars for work, there are several actions you can take as an employer to mitigate risk.
Understanding Non-owned and Hired Business Auto Liability Insurance
Does your California business have potential automobile loss exposures that you are not aware of? You’ve taken all of the necessary steps to ensure that your own fleet operation is properly insured in the event of an accident. But what about the potential loss that arises from individual employees who operate their own personal vehicles for company business? This is where non-owned and hired business auto liability insurance comes to play.
Do Your Employees Drive Their Own Car For Business?
There are many situations that present a potential for you to be held accountable for the actions of your employees while they are driving their own vehicles:
- Do administrative employees use their own vehicles to go to the post office or bank on your company’s behalf?
- Do you occasionally send an employee to pick up a visiting client at the airport?
- Have you sent employees to pick up lunch, drop off mail or pick up office supplies?
- Have you ever rented a vehicle while on a business trip?
- Do you have a sales force to which you provide a car allowance for business use of their personal vehicles?
If an employee has an accident under any of these situations, your business can be held accountable and sued for damages. Basic business automobile policies only cover employees while they operate company-owned vehicles to perform company business. Your best protection: non-owned and hired automobile liability coverage. This type of coverage will kick in if there is an accident and your company is found legally liable.
Typically, an employee’s personal automobile insurance will provide primary insurance to both the employee and the business if the employee is using their own vehicle on company business. However, there is the chance that charges will exceed the employee’s policy limit and would then be passed on to the company. Without non-owned and hired automobile liability coverage you may be vulnerable to a potentially costly exposure.
Purchase Hired and Non-owned Coverage
Any company that allows or requires employees to use their personal car for business should either purchase hired and non-owned coverage or add it to an existing automobile policy. Hired coverage is for autos that are not owned by the company or the driver, and non-owned coverage protects vehicles owned by employees but used on behalf of the company. In the event of an accident, these policies supplement the driver’s personal auto policy, which is typically activated first. For minimal yearly premiums, these policies generally protect the company only, not the car or the driver.
What Does Non-Owned Auto Liability Insurance Cover?
Non-owned and hired automobile liability insurance covers bodily injury and property damage caused by a vehicle you hire (including rented or borrowed vehicles) or caused by non-owned vehicles (vehicles owned by others, including vehicles owned by your employees). This coverage is typically added to your business automobile policy; however, it can be added to your general liability policy if you do not have a business automobile policy. It protects your company if it is found legally liable as a result of an automobile accident that you or your employee has in a hired or non-owned vehicle while on company business. Hired automobile coverage replaces or augments the liability coverage offered by automobile rental agencies.
Non-owned and Hired Automobile Insurance: The Basics
Here are the first things you need to know about non-owned and hired automobile coverage:
Who needs non-owned and hired automobile coverage?
If you or your employees ever drive vehicles not owned by your business for business purposes, then you need non-owned and hired automobile coverage.
What is non-owned automobile coverage?
Non-owned automobile insurance provides liability protection when an employee occasionally has to drive his or her personally owned vehicle for business purposes. It assumes that the vehicle is not owned, registered or contracted in your name or on your behalf.
What is hired automobile coverage?
Hired automobile insurance provides liability protection when you or an employee is driving a rented, hired or borrowed vehicle.
Use a Company Policy to Reduce Risk
According to the National Safety Council, 28 percent of car crashes are attributable to cell phone use while driving. Since distracted driving accidents can have serious implications for companies, a company policy that emphasizes the importance of driving attentively and restricts the use of mobile phones is essential to preventing employee accidents in all vehicles, both personal and company-owned. In addition, the policy should clearly state when the use of a personal vehicle will be expected or allowed, and all employee job descriptions should specify when driving a personal vehicle will be a job function. As a condition to employment and thereafter at least on a yearly basis, those employees driving personal vehicles should be required to provide:
- Proof of a driver’s license
- Motor vehicle safety inspection certificates
- Copy of auto insurance certificates proving liability coverage at or above an established company limit including personal injury and medical limits
- Proof that the employee has declared the use of the auto for business to his or her insurer
- Exhaustive lists of all prescribed controlled medications
Further, you should reserve the right to check motor vehicle records annually or more frequently.
Enforce the Driving Policy
After the driving policy has been instated, it should be actively communicated and enforced. Managers of employees utilizing personal vehicles should be directed to monitor the safety and maintenance of those vehicles. Employees found out of compliance with the company policy should be subject to reassignment or termination. It is every employer’s responsibility to ensure its employees’ safety on the job, and those that use personal vehicles on business are no exception.
What Should You Do Next?
If you do not already have this type of coverage and your employees occasionally use their own vehicles for business purposes—even quick errands—consider adding it to your business insurance package today. Consult with GDI Insurance Agency, Inc. to review your business automobile and general liability policies to ensure you have adequate insurance coverage and liability limits for non-owned and hired automobiles.
Any type of loss exposure, no matter how small, is too big to ignore. Call us today at 209-634-2929 to ensure that your California Business Auto Insurance meets your needs.
Ask your GDI Insurance Agency Broker for more help assessing your company’s risk regarding the use of personal vehicles, or to learn more about hired and non-owned coverage.
Let your GDI Insurance Agency Broker help you set up your Vehicle Fleet Safety Program.