Legal actions sometimes cast a wide net, drawing an employer into a claim by alleging that the use of a vehicle in the case was for business purposes. Business use can be alleged as the result of something as simple as storing some small tools in the automobile, taking the mail to the post office, or being on a cell phone call with the office.
While you cannot control this exposure totally in any operating business, you can attempt to manage the risk at an acceptable level. One of the foundations of risk management is that you cannot manage a risk until you have identified it. To that end, here are some tips to assist you in identifying and looking at options for managing the risk. Any of the following situations may create non-owned auto liability exposure:
- Salespeople who drive their own vehicles on company business
- An employee who goes to the bank for the company on his way home
- An employee who buys supplies or runs an errand for the company
- An employee who is asked by management to do company-related activity that requires use of the employee’s vehicle
- An employee who is reimbursed for driving his own vehicle to attend business meetings, visit customers, or pick up supplies or parts
- Volunteers who use their own vehicles when working for your organization
The best control is not to allow anyone to use a personal vehicle for company business. If this is not possible, consider taking the following steps:
- Review the individual’s motor vehicle record before he or she drives. Anyone with a driving record that does not meet acceptable criteria should not be allowed to drive a vehicle on behalf of the company.
- Annually require proof of liability insurance.
- Regularly inspect the vehicle used for company business.
If someone driving his own vehicle for company business has an at-fault accident, the company may have to pay for damages that exceed the limits of the vehicle owner’s auto liability coverage. Further, some personal auto insurance may exclude business use so that the company’s policy may be at risk for the entire claim. CNA recommends that employee drivers carry auto liability insurance with at least $300,000 combined single limits. (The employer should keep proof of this insurance on file.) Also, recommend the following to individual employees:
- Regularly inspect the vehicle used for company business.
- Keep in mind that the condition and appearance of the vehicle is a reflection on the company.
- Verify that the vehicle is maintained and in safe condition to be driven on the road.
Non-Business Use of Vehicles
Unassigned personal use of a company vehicle may occur when an employee asks to borrow or use a company vehicle. For example, the employee is moving something and wants to use the company pickup or van. Should you let the employee use the company vehicle? No. If the employee needs to use a truck for moving, the employee should go to a car or truck rental company.
Cell Phones
More than 80 percent of the nation’s 94 million cell phone owners use them while driving (at least sometimes). It is worth noting that:
- many states have legislation to regulate cell phone use while driving, and
- cell phone records can be subpoenaed to prove the employee was on the phone when an accident occurred.
In the past few years, cell phone usage has been an issue in several lawsuits, and employers may be held responsible if a worker causes an accident while talking on the phone.
So why aren’t employers more concerned about cell phone usage in vehicles? Interestingly, the distraction problem may not exist as much with two-way radios, which are as much a staple of contractors as cell phones, because those calls are usually much shorter. However, some states that ban handheld phones may consider two-way radios in the same manner, so you should check your state’s regulations on the use of two-way radios.
While there is no guaranteed defense against liability, developing appropriate policies, training, and enforcement mechanisms, such as the following, can help limit potential liability:
- Prohibit employees from using cell phones while driving on company time.
- Adopt cell phone safety guidelines, and focus on training and enforcement.
- Direct employees to comply with all state and local laws governing cell phone use.
- Require employees to pull over to the side of the road to take phone calls.
- Prohibit cell phone use in adverse weather or difficult traffic conditions.
- Prohibit texting, reading, or writing while operating the vehicle.
Each company should determine whether the benefit of employee cell phone use outweighs the risk.
To protect themselves, companies should consider establishing a written policy restricting any use of a cell phone incorporating some or all of the above suggestions and ensuring that employees read and sign the written policy. (MCAA’s Distracted Driving Reduction and Prevention Guide provides sample policy language and other information about the hazards, liability, and regulatory initiatives associated with distracted driving.)
After an accident involving, for example, driver A, an employee of your company, and driver B, one of the first steps that driver B’s attorney usually will take is to try to obtain the cell phone records of driver A. The attorney may attempt to prove negligence on the part of driver A to seek recovery of damages from you, the employer.
Responsibility for Punitive Damages
One of the issues that all fleet owners need to consider is that, depending on the state and circumstances of the claim, if gross negligence or other severe conduct is proven, the award from the court may include punitive damages. By law, several states will not allow your automobile insurance carrier to pay the punitive damages portion of an award. Based on the theory that punitive damages are meant to punish people for their “bad acts,” it is against public policy for someone to be protected from the consequences of their bad acts.
For more information, visit www.cna.com.
