Your Car or Mine?

Matt Gartner, XL Specialty Insurance Co.

We all need to get around. And in many instances, our jobs require us to do so either in a company car or our own. It’s important to realize that a business’ auto liability for the company car doesn’t stop at the end of the business day. And a business could be held liable in case where an employee’s personal vehicle was used to conduct work-related duties such as picking up supplies or running to the bank for the company. Waste companies would be wise to set policies to avoid added liability and expensive lawsuits and make sure they have appropriate insurance in either circumstance.

If an accident involves a company-owned car, the company’s commercial auto policy would be the first to cover potential liabilities. If an employee is using his own car for company business and has an accident, the employee’s personal auto policy (unless endorsed otherwise) would respond first. While this provides some degree of coverage, the company still carries considerable liability if the proper precautions and additional insurance is not in place.

To minimize after-hours driving risks, more and more companies are requiring their employees with company cars to carry their own coverage as well. This ensures that there is sufficient insurance coverage by both the employee and the business. Businesses need to decide what minimum levels of insurance should be required for vehicles that are operated for the business. A minimum liability limit of $100,000 for personal injury is the typical requirement. Once this threshold is set, businesses should require employees to provide proof of their insurance coverage limits such as a copy of an employee’s automobile insurance policy declarations page that can be kept on file.

Companies that require employees to drive as some part of their responsibilities should ensure that employees have appropriate training, such as driver safety course. These courses are readily available – either via classes or online – and are often offered by a company’s insurance company or broker.

Another good safeguard to manage a company’s auto liability is to run a motor vehicle record on drivers at least every six months. Additionally, it’s a smart move to establish qualifications for drivers, including setting limits on the number of moving violations and/or accidents, prohibiting DUI violations and requiring employees to self-report any violations. Of course, if driving is a big part of the job, companies are wise to set up a stringent screening process to evaluate and eliminate high-risk drivers in the first place.

Other policies to enforce include disallowing cell phone use and text messaging while operating any vehicle. Prohibit equipment like radar detectors that indicate if law enforcement is in range, typically to avoid speeding tickets. If company cars are used, policies can be set to limit vehicle use for business purposes only. To ensure that employees know about established auto use policies, many employers are required to sign a contract annually, acknowledging that they are aware of the policies and will abide by the company’s rules. In the event of a lawsuit involving a company car, a signed contract stating company auto policies is important in helping mitigate damage in court.

It’s important to remember that a vehicle is part of the company. It can certainly help carry out important business, but it can also have serious consequences for the company if not used wisely and driven safely.