Although many businesses have established rules to reduce accidents among company-owned vehicles, they neglect to apply these same controls to non-owned vehicles. Because of this, businesses are regularly forced to pay a significant amount of money and often become involved in lawsuits related to non-owned vehicle accidents.
Non-Owned Vehicle Matters
Reasons that organizations end up paying out money include:
- A company was found responsible for an employee’s negligent action performed during their employment, including staff driving. According to the legally recognized master-servant rule, it does not matter who owns the vehicle that the employee was driving.
- Several states do not require auto liability insurance, and state minimum limits for personal auto policies range from as little as $10,000 to $50,000, which will not cover major accidents. Even in states that require coverage, there are still a large number of drivers who are uninsured or have inadequate insurance.
Evaluating Non-Owned Vehicle Exposures
When evaluating non-owned vehicle exposures, certain individuals are typically overlooked, such as part-time and temporary employees, interns, and volunteers. Others that should be included are individuals attending seminars and conferences, employees renting cars on business trips, and even those using their personal cars to run errands for the company.
At a minimum, all individuals should be checked for a valid driver’s license and an acceptable driving record for the last 5 years. Because every organization is different, you should customize your policies for MVRs (Motor Vehicle Reports) to meet your specific needs and exposures. Below are several examples of key violations to check for:
- Leaving the scene of an accident
- Driving while under the influence of drugs or alcohol
- License suspension or revocation due to accidents or moving violations
- Reckless, negligent, or careless driving
- Tailgating or erratic lane changing
Mitigating Possible Losses through Risk Transfer
It is similarly important to mitigate possible losses with non-owned vehicles through risk transfer. For example, a minimum acceptable coverage limit should be established for non-owned vehicles used by employees driving during employment hours.
Here are several other tips to utilize in order to transfer risk:
- Verify that an individual’s personal line policy does not exclude “business use” of the vehicle and require annual certificates of insurance.
- List the business as an additional insured to the non-owned vehicle liability policy, or add frequently used employee vehicles via endorsement to the business auto policy.
- In cases where individuals are reimbursed for the use of their vehicle, require proof of insurance with satisfactory limits, as a portion of the reimbursement is normally for insurance.
Offering Continued Education
Over time, many drivers develop bad habits while on the road, and so it is wise to assign frequent drivers defensive driving training prior to driving for the company and at a minimum, annually after that. Some important topics to cover are safe following distances, intersections and when to yield, lane changes and passing, and distracted and inattentive driving. A combination of effective training resources should be used to address these and many more significant topics, and all training should be documented.
Holding Employees Accountable
All drivers should be required to sign a written policy on the use of personal (or company) vehicles for business purposes. Here are several examples of what could be included in the policy:
- Information regarding reimbursement of deductibles for damage to personal vehicles
- Insurance requirements
- Training requirements
- Prohibited actions such as picking up hitchhikers, using electronic devices like radar detectors, or utilize cell phones while driving for business reasons
- Consequences in the event that a driver fails to meet these designated standards
Maintaining Non-Owned Vehicles
It is imperative to ensure that non-owned vehicles used for business undergo regular maintenance and are in good health. Staff vehicles should be inspected or should be required to undergo an inspection by an outside service at least annually. Staff should also be required to inspect their own vehicles frequently and submit inspection reports.
All of these points are necessary to consider when evaluating possible exposures from non-owned vehicles. It is important to recognize that different businesses have different exposures and requirements and therefore each case should be evaluated on an individual basis. Contact us to discuss your options.