Did you know that your company or organization can be held liable for injuries and property damage as a result of a vehicle accident whether it owns the vehicle, borrows a vehicle or has employees and volunteers who may use their own personal vehicles for company business?
What is non-owned insurance? Under the business automobile policy, non-owned auto refers to automobiles that your company does not own, rent, or borrow, but that are driven by employees in connection with company business. This insurance also covers part time and temporary workers, as well as volunteers, board members and employees assigned a vehicle as well as family members who are allowed to drive a company car.
What is hired auto insurance? Hired auto provides coverage for those employees who rent a vehicle for company business travel. A leased vehicle is not rented because of the longer duration of use and therefore is not considered a hired auto, but falls under the non-owned auto classification.
Doesn’t the employee’s own auto insurance policy cover an accident? First, it is not uncommon for employees to maintain the state required minimum liability limits, which depending on the state can be as low as 10/20/10. The first two numbers refer to bodily injury liability limits and the third number refers to the property damage liability limit. The first two numbers in 10/20/10 would mean that in an accident, each person injured would receive a maximum of up to $10,000 with only $20,000 allowed per accident. The last number refers to the total coverage per accident for property damage which is this case would be $10,000. Typically an employee’s auto insurance will respond as the primary carrier to any auto claims or subsequent lawsuits. However, depending on the severity of the auto accident and limits of the employee’s auto coverage your company is at a greater exposure to loss and may be named in the claim as a secondary source for financial compensation.
7 simple loss prevention measures to minimize your company’s risk potential…
- Obtain Motor Vehicle Records (MVR’s) for all employees operating a company vehicle and for those driving their own personal vehicles for company business. MVRs should be obtained on all new hires and annually thereafter to ensure that an acceptable driving record is maintained by the employee so they may continue to operate a vehicle as part of their job duties.
- A copy of the drivers’ license should be obtained on all new hires and annually for employees operating a company vehicle and for those driving their own personal vehicles for company business.
- Management should require that employees maintain adequate liability limits on their personal auto policies and that a copy of the declaration page indicating limits of insurance should be retained on file. Minimum liability insurance limits should be established as a standard operating policy of $100,000/$200,000 or a combined single liability limit of $300,000.
- Management should have the employee verify that “business use” is not excluded from the employee’s personal automobile liability insurance policy.
- All employees operating a company car or those who use their own personal vehicles for company business should be included in driver safety training programs.
- Conducting road tests of all employees who are assigned company cars or those who use their own vehicles on company business provides management a means to determine if the employee is a safe driver.
- Employees with personal vehicles should be required to regularly inspect their vehicles and provide documentation to management.
The bottom line is that if an employee of your company has a serious auto accident in their own vehicle or in a rented vehicle while on company business and their personal insurance is not enough to cover the claim, your company can be held financially responsible. The above loss prevention procedures are not all inclusive, but provide a framework for identifying potential areas within the fleet safety program that can be strengthened thereby reducing the potential for a serious loss. Such risk management tactics serve to formalize the program and reinforces your company’s commitment to safety.
** The loss prevention information and advice presented are intended only to advise our insureds and their managers of a variety of methods and strategies based on generally accepted safe practices, for controlling potentially loss producing situations commonly occurring in business premises and/or operations. They are not intended to warrant that all potential hazards or conditions have been evaluated or can be controlled.