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Insuring Employees Who Drive Their Own Cars

Keys in the steering wheelBeware of Unexpected SituationsThe Insurance Information Institute notes that business owners sometimes don't realize that there may be a potential liability for employees using their own cars. For example:◦ Your office manager stops by the office supply store to pick up some items for work on her way back from lunch.◦ On the way home, a supervisor stops by a client's office to leave a product sample.◦ While on vacation, a salesperson driving his personal vehicle makes a brief stop to visit a customer."These are all situations where a business can find itself liable for an auto accident with damages higher than the policy limit of the employee's personal auto policy," explains the institute.In many companies, employees drive during the course of their jobs — to make deliveries, call on customers or pick up supplies. In some cases, they use their own cars, which can offer you several advantages, including that you don't:
  • Have to maintain a fleet.
  • Worry about non-employees driving the cars, and the employee's personal auto liability policy provides the first layer of liability coverage.
  • Have to account for personal versus business use of the car, making your accounting simpler. Many employers reimburse employees for their mileage at the current IRS standard rate (54.5 cents a mile for 2018, up from 53.5 cents a mile in 2017).
However, just because someone uses a personal auto doesn't relieve the employer of liability if the employee injures someone while on the job. An employer would become "vicariously liable" for any injuries an employee caused to a third party during the course of working. (Time spent commuting to and from work isn't considered work time; therefore, an employer has no liability for an accident that occurs during a commute.)
An employer can take a few steps to protect itself from liability when employees drive their own vehicles for work travel:
  1. When hiring for all positions that require driving, check applicants' motor vehicle records before making final job offers. This will show any traffic tickets they've received or accidents they've been involved in. Avoid hiring someone with multiple moving violations, especially speeding or failing to obey signals. Studies have shown that habitually careless drivers are more likely to become involved in accidents.
  2. Require employees who drive for work to carry a personal auto policy with at least $500,000 in liability coverage. (Some employees may have very low limits, which only satisfy state financial responsibility requirements.) The employee's insurance serves as your first layer of liability coverage, so be sure to notify employees that if they're involved in a work-related accident, their policy will respond first. Require employees to submit proof of insurance and make continuing coverage a condition of the job.
  3. Consider buying a business auto insurance policy (BAP) to cover auto-related liability exposures. The policy can be written to cover any commercial auto-related liability exposures, indicated by "symbols" on the schedule of coverages. To see whether your policy covers employee-owned vehicles, check for either Symbol 1 (which covers "any auto") or Symbol 9 (non-owned autos only) in the schedule of coverages. Note: If you have Symbol 9 coverage only, the BAP provides liability coverage only. It doesn't cover property damage to an employee's car.
The business auto policy covers only the liability of the named insured — that is, the employer. The business auto policy (and your other liability policies) don't cover the employee's liability.
The policy and other commercial liability policies also don't cover any injuries an employee causes to a fellow employee. Workers' compensation protects you from this type of claim.
In some states, employees can sue their colleagues for work-related injuries under certain circumstances. The employer's workers' compensation insurance doesn't provide coverage for this kind of claim, making the employee personally liable. If you want to provide employees with liability protection for this and other situations, you can buy additional coverage in an "employees as insureds" endorsement. The endorsement provides employees with coverage under your BAP, secondary to the employee's personal auto policy. Note that if you have Symbol 9 coverage only (non-owned autos only), the BAP provides liability coverage only. It doesn't cover property damage to an employee's car.
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