It seemed innocent enough. Tim had his employee, Sandy, drive her personal vehicle to a vendor to pick up supplies once a week. The arrangement had worked out well for a long time. Tim wasn’t worried about insurance because he assumed Sandy’s personal auto insurance would cover any liabilities.
And then one day it happened. Tim got a call from the hospital – Sandy had been in a serious accident. She had run a red light and hit another vehicle carrying a mother and two young children, totaling both vehicles and seriously injuring one child. Sandy was subsequently charged with failing to yield for a red light. Then it was discovered that Sandy only carried $50,000 auto liability limits on her personal auto insurance, but the total value of the claim was in excess of $1,000,000. On top of that, Sandy had other violations on her driving record that Tim didn’t know about.
Now Tim is facing lawsuits from Sandy’s insurance company, the other driver’s insurance company and the other driver’s attorney – and his business is facing a costly uphill battle.
This is just one of many possible nightmare scenarios that could devastate your business in the blink of an eye if you use hired or non-owned vehicles for your business.
In the example above, Tim made several costly mistakes…
- First, he bought into the myth that he didn’t need insurance for Sandy’s vehicle, assuming her personal insurance would cover any liabilities. But most personal auto policies exclude coverage for using a vehicle for business purposes, and even when coverage responds, the liability limits on an employee’s personal auto insurance can be grossly inadequate to respond to a serious claim like the one above, leaving you vulnerable to costly lawsuits. And don’t forget – the employee could be driving around with no coverage without your knowledge.
- Second, he clearly underestimated the potential exposure to loss that could occur as a result of his employee driving a personal vehicle for company business, and he failed to protect himself from that potential exposure.
- Third, he failed to check and stay up to date on Sandy’s motor vehicle records.
Steer clear of this costly legal roadblock
If you want to avoid Tim’s fate, make sure you carefully assess every possible risk of having employees drive for company business, and have a plan to mitigate those risks. At the very least, you should:
- Identify all employees who operate their own personal vehicles for company business and require them to provide adequate limits of automobile liability insurance.
- Ensure that employees’ vehicles are properly inspected and in safe working order.
- Make sure employees undergo fleet safety and driver training programs, and monitor these programs regularly.
- Obtain periodic MVR’s on all employees who drive for company business, and review and evaluate them against written criteria. If an MVR is deemed unacceptable, the employee shouldn’t be permitted to operate a vehicle for company business.
- Document everything.
- Protect your business with non-owned and hired auto liability coverage. This provides coverage for bodily injury and property damage caused by non-owned vehicles (vehicles owned by others, including those owned by your employees) or caused by a vehicle you hire (including rented or borrowed vehicles).
One serious accident could wipe out your business, and you don’t want to find out after an accident that you’re not covered. To make sure you don’t get sideswiped by an unexpected auto liability lawsuit, let the commercial auto insurance experts at Higginbotham analyze your needs and craft the perfect coverage to protect you, your employees and your business.