Managing the Use of Personal Vehicles on Company Business

When an employee has an at-fault accident while driving their own car on company business, their employer can be liable for their injuries, injuries to a third party, or damages to another car or property.

It is important to understand the risks, obtain adequate liability coverage, and establish formal guidelines for the use of personal vehicles to minimize accidents, potential liabilities, and costs to
your business.

Understand the Risks of Personal Vehicles Used on Company Business

Companies must know the insurance risks and potential litigation they face in order to fully protect their assets and reputation when employees are driving their personal vehicles for business purposes.

When an employee has an at-fault accident in their own vehicle, the first line of coverage is the auto liability insurance policy on their personal vehicle. However, if the employee does not have adequate limits to cover the loss, the injured party may seek damages from the employer’s auto liability insurance policy as a second line of coverage. If the employer does not have adequate coverage for non-owned vehicles or has no coverage at all, they could face unexpected liability and out-of-pocket financial loss.

Additionally, under the legal doctrine of respondeat superior, also called the master-servant rule, a party is responsible (has vicarious liability) for acts of their agents. This means an employer could be liable or partially liable for the negligent actions of their employee involved in an accident. Negligence comes into play when employers have not done their due diligence to make sure their drivers meet safe driving policies, and the accident investigation uncovers facts such as:

• The employee had a poor driving history
• The personal vehicle was not improperly maintained
• The employer did not establish safe driving rules and policies

If the company does not have a personal use auto policy or driver safety guidelines, the potential for liability increases substantially and business assets are then at risk.

Obtain Hired and Non-Owned Auto Coverage

Although an employer may have a commercial auto policy, it only protects employees who drive company-owned vehicles; it does not cover an employee’s personal vehicle when used for business. Companies can purchase or add hired and non-owned auto coverage to an existing automobile policy to protect against the worst-case scenario. Hired coverage is for situations in which autos are not owned by the company or an employee driver (e.g., rental cars). Non-owned coverage protects the company against liability when employees use their personal vehicles on behalf of the company.

In the event of an accident, these policies supplement the driver’s personal auto policy and covers the costs of bodily injury and property damage for minimal annual premium. These policies generally protect only the company and not the employee or their personal vehicle.

Develop a Formal Safety Policy for the Use of Personal Vehicles on Company Business

A business can mitigate risks and protect the company and their employees with a Use of Personal Vehicles on Company Business safety policy. This should be a written policy that is reviewed annually, updated as needed, and signed by all employees. Critical elements of the policy should include:

• Criteria for qualifying employees allowed to drive personal vehicles
• Coverage and maintenance of personal vehicles
• Safe driving policy and expectations
• Driver safety training

Driver Qualification 

Qualifying drivers who use their personal vehicles for work demonstrates a firm commitment to safety and protects businesses from liability exposure.

• Identify all drivers who drive non-owned vehicles for business purposes.
• Establish a Motor Vehicle Records (MVR) policy and criteria for an acceptable driving record.
• Obtain a signed consent form from drivers.
• Qualify each driver identified by checking for a valid driver’s license and acceptable MVR.
• Re-qualify each driver at least annually thereafter.
• Allow only qualified employees to drive their personal vehicles for business.
• Employee must drive company vehicles if available to minimize use of personal vehicles.

Insurance Requirements

Adequate insurance and proper maintenance of personal vehicles improves safety and protects employees and businesses in the event of an accident.

• Establish minimum limits for auto liability coverage relative to the risks of driving tasks (i.e., purpose, distance, frequency, driving record, etc.). For example:
  • $100,000 bodily injury limits per person
  • $300,000 bodily injury limits per accident
• Employees must declare the use of the auto for business to their personal auto insurer.
• All employees who drive a personal vehicle for business must have proof of auto liability insurance.

Safe Driving Policy 

Requirements for safe driving clearly defines the company’s expectations when using personal vehicles for work.

• Abide by all federal, state and local motor vehicle safety regulations, laws and ordinances.
• Prohibit use of handheld devices (e.g., cell phones and GPS devices) while driving.
• Prohibit other forms of distracted driving such as eating, drinking or reading.
• Prohibit driving if impaired, affected, or influenced by alcohol, illegal drugs, medication, illness, fatigue or injury.
• Require seat belts for driver and all passengers.
• Conduct and document a road test for qualified drivers.
• Establish inspection and maintenance guidelines to ensure personal vehicles are safe to operate.
• Establish guidelines for investigating all accidents.

Driver Training

Defensive driver training increases awareness of safe driving and lowers the probability of accidents. Three types of driver training are encouraged:

• Initial driver training for all qualified drivers within a specified time period.
• Refresher driver training and/or reminders to maintain awareness of safe driving.
• Post-accident driver training for those involved in a preventable collision.

Defensive driver training should include topics such as:

• Distracted driving
• Obeying speed limits
• Proper following distances
• Passing and lane changes
• Driving in bad weather
• Vehicle emergencies