Minimize Your Risk When Using Personal Vehicles for Business Purposes

If you’re considering – or have asked – employees to use their own vehicles in relation to your business, consider the following information to help minimize your risk.

Generally, laws may hold employers responsible for the actions of employees performed within the course and scope of their employment – even when driving their personal vehicles.

While auto accidents cannot be predicted, the risk your business faces when employees drive their own vehicles for business purposes can be. If an employee is involved in an accident while performing work-related duties your business may be held responsible – entirely or in part – for the resulting damages. The extent to which your business is held responsible may be offset by the employee’s personal auto insurance coverage in force at the time of the event.

  • Add hired and non-owned auto coverage to your business’s auto or general liability policy. This coverage supplements the driver’s personal auto insurance policy, providing essential bodily injury and property damage protection for your company when employees rent vehicles or drive their personal vehicles for business-related purposes. Typically, in these situations your employee would not qualify as an insured under your business auto policy without this coverage.
  • Add hired auto physical damage to provide primary physical damage coverage on autos rented for use in your business operations (excludes vehicles rented with a driver, or vehicles rented or borrowed from any of the insured’s employees, partners, members or members of their households).
  • Define driver qualifications and performance benchmarks for employees who may drive for your business and keep an acknowledgment signed by the employee that they have received and understand the performance expectations.

As the employer, your company’s driver policy or procedure can help demonstrate that you recognize the potential risk and have taken reasonably appropriate steps to offset the risk. Consider these points when creating or reviewing your policy:

  • Personal insurance coverage. At a minimum, the personal insurance coverage of your drivers should follow state-mandated limits and coverage conditions. Going a step further, employees who are drivers should maintain matching minimum limits of insurance for liability and uninsured underinsured motorist coverages. Optimally, an employee’s limits (from either an auto policy or a combination of auto and personal liability umbrella) should match the limits maintained by your company. Require all employees who operate personal vehicles for your business to provide proof of current insurance in the form of the policy Declaration page. 
  • Driver qualifications. Employees who are authorized to operate personal vehicles for business purposes should be qualified at the same level as employees operating business-owned vehicles. Drivers should have a valid driver’s license from their state of residence. Obtain a Motor Vehicle Record initially, and annually thereafter, for each driver. Evaluate the MVRs against your company’s performance criteria. Do not allow employees who fail to meet performance criteria operate vehicles for your business.
  • Driving policies. Require employees to comply with all pertinent state motor vehicle laws code and regulations. Additionally, use of nonowned vehicles should be aligned with the same rules established for use of company-owned vehicles including use of safety restraints, limiting use of cell phones and electronics and prohibiting vehicle operations while under the influence of alcohol, drugs and medications that impact one’s ability to operate vehicles. 
  • Supervision. Review your other policies and procedures to ensure your expectations are reasonable. For example, avoid scheduling appointments too closely as this can encourage speeding and reckless driving. Supervisors should be required to acknowledge that they understand driver performance benchmarks and authorization process established. Consider requiring that supervisors sign off on the driver acknowledgement form that authorized drivers completed.  
  • Training. Newly authorized drivers should complete the orientation session that drivers of company-owned vehicles are required to take outlining your company’s expectations of performance and consequences in the event they do not comply. Document all training and awareness activities in driver personnel files or company safety records.
  • Maintenance. Authorized drivers should maintain their vehicles in accordance with the manufacturer’s recommended service guidelines. If it’s feasible, management should inspect vehicles at least twice a year. A good practice is to visually inspect the vehicle at the time the employee provides updated proof of personal insurance.
  • Accidents. Make sure authorized drivers know to immediately report any accidents to management so that incidents can be reported to the insurance agent and carrier. Record accident details in the event the company is involved in future litigation.

Please contact your independent agent with questions for your Cincinnati loss control representative or to discuss considerations when asking employees to use personal vehicles for business purposes. Thank you for trusting your agent and Cincinnati to protect your business.

Our loss control service is advisory only. We assume no responsibility for management or control of customer loss control activities or for implementation of recommended corrective measures. These materials were gathered from trade services and public information. We have not tried to identify all exposures. We do not warrant that this information is consistent with Cincinnati underwriting guidelines or with any federal, state or local law, regulation or ordinance.

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