When employees are willing to drive their own cars for company business, it can lead to substantial savings for the company.
Rather than maintaining a vehicle, they can just reimburse the employee for mileage and avoid dealing with a large fleet. However, it can also come with some hidden liabilities that you should be aware of.
Compare auto insurance quotes today to make sure you have the right coverage in place for the right price.
The Business Liability Associated with Employee-Owned Cars
There are many businesses that require employees to use their personal car in the course of a work day.
These employees include regional managers who occasionally drive to other sites to check on activities, therapists who offer home visits, and even an accountant who’s expected to drive a personal car to make the daily deposits.
A general rule of thumb is that your business can be held liable for any accident that occurs while on company time or business. This can include scenarios such as:
- A sales person stopping to visit a customer while on his vacation
- Supervisors who stop in at other facilities on the way home to address an issue that came up
- An hourly employee who’s asked to stop at the store for supplies while they’re out for lunch
In any of these situations, the employee’s personal auto insurance would come into play initially, but the business could wind up liable for any damages above and beyond the personal policy limits.
Additionally, a company that’s trying to avoid paying claims can delay things by trying to have the business pay the entire claim.
There are several companies offering commercial auto insurance, so you can shop around for better rates. With the right coverage, you can be confident that your company is protected against almost any type of accident.
The Nonowner Option
Before you ask an employee to run any company errand, take a look at nonowner auto coverage. This liability plan is specially designed for those occasional events where you have an employee use a personal car for company business.
The policies are designed to protect the company and company assets in the event of a lawsuit.
However, nonowner coverage will not provide the employee or driver with any additional protection on a personal level. Employees who use their own cars to run errands at work should protect themselves by:
- Ensuring that occasional business use of the personal auto is covered
- Reviewing limits to be sure that they’re high enough to protect personal assets
- Ask for a “drive another car” endorsement for personal protection provided by the company’s insurance plan
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When Employer Liability Arises
Whether your team members are using their own cars or driving in a company van, you can be held responsible for their actions behind the wheel.
The decision to have a person drive on behalf of your company should be taken seriously as it can lead to major legal problems if you’re not careful. There are basically three ways that an employer can be held liable for an accident:
– Employer Negligence
In this instance, an investigation may find that a business trusted a driver who did not have the proper training or license for the position.
Any time you’re going to put someone in charge of a commercial vehicle, you should ensure that the individual has a clean driving record with his or her CDL.
Furthermore, the company is expected to take steps to monitor the driver and ensure that perform their duties in a safe manner. Many businesses check driving records and require drug testing for their drivers.
– Negligent Supervision
As an employer, you’re expected to have certain safety programs in place to minimize accident risks. You should be taking steps to keep drivers in full compliance with safety laws and standards.
These steps can include having people log their hours, as well as keeping vehicles in check with regards to weight and maintenance.
– Vicarious Liability
With this type of liability, the business does not have to be found negligent in any way in order to be held financially accountable.
Under this doctrine of law, it’s believed that the actions of an agent are essentially the actions of the principle, so you can be held liable even if you’ve done everything right.
However, this will only extend to you if the employee is acting on your behalf.
You can be held accountable for an accident that occurs when an employee is driving to make a delivery for your company, but you cannot be held accountable if they stop for lunch on the way back and get into an accident.
Factors that Influence Commercial Auto Rates
Car insurance can be costly, and it’s even more expensive for businesses because a business generally faces greater liability issues, including having employees behind the wheel.
However, there are actually several factors that play into your commercial auto insurance rate, including:
- How many claims the company has filed
- The driving records and ages of all drivers within the company
- Whether vehicles are stored in private lots, secure garages, or out on the road
- The presence of security mechanisms that are in place
Additionally, the type of business you’re in will play a role in rates. If you routinely have employees in the car or transport inventory, then your rates can be a little higher.
Companies whose vehicles are out on the road all day will also face higher premiums than businesses that require minimal travel and errands.
Keeping the Costs Down
One of the best ways to keep insurance costs down is by making some changes to how the business vehicles are insured and when employees are asked to use their own cars. You can protect your best interests by:
- Checking driving records before making final job offers, and focus on only hiring people with excellent records
- Having employees who will drive their personal cars for business use increase their liability coverage to at least $500,000
- Having employees sign a statement that they understand their personal insurance will be the first policy to respond in the event of an accident involving their vehicle
- Investing in a business auto policy that will cover this particular type of exposure
You can also reduce your costs by taking the time to shop around for a more appropriate policy. Determine what your needs are ahead of time so that you can look at the costs between comparable plans.
Clear Company Policies
You can also reduce your liability exposure by putting clear company policies in place for the cars. This is particularly important if you supply the vehicles that employees drive while on company business.
The vehicle policy should do the following:
- Outline what type of personal errands will be allowed while on company business or in company vehicle
- Use positive but firm language that clearly conveys your message
- Remain flexible enough to coverage several different situations
- Specifically prohibit any illegal drug use or alcohol use
- Require that you be given notice when the employee is going to be taking prescription or over-the-counter drugs that have any warnings regarding operating heavy machinery
When you sit down with an insurance provider to discuss your needs, be prepared to review how many employees drive on your behalf and who owns the cars that are used.
There are different riders and plan options available that will make it easier to customize a program that suits your needs.
When comparing plans between companies, be sure to include these additional expenses before making a choice based on rate alone.
By shopping around, you can keep your rates lower while still getting the protection that you really need. Enter your zip code into our free comparison tool to begin your search.