Confused about auto insurance liability exposure? One of our most often asked questions is ;”We don’t own any auto’s , but our employees regularly drive on company business their own cars, how do we protect ourselves and our employees in the event of an accident? Ah, great question grasshopper as I try to be succinct here.
If your companies has no auto’s registered to it, but has sales or consultants driving on company business you are correct both the business and the employee have significant liability exposures. In the event of a bad accident whereby severe injuries and property damage are sustained, both the employee and the business stand a high degree of probability of being sued.
Here is how the claim process would follow:
1) The liability , and the insurance follows the vehicle first. Thus in the example above the first pool of capital that would respond would be the employees car insurance policy. That policy would not just respond for the employee , but also the business that the employee was driving for. That’s the good news, the bad news is the limits available maybe be too thin to respond fully for both parties.
( As an example if the employee is only carrying $100,000 of liability coverage per 1 incident, then that is the full amount available for lawsuit. If the suit is for $ 1 million dollars , the company and employee are short $900,000 that’s the bad news.
2) If you had a risk advisor then in all probability that risk advisor would have suggested purchasing Hired/Non Owned Auto coverage that would respond for exactly that scenario. This policy would then drop down for the company , and perhaps the employee contingent on the endorsements and wording, solving for the $900,000 gap in coverage limits .
3) If your risk advisor was really on their game you would have an umbrella policy that would boost the coverage limit available over the initial base policy limit of $ 1 million dollars to what ever the coverage limit purchased on the umbrella , thus providing a more substantial buffer of insurance dollars to respond to a very bad loss.
HOT TIPS:
1) Now that you know your employees auto policy is the first line of defense , insist in your employee handbook / manual that certain employees ( By Class), as company policy must maintain a minimum limit of liability insurance ( you set the amount) . We suggest somewhere between $300 k & $500 k single limit.
2) To point # 1, insist that those employees also carry a minimum $ 1 Mill of umbrella coverage that would sit over their personal auto of $300 or $500 k single limit.
3) HR , CFO , or whoever is in charge of employee admin should require proof of coverage consistent with items #1 & #2, each year. Compliance to point # 1 & # 2 is critical. If you get push back from the employee offer to contribute some money towards the increased insurance requirements. $250 per annum per employee if very fair and pays for most of the increased coverage requirements.
4) Call a Risk Advisor and purchase a Hired / Non Owned Automobile policy in the name of your company, include the DBA if there is one. Minimum limit their is $ 1mill. It can usually be added to your other insurance policies for a nominal amount.
5) Coordiante with your companies umbrella carrier that the Hired / Non Owned Auto policy is now a scheduled insurance policy eligible for umbrella coverage within the umbrella contract. Yes, you must connect the dots here or there will be no coverage in the event of a claim even though you have both policies in force. This is a common mistake.
6) LIKE US on Facebook because we just saved your company from going out of business if you ever had an employee car accident!! LOL
Seriously, the most dangerous thing each and every one of us do each day is get behind the wheel of a 3000 lb fort on wheels , hurtling at ungodly speeds . It takes so little to change yours, and someones else’s lives irreparably. Just saying……..
Photo by Christopher Gower on Unsplash