In a previous post to the Rue Insurance Blog I talked about how a business owner does not reduce his exposure to liability by having his employees use their own vehicles to conduct work. In this post I want to talk about how to manage this exposure in your company. There are some common sense ideas that you can use to help mitigate your exposure to liability.
Identify Job Positions Where Employee Has to Drive
The first step in the process is identifying the job positions that require an employee to use his own vehicle on a frequent basis.
State in the job description that these positions require a mandatory review of their driving record at the time of hire and then on an annual basis. Establish criteria for what is an acceptable and unacceptable motor vehicle record and let your employee know what that criteria is.
Why is the person’s driving record so important? The conventional wisdom in risk management is if a person has a poor driving record, the chances of him getting into an accident are greater. If his driving record off the clock is bad, his driving habits do not suddenly get better when he is working for you.
Establish Driving Record Criteria
As to establishing a criteria for reviewing a Motor Vehicle Record there are two sources for this information:
- Your Insurance Agent or Broker. Some agents or brokers have information to share, but some don’t. Warning: Blatant self promotion ahead! Clients of Rue Insurance have access to custom designed MVR review criteria from our In House Risk Management Department. Become a client of our and we can work with you on this. End of blatant self promotion.
- Ask your auto insurance carrier for their general criteria of what is an unacceptable driver. Most reputable insurance companies will do this because it actually benefits them to have customers establish MVR review programs.
You may run into a problem where an insurance carrier’s customer service department won’t know how to answer this question. If so, ask for a name of someone in the “Loss Control Department.” This division of an insurance company is focused on helping customers manage risk and may have some resources to share with you.
If your insurance carrier won’t do this for you, fire your insurance company.
Establish Minimum Driving Age
Establish a minimum hiring age and years of driving experience required. It comes as no surprise that those who pay the most for personal car insurance are teenagers. According to the Insurance Institute for Highway Safety teen drivers have crash rates 3 times those of drivers 20 and older, per mile driven.
In my experience a common question I see asked by insurance companies is “Do you have any drivers under the age of 20?” Insurance carriers have denied offering hired and non-owned auto liability coverage because of exposure to youthful drivers.
Establishing a minimum driving experience of 3 years or more for those over the age of 20 is a reasonable starting point. The thought process is that after 3 years of driving the average adult has a better understanding of the rules of the road.
Establish Employee Insurance Requirements
Most states do require that a vehicle owner purchase auto liability insurance. However do not assume that your employee purchased a policy. Have your employee show proof of coverage by providing a copy of his Auto ID Card or a copy of his policy’s declaration page and keep that in the employee’s file.
I have seen insurance companies say that the employee should carry a minimum liability limit of $100,000 per person / $300,000 per accident for bodily injury and $100,000 for property damage or a $300,000 combined single limit which covers both bodily injury and property damage.
The reason for suggesting minimum limits of liability is most small accidents will be addressed by such limits, thus saving your company’s insurance policy from having to pay a claim.
Consider this: the minimum limits of liability coverage in the following select states:
Once the employee’s insurance policy limits have been exhausted your Hired & Non-Owned Auto Liability coverage will begin to pay. Keep in mind that this kind of coverage (if purchased) is designed to protect your company, not your employee. Although you can craft the coverage to include your employee.
Establish Rules of Conduct While Driving
Establish rules of conduct while driving.This is the tougher part to enforce in managing but it can’t be overlooked. Here are some bullet points of things to consider:
- Establish a cell phone usage policy
- Establish a no texting while driving policy
- Limit passengers to those associated with business use. IE don’t pick up hitchhikers.
- Drivers and passengers must wear seat belts
- Report all auto accidents immediately, even the small ones, to the employee’s manager, supervisor or owner of business.
Having a formal program that manages your company’s exposure to employees driving their own vehicle will help reduce your company’s total cost of risk. It’s a wise investment in your company’s profitability.