Business Use Of Employee’s Autos – An Insurance Perspective – Scott Simmonds
Introduction
I get asked certain policy questions regularly. One such interrogate involves employee manipulation of personal vehicles on company time. It ’ s a confusing subject filled with many opportunities for misinterpretation .
Most personal vehicles are guarantee using a “ personal car policy. ” Most businesses that own vehicles utilize a “ business car policy. ” The follow discussion is based on the above assumptions .
The Employee’s Insurance
Most personal car indemnity policies will provide protection for vehicles titled to individuals and used for a business purpose. The only exception is “ bilious ” – carrying goods or people for a fee .
Note:
-Using the vehicle for livery will invalidate coverage under many personal car policies.
-Share-the-ride expenses and mileage reimbursement do not jeopardize coverage .
-Delivery services including software pitch services, pizza delivery, and flower delivery are considered livery – coverage is excluded .
-General business habit of a vehicle ( picking up supplies, visiting customers, attending conferences ) is not a coverage return under most policies .
The indemnity purchased on a particular fomite is always “ primary. ” The policy covering a vehicle pays first before any other policy. If an accident occur while an employee is operating their cable car on an errand for the employer, the employee ’ s personal policy is the chief coverage, and should be looked at to provide protection .
Employees should check with their own indemnity carriers to be certain of their coverage. Explain to the agent or insurer the clientele circumstances in which the fomite will be used. broad disclosure of occupation habit will prevent coverage problems once a claim occurs. Most insurance companies will not increase premiums for occasional business practice. Salespeople using their cars primarily for occupation may find that their premiums are increased .
The Employer’s Insurance
The indebtedness section of the Business Auto Policy provides protective covering for bodily injury and property damage for which the cover company is liable. Under common jurisprudence, employers are responsible for the actions of their employees. Employers must be certain that their policies provide coverage for “ non-owned ” and “ hired ” autos. The company is then protected if an employee causes an accident. If an employer does not own any vehicles, “ hired and non-owned ” car liability policy is needed to provide the coverage outlined above .
The standard business car policy provides no coverage for the employees that are sued even if the accident took place on company time. The intent of the commercial enterprise car policy is to protect the company ( employer ) from become .
Most insurers will add “ employees as extra see ” for a little extra premium. Remember, the indemnity on a detail vehicle is always primary. consequently, any accident caused by an employee while driving his or her own cable car will be paid first gear by the insurance company of that vehicle. If there is not enough coverage under the employee ’ second policy then the employer ’ south commercial enterprise car policy will step in to pay the excess come if the employer ’ randomness policy has been endorsed to include “ employees as extra insured. ”
Most occupation car policies include no coverage for price to an employee ’ sulfur car. coverage can be purchased. however, it is generally not worth the supernumerary cost. It besides does not change the fact that employee ’ mho coverage is calm chief. even after buying the extra coverage, the business car policy will merely pay if there is no policy on the employee ’ mho vehicle .
Case Study
Let ’ s walk through a few claims to illustrate how coverage will respond .
Mary Smith is driving her 1999 Chevy to the office supply store. She is doing an errand for her employer, ABC Manufacturing Co. Assume she has a personal car policy with $ 300,000 of liability coverage and $ 250 deductible collision protection. besides assume that ABC has a business car policy with chartered and non-owned car coverage at a limit of $ 1,000,000 .
exemplar 1 – Mary causes an accident that results in damage to her car and damage to a park fomite in the total of $ 5,000 .
policy Response – Mary ’ randomness car insurance pays for the wrong to her car less the $ 250 deductible. Mary ’ randomness car insurance besides pays for the damage to the parked car. ABC ’ s indemnity pays nothing .
example 2 – Mary causes an accident that results in damage to her car and wrong to a vehicle stopped at a stop sign. damage to the other fomite is $ 10,000. There are three passengers in the car. All three jumpstart out of the cable car after the accident gripping their necks in agony. They sue Mary and ABC. The court awards the hurt passengers $ 500,000 from Mary and $ 750,000 from ABC .
policy Response – Mary ’ s car insurance pays for the price to her car less the $ 250 deductible. Mary ’ sulfur car insurance besides pays for the damage to the park car, $ 10,000. Mary ’ south insurance will pay her legal expenses and up to $ 290,000 of the opinion ( her $ 300,000 limit of liability less the $ 10,000 paid for the damage to the other vehicle ) Mary is responsible for the measure of the judgment above her indemnity. ABC ’ s policy pays their legal fees and the $ 750,000 award .
example 3 – Same scenario as above except ABC ’ s insurance includes “ Employees As Additional Insured. ”
policy Response – Mary ’ sulfur car insurance pays for the damage to her cable car less the $ 250 deductible. Mary ’ randomness car indemnity besides pays for the wrong to the parked car, $ 10,000. Mary ’ south insurance will pay her legal expenses and up to $ 290,000 of the sagacity ( her $ 300,000 limit of liability less the $ 10,000 paid for the wrong to the other vehicle ) ABC ’ s policy pays for the opinion against Mary in overindulgence of her insurance plus their legal fees and the $ 750,000 award .
Solution
When I explain the above in person I get all kinds of comments – all some variation of, “ It ’ s not fair ! ”
When I was younger, I would try and convince the early person in the conversation that, in fact, the manner this works is clean. nowadays I just nod. The coverage reaction above is the direction the policy world works, right or ill-timed, like it or not .
Employers are detached to respond in several ways :
-Provide a company car for party errands .
-Offer to pay the deductible for any accident that occurs to a personal fomite .
-Pay larger mileage rates to compensate for the hazard. The current ( 2009 ) pace set by the IRS is 55 cents per nautical mile .
I urge the latter solution. A company car may not be feasible. Paying the deductible could lead to disputes over issues such as, was the accident work related ? For model, a secretary who stops at the bank to make the company sediment before going to lunch has an accident on the way back to knead after lunch. Is this employment related ?
Paying a fair mileage rate and informing employees of the issues is generally, in my public opinion, the best solution. It recognizes the realities of the policy earth. The key to all this is to let employees know ahead of time what to expect .
My recommend set about is to send a letter to all employees outlining the way the worldly concern works. In that way everyone is operating on the same information.
here is a sample letter :
Dear Employee ,
From clock to fourth dimension it may be necessary for you to drive your personal fomite on company business. The function of this letter is to remind/advise you of our policy regarding such .
All employees using their personal vehicle for approved business travel will be reimbursed for such use at a pace of < $ .xx > per mile. This fee is intended to repay you for your expenses in operating the vehicle including the cost of natural gas, oil, tires, care and the price of insurance .
We require that all employees who drive personal vehicles on caller business carry at least < $ x00,000 > of indebtedness auspices and uninsured motorist coverage. The purchase of “ comprehensive ” and collision insurance is at your delicacy .
In the event of an accident while you are driving on ship’s company business you should look to your own policy to protect you and your fomite .
Remember, the car policy you buy is what will protect you on or off ship’s company time. Our company automobile policy policy provides no coverage for your fomite .
Should you have any questions regarding this memo please see your supervisory program .
Comments And FAQ
This article is by far my most popular military post. About 2/3 of my overall web dealings is on this page. I ’ megabyte glad to be of service .
here are a few questions that come out of the imprint downstairs. Go ahead and comment below so I can improve the nibble .
What Happens If My Employer Does Not Pay Mileage?
The indemnity on the car drive is always basal. If you drive your car on your employer ’ s clientele your car policy protects you. Your employer ’ s insurance protects your employer. Paying mileage does not affect the insurance you have on your car. My hypnotism that employers pay mileage goes to the transaction and comeliness ( IMO ) .
Does An Employer Have to Pay Milage?
not that I have ever heard. You make a distribute with your employer. If you don ’ deoxythymidine monophosphate like the deal, necessitate to change it or quit. Of course, you could talk with an lawyer. My think is that an employee asking the above question is looking for a argue to quit .
How Can I Be Sure My Insurance Covers Me?
Ask your insurance agent. I ’ m lone giving general advice here. State laws vary. different insurers handle things differently. Check with your agent .
I Have An Employee Who Will Not Drive Her Car On Company Business. What Should I Do?
Fire her or give her a raise. How the heck would I know ? Deal with your employees as adults. If they do not meet your standard fire them. conversely, you asking me this interview tells me the employee probably has some doubts about your ability to manage. I ’ five hundred tell them to quit .
I Need To Know If The Employer Has The Right To Ask For Our Driving Record Without Any Compensation For Using Our Personal Vehicles?
I urge all my commercial clients to run motive vehicle records on their employees who expose the business to liability. If you drive to the agency supply memory and cause an accident your employer could be sued. Of course they must follow privacy laws and your state laws regarding the use of motive vehicle data. I think your drive record is relevant to your employer. person with four speeding tickets and two accidents in the past class has a problem – a trouble I don ’ deoxythymidine monophosphate want my customer involved in .
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