10 Tips for Protecting Your Company from Auto Liability Claims

Although the number of auto liability claims has fallen in the last few years, the cost of claims is increasing, even though the severity of injuries is decreasing. In 2012, auto liability claim costs for property damage averaged $3,073; cost of bodily injury claims averaged $14,653, according to the Insurance Services Office (ISO). Protect your company from these costs by ensuring you have the right insurance protection.

If one of your employees causes property damage or injury or death to another while driving on company business, your company could become liable. In addition to the human cost, involvement in an injury or fatal accident can create adverse publicity, cause lost time and potentially cost thousands of dollars in liability claims.

For many reasons, then, it makes sense to prevent auto liability claims whenever you can and to minimize the company’s liability when a claim does occur. Practical action steps include:

1. Define the jobs that involve driving. If a job requires driving, obtain copies of applicants’ motor vehicle records (MVRs) from the state department of motor vehicles before making a job offer. Be sure to obtain applicants’ written permission before doing this to avoid violating any privacy regulations. Use the MVRs to screen out any applicants whose records indicate unsafe driving behaviors.
2. Request MVRs on a regular basis—at least once a year—for all employees whose jobs involve driving or who are given company cars.
3. If an employee needs to drive infrequently on business—for example, on a business trip—you might save time by requesting the employee to provide a copy of his or her own motor vehicle record abstract.
4. Develop a company driving policy. Department of Transportation statistics reveal that most accidents involve unsafe driving behavior. Your policy should require seat belt use for the driver and all occupants, prohibit driving while intoxicated (including while under the influence of legally prescribed drugs that can impair reflexes, judgment or vision), and require safe use of cell phones and other mobile devices while driving. Many companies (and some states) allow only hands-free devices or ban the use of mobile devices altogether while the vehicle is moving.
5. Your driving policy should also include a list of disciplinary actions the company will take for violations. This could include a point system, where drivers receive points for various moving violations, along with listing offenses that will result in termination of driving privilege or employment, such as DUIs, reckless driving charges or vehicular manslaughter.
6. To minimize paperwork, have employees sign a consent form at time of hire, authorizing the company to review their MVRs on an annual or as-needed basis, and that they have read and agree to abide by the company’s driving policy.
7. Provide written notification to employees who have corporate cars or who rent cars for business purposes that the company’s insurance policy will not provide coverage for personal use of a company car or car rented for business purposes, and that the employee should carry personal auto insurance.
8. Require employees who use their own cars for business to carry certain minimum liability limits on their personal auto policy. The Insurance Information Institute recommends that individuals buy a minimum of $100,000 in bodily injury coverage per person and $300,000 per accident. High net worth individuals will need more; employees should consult their personal insurance advisor.
9. Since some accidents involving employees’ personal vehicles will exceed the limits of their personal coverage, your company might want to buy additional protection for itself through a difference in conditions (DIC) policy. This nonstandard policy covers exposures not covered by other policies on either an excess or first-dollar basis. If you have large numbers of employees who use personal autos for business, you might also want to discuss arranging a group personal umbrella or excess insurance program for these employees, to supplement their coverage under their personal auto policy.
10. Check the limits of your company’s business auto policy. Limits that were adequate several years ago might not provide enough protection for today’s more litigious environment. For information, please call us.