When To Make Sure Your Business Auto Policy Covers Employees With Their Own Cars

Just because an employee uses a personal auto does not relieve the employer of liability if he or she injures someone while on the job.

In many companies, employees drive during the course of their jobs — whether for deliveries, calling on clients or picking up supplies. They use their personal car rather than company cars. This has several advantages for the employer—it does not have to maintain a fleet, it does not have to worry about non-employees driving the car, and the employee’s personal auto liability policy provides the first layer of coverage. Accounting is also simpler—the employer does not have to account for an employee’s personal vs. business use of the car—all the employer has to do is reimburse employees for their mileage at the current IRS rate.

However, just because an employee uses a personal auto does not relieve the employer of liability if he or she injures someone while on the job. An employer would become “vicariously liable” for any injuries an employee caused to a third party during the course of work. (Time spent commuting to and from work is NOT considered work time; therefore, an employer has no liability for an accident that occurs during an employee’s commute.)

An employer can do a few things to protect itself from liability when employees drive their own vehicles for work:

1. For all positions that require driving, check applicants’ motor vehicle records (MVR) before making a final job offer. This will show any tickets they’ve received or accidents they have been involved in. Avoid hiring someone with multiple moving violations, especially for speeding or failing to obey signals. Studies have shown that these habitually careless drivers are more likely to become involved in accidents.
2. Require employees who drive for work to carry a personal auto policy with at least $500,000 in liability coverage. This will serve as your first layer of liability coverage, so be sure to notify employees that if they’re involved in a work-related accident, their policy will respond first. Require employees to submit proof of insurance, and make continuing coverage a condition of the job.
3. Consider buying a business auto policy (BAP) to cover auto-related liability exposures. The BAP can be written to cover any of an insured’s auto-related liability exposures, indicated by “symbols” on the policy’s schedule of coverages. To see whether your policy covers employee-owned vehicles, check for either Symbol 1 (which covers “any auto”) or Symbol 9 (non-owned autos only) in the schedule of coverages.

The BAP covers only the liability of the named insured — that is, the employer. The business auto policy (and your other liability policies) will not cover the employee’s own liability.

The BAP and other commercial liability policies also will not cover any injuries an employee causes to a fellow employee. Workers’ compensation protects the employer from this type of claim.

In some states, employees can sue their co-workers for work-related injuries under certain circumstances. The employer’s workers’ compensation insurance will not provide coverage for this kind of claim, making the employee personally liable. If you want to provide employees with liability protection for this and other situations, you can buy this additional coverage in an employees as insureds endorsement. The endorsement will provide employees with coverage under your BAP, secondary to the employee’s personal auto policy. Please note that if you have Symbol 9 coverage only (non-owned autos only), the BAP provides liability coverage only; it will not cover property damage to the employee’s car.