Risk Management
Would you Let a Stranger Drive Your Car?
Better yet, would you let a stranger drive his or her car on your business’s behalf?
If you answered ‘no’ to the above questions, but don’t have an internal process to screen drivers, ensure adequate insurance coverage, and establish vehicle reliability and safety standards, you may be retaining more risk than you realize. All individuals driving on your behalf – regardless of vehicle ownership – should be screened for valid licensure and a satisfactory motor vehicle record. While it’s up to you to determine the standards for “acceptable” driving records, it should be noted that many insurance carriers have their own driver criteria to which your organization’s drivers must comply, or risk being excluded.
If your organization permits drivers to utilize their own vehicles for business use – daily commutes notwithstanding – ensuring adequate coverage limits on a driver’s Personal Auto Policy (PAP) is a must. Remember, your business auto policy sits in excess of the driver’s Personal Auto Policy, thereby creating a higher attachment point, above which your business auto policy will take effect. Without internal standards to verify minimum PAP limits, your attachment point may fluctuate from driver to driver, and in some cases leave you providing first-dollar auto liability coverage. Underwriters are aware of this possibility, and may charge higher rates to compensate for accepting the residual risk of underinsured drivers. Some insurance carriers require minimum liability limits of $100,000 per individual/$300,000 per occurrence, with no coverage exclusions for business use. Absent these conditions, you may unwittingly assume responsibility for any economic judgements against your employees, in excess of their potentially low liability limits.
Finally, those in positions of authority would be prudent to establish minimum safety guidelines for employee-owned vehicles. While many PAPs provide medical expense coverage for injured passengers, standard limits are often inadequate to pay for severe physical injuries. This exposure can be further mitigated by requiring that employee-owned vehicles – especially those used to transport third parties – be newer models equipped with safety features such as: front and side airbags, anti-lock brake systems, and functional passenger restraints.
These exposures should be further discussed with your insurance consultant, and are most effective when incorporated into a comprehensive ‘Fleet Safety Policy.’
