When Personal Vehicles Become a Business Risk
Think about the last time an employee drove their own car to a client meeting, made a supply run, or grabbed lunch for a team event. It seems routine, and it is. However, if that employee is involved in an accident while performing a work-related task, your business could share in the liability, even though you don’t own the vehicle.
This is one of the more common coverage gaps business owners across Delaware, Pennsylvania, and New Jersey overlook. Personal auto insurance and business liability are not the same thing, and the space between them can create real financial exposure.
Why Personal Auto Insurance Isn’t Enough
When an employee drives their personal vehicle for a business purpose and gets into an accident, their personal auto policy is generally first to respond. The problem is that personal policies have limits, and business-use situations can quickly exceed them. Depending on the severity of the accident, injured parties may pursue additional compensation, and your business could be in their sights.
Insurers also pay close attention to what the driver was doing at the time of the accident. If business activity is identified, the employee’s insurer may pursue subrogation, essentially seeking reimbursement from your company, for what they paid out. That’s a scenario that can catch business owners’ completely off guard.
The coverage designed for this situation is called hired and non-owned auto insurance. “Non-owned” coverage protects your company when employees use their personal vehicles for business tasks. “Hired” coverage applies to vehicles your company rents or borrows. Added to your existing commercial policy, this coverage is typically affordable and fills a meaningful gap.
What Policies and Practices Should Businesses Have in Place?
Coverage alone isn’t the whole answer. Any business that allows or requires employees to use personal vehicles for work should have a formal written policy in place. That policy should define when personal vehicle use is permitted, set minimum insurance requirements for employees who drive, and outline consequences for non-compliance.
Employees who drive on behalf of your company should be required, at least annually, to provide a copy of their driver’s license, current vehicle inspection, and proof of personal auto insurance meeting your company’s minimum standards. They should also confirm that they’ve notified their personal insurer that the vehicle is used for business. If they haven’t made that disclosure, their coverage could be limited or denied in a claim, which again puts your business in a difficult position.
Distracted driving is worth addressing explicitly. The National Safety Council links mobile phone use to more than one million crashes per year. A clear, enforced policy against phone use while driving reduces both accidents and your legal exposure.
Enforcing What You Put on Paper
A policy that isn’t enforced isn’t really a policy. Managers should be responsible for monitoring compliance among employees who drive personal vehicles on company time. Motor vehicle records should be reviewed at least once a year. Employees who don’t meet requirements shouldn’t be permitted to drive for work purposes, regardless of their role.
For most businesses, hired and non-owned auto coverage is a modest addition to an existing commercial policy.
Want to make sure your business is protected when employees are on the road? Reach out to McHugh Insurance Group to review your commercial auto and liability coverage.
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