Commentary: At-Risk Company Drivers Can Be a Risky Business
Bad drivers can put their employers at risk. Whether an employee is driving a company car or being reimbursed for driving their own vehicle on company business, the employer can be accused of negligent entrustment following a collision. In simple terms, negligent entrustment means an employee or contractor was dispatched to drive without proper regard for his or her qualifications and/or ability to safely operate a vehicle. Because settlements can be large and judgments can include punitive damages for egregious behavior, employers need to take note.
Although the driver’s own negligence in causing a collision may be the primary issue, a company’s policies and practices for its drivers can result in additional suits and expensive verdicts against the employer. In court, employers are responsible not only for what they did know but also for what they should have known.
Employers can reduce their exposure by taking the time to do a thorough pre-employment screening for every driver, implementing a strict driver safety policy, providing ongoing driver review and conducting post-accident reviews. In addition, employers should make sure hiring and training decisions are consistent with the Fair Credit Reporting Act (FCRA), which allows employers to obtain motor vehicle records as well as other information about a driver’s history of problems and violations. The employer’s insurance carrier may be able to provide some assistance in obtaining these reports.
But, past performance may not adequately address what an employer should have known about a specific driver. That’s why many businesses with a fleet of vehicles choose to install a mobile resource management (MRM) system. When data from a business’ own MRM system is integrated with a fleet management company’s MRM system, a variety of reports can be generated to help employers monitor drivers’ behavior, from off-hours vehicle usage to driving speeds and jackrabbit starts.
Of course, as in every business situation, having this information and acting upon it are two different things. It is the employer’s responsibility to enforce rules, take actions to change behaviors and commit to enforcing standards for every driver without exception.
According to the Insurance Information Institute, “When there is an auto liability lawsuit against the insured business where the loss is covered by the policy, the insurer is obligated to defend the business or settle the lawsuit. The decision whether to contest or settle the case is entirely at the insurer’s discretion.”
The insurer’s duty to defend or settle ends when the insurance policy limits are exhausted. By way of example, imagine that three people are injured in an accident in which you or one of your employees is at fault. The policy limit is exhausted in judgments or settlements for the first two claimants. That leaves your business liable to pay the award directly, should there be a judgment in favor of the third person. Punitive damages may be awarded in cases of gross negligence, such as drunk or reckless driving. By law
in a number of states, a business auto Coverage Form (the most commonly used contract for providing business liability insurance) cannot cover any punitive damages for which you may be liable. Even in states where coverage for punitive damages is allowed, your policy may exclude them.
William (Bill) Keller is assistant vice president of Corporate Risk Management for Enterprise Fleet Management, a full-service fleet management company for businesses with mid-size fleets that is an affiliate of Enterprise Holdings Inc.