Oftentimes, employers feel relieved knowing their employees are driving personal cars for work purposes and not company cars. They may believe it minimizes employer liability because employees likely have their own auto insurance to cover any damages or injuries that could result from an accident. But it doesn’t always work this way. In some situations, businesses can be held liable for damages in the event an employee causes an accident while using his/her personal car for work-related purposes under vicarious liability.
What Is Vicarious Liability?
Employer vicarious liability is the attachment of responsibility to an employer for harm or damages caused by employees’ negligence during the scope of their work. In this case, it is the attachment of responsibility to an employer for damages incurred by an employee who causes an auto accident while using a personal car for work purposes.
When Are Employees Driving for Work-Related Purposes?
Generally, if an employee is driving while on the clock carrying out regular work duties or completing a task at the employer’s request that the employer benefits from, the employee is operating a personal vehicle for work purposes and the employer could have vicarious liability. Examples include:
- Making sales calls and visiting clients (salespeople are the most common job category where employees are using personal cars for work).
- Going to the bank or post office on behalf of the company.
- Delivering something to another office or client site.
- Running business errands, like purchasing office supplies.
- Picking up food for a company-sponsored team luncheon or breakfast.
If an employee is running a personal errand while on the clock, like picking up their own lunch or attending a doctor’s appointment, generally, the employer would not be responsible. Additionally, under the coming and going rule, the commute to and from work is not considered driving for work-related purposes. An exception to the coming and going rule would be if the employee runs an errand requested by the employer on the way home from work and gets into an accident on the way to complete the errand. In this case, the employer could be held responsible. However, if the accident occurs after the errand has been completed, the employer may not be liable.
Does the Employee’s Personal Auto Insurance Cover the Damages?
Generally, if employees use their personal vehicles for business purposes, their personal auto insurance covers the damages should an accident occur. However, if the damages exceed the employee’s policy limits, the employer may be responsible for the additional cost of damages incurred. This can happen when multiple cars are involved in the accident or the accident involves a very expensive car. For businesses with hired non-owned auto insurance, the policy kicks and pays when an employee’s auto insurance policy won’t cover all of the damages. Hired non-owned auto insurance is designed for businesses and covers liability and medical payments for vehicles rented and leased by your business, in addition to those that are owned by your employees but used for business purposes.
Is the Employer Responsible for Paying an Employee’s Auto Insurance Policy Deductible in the Event of an Accident?
Typically, there is a deductible in the event of a claim. Employees may think employers should pay the deductible if they were using their personal car for business purposes at the time of the accident. However, employers typically are not required to provide reimbursement for deductibles or other costs incurred as a result of an accident. However, employers may choose to assist or fully reimburse employees for any damages to their personal vehicle or for the cost of their insurance deductibles. For employees who receive mileage reimbursements, those costs are considered to be included in the reimbursement rate.
To alleviate confusion, it is best to clearly explain your corporate policy regarding the authorized use of personal vehicles for business purposes in writing in your employee handbook or expense reimbursement policy manual. Be sure to include an explanation of how the mileage reimbursement rate is set. Refer to the IRS website for more information to include in your policy. Include your approach to reimbursements in case an accident occurs. Be sure to include workers’ compensation claim filing information in the event that the employee is injured in the accident.
For expert assistance with claims management turn to Axcet HR Solutions for workers' compensation insurance.