When employees use their own cars for errands like client visits, bank runs or supply pickups, many business owners assume the employee’s personal auto insurance is enough. But that isn’t always the case.
Through vicarious liability, employers can still be held responsible if an employee causes an accident while driving a personal vehicle for work. And with motor vehicle crashes ranking as the leading cause of work-related deaths in the U.S., the financial and legal stakes for employers are high.
Understanding when liability applies, how insurance responds and how to manage policies on personal vehicle use for work can help protect both your team and your business.
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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 context, it applies to accidents caused by employees driving personal vehicles for business purposes.
💡In driving cases, liability hinges on whether the trip was within the scope of employment—a concept courts interpret broadly to include many work-related errands.
Employers may be liable if employees drive personal vehicles for work-related tasks that benefit the company, such as:
💡Employers can minimize gray areas by requiring employees to document trip purposes when requesting mileage reimbursement.
An employee’s personal auto insurance is typically the first source of coverage. However, if damages exceed the policy’s limits—such as in multi-car accidents or those involving expensive vehicles—the employer may be responsible for additional costs.
Employers can mitigate this risk by securing hired non-owned auto insurance, which 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.
For businesses with hired non-owned auto insurance, the policy kicks in and pays when an employee’s auto insurance policy won’t cover all of the damages.
While not required, employers may choose to fully or partially reimburse employees for insurance deductibles or damages incurred during work-related tasks.
Mileage reimbursements often account for general vehicle wear and tear, and policies on accident-related costs should be clearly outlined in employee handbooks.
Call 911 and secure the scene.
Seek medical evaluation for injuries.
File a police report.
Notify both the employee’s auto insurer and your HR/risk team.
Begin workers’ comp reporting if the employee is hurt.
💡For professional assistance with small business risk management and all workers' compensation claims contact Axcet HR Solutions.
When employees drive their own cars for business errands, employers need clear policies on how they’ll be compensated. The most common method is reimbursement at the IRS standard mileage rate (70¢ per mile for 2025), which is designed to cover fuel, wear and tear, and other vehicle expenses.
Some companies instead offer a monthly car allowance or adopt a Fixed and Variable Rate (FAVR) program, which can be more accurate for employees who log high mileage.
Whatever method you choose, put the details in your employee handbook—clarifying whether reimbursement includes deductible costs after an accident while driving a personal vehicle for work, and how quickly employees will be reimbursed. Clear policies not only keep employees whole but also reduce the chance of disputes.
To minimize liability risks, employers should:
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Navigating employer liability can be complicated. As a certified PEO, Axcet HR Solutions specializes in helping small businesses manage risk, ensure compliance and protect their bottom line. From workers’ compensation claims management to expert guidance on liability issues, we are your trusted partner in workplace safety.
For expert assistance from a top risk management company, turn to Axcet HR Solutions. Schedule a consultation today >>
Q: Are employers liable if an employee has an accident while driving a personal vehicle for work?
Yes. If the trip was for business purposes, employers may face vicarious liability.
Q: Does personal auto insurance cover work trips?
It usually responds first, but exclusions may apply. Non-owned auto insurance provides backup for employers.
Q: How are employees compensated for using their own car at work?
Most companies reimburse at the IRS mileage rate, while some use allowances or FAVR plans. Policies should be written in the handbook.
Q: What should an employer do right after an accident?
Ensure safety, call 911, file reports, notify insurers and begin workers’ comp if there are injuries.
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