Employer Liability When Employees Use Personal Cars for Work Purposes

Employers may feel reassured when employees drive personal vehicles for work purposes, instead of a company car, believing their liability is reduced since the employees’ auto insurance should cover any damages.

However, this is not always the case. Under vicarious liability, employers may still bear responsibility for damages if an employee causes an accident while driving their personal car for work purposes.

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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 context, it applies to accidents caused by employees driving personal vehicles for business purposes.

When Are Employees Driving for Work-Related Purposes?

Employers may be liable if employees drive personal vehicles for work-related tasks that benefit the company, such as:

• Making sales calls or visiting clients.
• Running errands like going to the bank or post office.
• Delivering items to another office or client site.
• Purchasing supplies or picking up food for a company-sponsored meal.

Exceptions to Employer Liability

• Personal errands, such as picking up lunch or attending a doctor’s appointment.
  
  
• Commuting to and from work, under the coming-and-going rule, which generally excludes employer liability for accidents occurring during an employee's regular commute. 
  
  An exception to this rule applies if the employee runs an employer-requested errand on their way to or from work. In such cases, the employer may be held liable if an accident occurs during the errand. 
  
  However, if the accident occurs after the errand has been completed, the employer may not be liable.

For professional assistance with small business risk management and all workers' compensation claims contact Axcet HR Solutions.

Does the Employee’s Personal Auto Insurance Cover the Damages?

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.

Hired Non-Owned Auto Insurance

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. 

Are Employers Responsible for Deductibles?

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.

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Risk Management Best Practices

To minimize liability risks, employers should:

• Establish clear policies on personal vehicle use for business purposes in the employee handbook.
• Define mileage reimbursement rates and their inclusions.
• Provide guidance on filing workers’ compensation claims if an employee is injured during a work-related accident.

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Why Axcet HR Solutions?

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 >>