Do you or your employees use personal vehicles to travel to customers’ facilities or drive them out to lunch? If so, be sure to take a close look at your auto insurance to make sure you are adequately covered. If not, it could result in expensive liability problems.

“Typically, employees’ personal auto insurance will adequately cover any accidents,” says Kim Eakins, senior unit manager of commercial lines and liability claims, Sentry Insurance, Stevens Point, Wis. Some companies even require employees to have personal auto insurance, she adds.

Gene Tarney, insurance agent at The Insurance Office, Waukesha, Wis., says that an employee’s personal auto insurance policy might be adequate for the use of a company car if the limits of liability are where they should be. “Some personal carriers will not let you use the policy for business use, so it is very important to let your insurance carrier know of any business use plans,” he says.

Of course, in the event of an accident the amount of coverage can vary depending on the circumstances. “If there is a car collision and you are driving your own car for business purposes, then personal auto insurance might be enough. It depends on the other person,” says Tarney. If that other person finds out that the employee was running a company errand, then that person might try to go after the company for more compensation, he adds.

Even though personal insurance should still offer enough coverage, employers run the risk of being held liable. Therefore, employers should look into all of the possible options.

“Employers should make sure they have ‘non-owned and hired’ coverage as part of their commercial package,” says Tarney. A commercial package defines such clauses as general liability for workers. “This also includes a clause for commercial vehicle insurance — this covers cars strictly used for business purposes,” Tarney explains.

However, another option that employers should consider is to add a higher auto endorsement clause to their existing policy, says Eakins. This helps employers protect themselves against liability by adding higher liability limits; however, it does not include damage protection.

Besides the actual insurance coverage, another thing employers should pay close attention to is the past driving records of its employees.

“As with driving any car, you want people who have a good past history of driving,” says Tarney.

Eakins explains that typically underwriters will do a background check on employees’ driving records and exclude the ones that are high risk. “It’s always a good idea for employers to protect themselves with past and current driving history checks. An employee with a bad driving record puts a liability risk on the company and on the employer,” she says.

Employers can also go one step further to protect themselves from at-risk drivers. “An employer can list themselves on the employee’s personal car insurance as an ‘additional insured.’ This way the employer is notified if the policy lapses or if payments are missed,” explains Tarney.

Rates are another variable when choosing car insurance for your company. Although rates vary state-by-state, they are also based on the employee’s driving record, age and other personal criteria. Rates can also vary depending on the number of vehicles a company is insuring.

The best way an employer can make sure that its commercial auto insurance or its employees’ personal auto insurance is adequate to cover damages and liability claims is to speak with an insurance representative.

An employee or employer is making a risk-decision when choosing whether or not to insure a car, says Eakins — a decision that could cost everyone involved a lot of time and money.




POSTED ON: 7/1/2001