Fleet Safety: Are You Covered?

When it comes to work-related injuries and fatalities, no other cause comes close to the destruction wrought by motor vehicle accidents.

Motor vehicle accidents are—and have been for many years—the leading cause of work-related fatalities in the United States. They are also consistently in the top 10 causes of nonfatal injuries. Because these incidents usually take place outside the worksite, and because they can also involve nonemployees, motor vehicle accidents are an area where employers face increased liability.

Here’s the good news: A strong fleet safety program, coupled with workers’ compensation and liability insurance, can minimize your exposure. Unfortunately, it’s not all good news—your insurance could let you down just when you need it most.

Liability Insurance: What Doesn’t Your Policy Cover?

If one of your employees causes property damage, injury, or death to a nonemployee, your liability insurance policy should cover it. However, these policies may have exclusions that could leave you on the hook for substantial amounts of money.

Find out whether your policy covers:

• Punitive damages. If someone who is injured by one of your employees sues you, he or she may receive both compensatory damages (direct compensation for losses) and punitive damages (compensation intended to punish the party responsible for the injury). Your policy might cover compensatory damages but exclude punitive damages, or it could cover only a limited amount of punitive damages.

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• Negligent entrustment. Many liability policies exclude coverage for “negligent entrustment.” You can be found guilty of negligent entrustment (also known as “charge of carelessness”) if you permit a driver to operate a vehicle under circumstances in which you either knew, or should have known, the driver was not competent, and that driver’s negligence is found to have caused the accident. And it’s not unheard of for an employer to be found guilty of negligent entrustment even if the driver is found to be competent.

Your risk of being charged with negligent entrustment increases substantially under any of the following circumstances:

• The driver was somehow not qualified to drive a vehicle safely when he or she was hired. This means that you missed, during the hiring process, that this individual is not a licensed driver, has some other problem such as a suspended license, or is not licensed to drive the kind of vehicle driven.
• The driver is not legally qualified to drive the vehicle under state or U.S. Department of Transportation regulations.
• The driver has a history of traffic violations or accidents.
• The driver was not qualified to operate the type of vehicle involved or to operate the vehicle under the conditions involved. For example, some driver’s licenses are issued with restrictions.
• The driver was behaving in a high-risk way. For example, the employee was driving while under the influence or texting while driving.

You may be found guilty of negligent entrustment without regard to whether the driver was operating a company-owned or personal vehicle, or whether the risky behavior involved a work—issued or personal device (like a phone). All that is necessary is that the worker was operating the vehicle “in the scope of” his or her employment.

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Workers’ Compensation: Does Your Policy Leave You Exposed?

Workers’ compensation coverage is supposed to compensate workers for work-related injuries and illnesses while limiting the employer’s liability by providing that workers’ compensation is workers’ “sole remedy.” However, motor vehicle accidents are a gray area in workers’ compensation coverage.

For example, a worker who is on duty and struck by a vehicle driven by a private citizen may be eligible for workers’ comp as well as damages paid by the driver’s insurance.

If the driver is uninsured, the injured worker could also be eligible for compensation under uninsured/underinsured motorist provisions in the company’s own liability policy—and those provisions often provide greater coverage than workers’ compensation, creating duplicate liability for the employer. In some states those claims can be offset, but make sure you understand how your policies would work in such a case.

When your own employee is at fault, you may discover that your workers’ comp policy excludes accidents that result from “deviations from employment.” A deviation from employment occurs when a worker performs an activity for his or her own benefit that is not within the scope of his or her employment.

For example, an employee who calls home to check on her children while driving for work and causes an accident may be found to have deviated from her employment—but the accident still took place while the worker was “on the clock.”

At first blush, it might seem like a positive development that your workers’ comp carrier refuses to cover an accident under these circumstances. But you could ultimately be exposed to greater liability because the worker may then be able to sue you. If an injury isn’t covered by workers’ compensation, after all, the worker can pursue other remedies.