Hidden Liability Exposure of Personal-Use Vehicles
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Driver safety should be a top concern for fleets, and for those where it isn’t, they are automatically increasing the likelihood of being held liable for negligence if one of their drivers were to crash into another car, or worse, a pedestrian.
Fleet managers should know that having a sound fleet policy, doing motor vehicle record (MVR) checks, and regularly conducting safety training are all major pillars to an effective safety policy. Fleets that are already addressing this know that their reason for doing so is not only to keep their drivers safe, but to reduce the chances a fleet has of being held liable in the event of an accident. However, when adding personal use, fleets might want to take a harder look at their policies, as focusing on specific elements can help prevent potential issues.
Indeed, there exists a number of “hidden” problems and concerns related to personal use vehicles in a fleet that fleet managers might not be aware of. Considering these issues will help put fleets on the path of creating a stronger policy against potential litigation.
Like any good safety program, a solid safety policy is designed in part to prevent fleets from exposing themselves to liability. However, some fleets might think, because they are using a reimbursement model, that certain policies that apply to a fleet of vehicles that a company owns/leases do not apply to vehicles which are used in a personal use program. This is not the case.
“Fleets with drivers who take part in a reimbursement program still have liability exposure and absolutely need to have an active safety policy in place that is proactively monitoring and training drivers and reacting appropriately with consequences to those out of compliance, very similarly to those drivers in possession of company-owned vehicles,” said Allison Lanzilotta, executive vice president for Fleet Response.
Judge Brian MacKenzie, CFO at the Justice Speakers Institute, which is an organization that educates the public on justice issues, also concurred with this sentiment.
“[Having a personal use policy] doesn’t eliminate the need to make sure the driver is trained, to check their license, to do all of things that you would do for someone who is driving a fleet vehicle. You still have all of those training requirements, and if you don’t do it you’re opening yourself to a huge amount of liability that the training you do for fleet drivers helps you eliminate,” said MacKenzie.
Brian Kinniry, senior director of strategic services, The CEI Group, echoed similar sentiments, adding that not enforcing a policy, or harshly enforcing a policy for one employee and not for another, can weaken a company’s position in the case of legal proceedings.
Indeed, as mentioned, there are policies ubiquitous to fleets that also apply to personal use, and have their own issues that should be considered,
For example, Rich Tillotson, vice president sales/business development at Corporate Claims Management (CCM), said that some fleets will stop performing MVRs because a personal use vehicle belongs to the driver, assuming that this responsibility is absolved of them. This is not the case.
“As long as drivers are driving on company business, if they have three DUIs on their record, the company is equally responsible,” he said. “Don’t ever stop doing things like MVR checks or driver training for that matter.”
Indeed, as other fleet safety experts mentioned, if fleets aren’t actively disciplining drivers for poor driving behaviors, and one of their drivers happens to get into an accident, an attorney may observe this as negligence on the fleets part.
Lanzilotta of Fleet Response further addressed the importance of addressing personal use policies as thoroughly as you would with other fleet policies.
“If use of a personally owned vehicle is permitted, companies are still held accountable for the action of their employees. It’s important for companies to have a clearly communicated policy with consequences for high risk driving records and accidents for all employees driving on behalf of company business,” she said.
Due to the overall increased usage of a personal use vehicles, whether during company hours or not, fleets without a policy that addresses exactly when a fleet driver is driving for work, is opening itself up to further liability.
For example, Tillotson said fleets should have language in their policy that clearly identifies personal use for a vehicle during normal corporate hours.
“If you have an accident Saturday morning going to a ball game, for example, the company is equally exposed because it’s a company car. But by policy, if you can restrict the policy of reimbursement to ‘working hours,’ you’re taking at least 16 hours of that exposure, at least, per day. If you write it properly in your policy book, when he’s on personal time you cannot be held accountable for crashes or accidents or damages done.”
Tillotson said fleets who switch to a personal-use program may neglect to consider this.
However, MacKenzie said this kind of policy would only work assuming the fleet doesn’t ask its employees to work on company matters after business hours.
“The minute you cross that border, the policy fails as a defense,” said MacKenzie.
However, David Wallace, vice president of the Justice Speakers Institute, suggested that these concerns can help be addressed if the fleet creates a sound safety culture.
“In some ways, it doesn’t matter if it’s a fleet vehicle or a personal vehicle driven for business purposes, it really comes down to has the company created a traffic safety culture. Are they really taking the time to educate their employees with what they expect,” said Wallace.
However, the issues addressed are just a few examples of things to consider. Indeed, some policies to consider specifically for personal use, that fleets might neglect, are those of cellphone use and the type of vehicles that are being utilized.
There is no debate that distracted driving is a problem. Indeed, according to the National Highway Traffic Safety Administration, 3,477 people were killed and 391,000 were injured in motor vehicle crashes involving distracted drivers in 2015.
To reduce this problem for a fleet’s operation, Kinniry of The CEI Group also mentioned having a strict distracted driving policy as a must have inclusion. He said the rise of distracted driving is due to the ubiquity of mobile devices. To combat distracted driving, every fleet should have a rigid no-cellphone clause, which prohibits the use of any device while the vehicle is in motion, he added. The same should be applied when considering personal use.
MacKenzie of the Justice Speakers Institute echoed this sentiment and further elaborated on how it plays into personal use policies.
“One of the areas where you have a hole in fleet safety policies, is the issue of cellphones.” said MacKenzie. “Cellphones are causing about as many accidents as drunk driving. If a person is in their own personal vehicle, use of the cellphone can’t be limited. Nor can it be controlled.”
Indeed, MacKenzie said corporate vehicle fleets can create policies that prevent phone use in a vehicle while it’s moving, or add blocking devices that prevent phone use. However, with a personal-use vehicle, fleets do not have this ability.
He observed that he had not seen many fleets address this concern as it relates to personal use.
Another policy that should be stressed for fleets when considering a personal use vehicle is whether the vehicle is appropriate for the type of work of the fleet.
MacKenzie of the Justice Speakers Institute mentioned, as an example, a fleet whose main job is transporting pesticides. This would require the use of certain vehicles with certain standards and available equipment, since there are EPA regulations to consider with the transportation of pesticides. If a fleet were to utilize a personal use vehicle not suited for this kind of job and the pesticides somehow unintentionally exited the vehicle, that fleet opens itself to being liable for negligence.
“If the vehicle is not appropriate for the type of work that needs to be done, you’ve created a whole area of liability. You could have a perfect safety policy and perfect control of everything else and be completely liable for that,” said Mackenzie.
Indeed, the policy should be specific as to the vehicle that is best suited for the job of the fleet.
“At the start you’ve got to tell the driver why they have to have a certain vehicle for the job,” said Tillotson of CCM. “Even some of the reimbursed fleets use lessors because they help tell drivers the type of vehicle they should get.”
In this type of instance, the reimbursed driver can contact an FMC who will then help select a vehicle for the driver based on the parameters of the fleet’s duties and the driver policy.
Tillotson said this is also important to consider as it will help address maintenance concerns that may arise resulting from a personal use vehicle.
“That is an issue for anyone who is reimbursed, because the mechanics of checking those vehicles is difficult,” he said.
Fleets should also consider the driver’s auto insurance policy in instances of personal use.
This is critical for fleets to consider, as MacKenzie notes that drivers who are being reimbursed might have basic insurance with a policy that will not offer coverage necessary to cover a settlement or any potential damages.
As another example, MacKenzie of the Justice Speakers Institute considered a fleet driver on a reimbursement program who happens to have basic auto insurance. If his fleet manager thinks that the fleet is protected by the driver’s insurance policy, and the driver gets into an accident, the drivers auto insurance may end up not covering all of the finances resulting from the accident. Meanwhile, the company, since they are labeled as the secondary liability on the insurance, will find that it then has to then pay the rest of the settlement out of its own pocket.
Rich Tillotson of CCM observed additional issues as they related to being listed on a personal use driver’s insurance policy.
“Some of the things that seem to slip through the holes are fleets that don’t insist the company add itself as the additional insured on the declaration page. If the deposition page is reviewed during an inquiry in the event of an accident, the third party will be able to see that the company is the secondary insured,” said Tillotson. “Therefore, if an accident occurs, and there is a lapse of insurance one month, the fleet will be held liable for having employed a driver that is not insured.”
Tillotson offered additional advice about auto insurance.
“Insurance is playing the best of averages. So, if you think of insurance, or any decision you make on the risk side, think of it like an insurance adjuster would think of it. Think of it with a rating performance mentality. What’s the likelihood that this is going to occur relative to what’s the likelihood another situation would occur.”
While personal use has proven to have its share of “hidden” liability elements, there exist other aspects that apply to fleets that utilize any kind of vehicle program, which are worth considering.
Brian Kinniry of The CEI Group, stressed the importance of having complete buy-in when it comes to a creating an improved safety policy, which can be also applied to personal use vehicles.
For this, he suggested involving many levels of the fleet structure as possible. This would include top executives, HR, legal, risk managers, and even field managers and drivers. The safety program’s success is heavily dependent on the top executives involved, as having full buy-in from upper management will set the expectations of the entire company.
Another hidden element that expands on the idea of monitoring driver behavior is the idea that fleets should be monitoring the driving history of all of its drivers, and not just those with a poor driving history.
“While it’s important to focus on drivers with previous violations and accidents, the majority of incidents continue to be caused by drivers with no previous record,” said Lanzilotta of Fleet Response. “If a fleet is truly attempting to reduce their overall incident rate and liability exposure, one of the most beneficial things they can do is to regularly, proactively train all employees driving on behalf of the company. This includes those drivers with a perfect record,” said Lanzilotta of Fleet Response.
However, Wallace of the Justice Speakers Institute said that if fleets are implementing all the best practices, and following through with training and education, they shouldn’t have to necessarily worry about “hidden” elements.
“If they educate, engage, train and monitor, and have an effective policy in place that they enforce, I don’t see the ‘hidden things as being an issue. If they’re taking the proactive steps to creating a traffic safety culture from the get-go, and continue to follow through with that, then they’ve taken care of, for the most part, the ‘hidden’ issues,” he said.