If an employee causes a car accident while on the job, the company will likely face some liability. Vehicle accidents are one of the leading causes of work-related injuries and fatalities. Let's explore the legal risks and how to reduce liability.
Employer liability for employee car accidents
From 2011 to 2022, over 21,000 U.S. workers died in a work-related vehicle accident. Most years, motor vehicle crashes are the first- or second-leading cause of work-related death in every industry. In 2022 alone, 1,369 fatalities occurred from auto accidents at work. Truck drivers and sales reps account for around 20% of all fatally injured workers.
Vicarious liability for accidents
When an employee driver or passenger is killed or injured, the employer often pays worker's compensation. If fatalities or injuries to other motorists or pedestrians occur, the employer often faces liability as well. The average company costs of a fatality or injury are $751,000 and $75,000, respectively.
Costs of employee car accidents
Add in property damage, and the cost of an employee-caused accident can be devastating. In 2019 alone, auto accidents cost employers $39 billion. Financial responsibility for these employee accidents comes by way of the concept of vicarious liability.
What is vicarious liability?
Vicarious liability means that one party is responsible for actions of another party acting on their behalf. An employer may face vicarious liability for an employee's actions because the employee is an agent of the employer.
Examples of vicarious liability
Examples of people and entities subject to vicarious liability:
- employers
- parents
- business partners
- corporations
In each of these cases, a superior risks liability for an inferior's actions. Parents, for example, are responsible for some of their children's actions. Corporations may have to answer for the actions of officers. These legal liabilities arise from a torts law doctrine called respondeat superior.
What is respondeat superior?
The concept of vicarious liability comes from the legal doctrine of respondeat superior. This Latin phrase literally means “Let the master answer.” Simply put, a superior answers for the actions of an inferior. Employers thus may be liable for an employee accident.
Respondeat superior and insurance claims
When a worker causes harm, a lawsuit may name the employer or supervisor. An insurance claim may target the company's insurance and not just the employee's.
HR directors and finance officers should calculate and reduce the risk of vicarious liability from vehicle operations. They should especially pay attention to insurance claim liability. If you have employees who drive as part of the job, you need to understand the risk of vicarious liability.
Determining vicarious liability for car accidents
If a plaintiff wants to sue the company because of damages caused by an employee, they face a clear legal burden. The plaintiff must demonstrate that the employee was acting on behalf of the employer. What if the employee was grabbing a cup of coffee? Or running a personal errand?
Detour vs. frolic and car accidents
When applying respondeat superior to car accidents, courts typically distinguish between detour and frolic.
- Detour – a minor departure from job responsibilities (getting coffee, grabbing lunch, etc.)
- Frolic – a major departure for personal reasons (buying groceries, going to a movie, etc.)
A detour can result in the employer being held responsible under tort law. An accident that results from an employee frolic will likely keep the employer free from liability. For this reason, workplace policies should clarify what vehicle trips count as business vs. personal.
Business commutes and car accidents
Typically a commute does not count as on-the-job driving. Commutes, however, can turn into a gray area for vicarious liability.
What if the employee has to stop at a job site on the way to the office or on the way home? Or run a work-related errand on the way to the office? An employee that works from home could cause an accident on the way to a client. In that case, the employer may be held vicariously liable.
Reducing liability for work-related vehicle crashes
If the employee is acting on behalf of the employer, two legal risks emerge: insurance liability and negligent entrustment. Both risks can be mitigated through proactive policies. Let’s explore best practices for each.
1. Auto insurance liability
After an accident, the victim’s insurance company will file a claim with the other driver’s insurance company. But what if that driver is uninsured or underinsured? If the driver was operating within the scope of his employment, the victim will file a claim with the employer’s insurance company.
Thus every organization with mobile employees should set minimum required auto liability insurance limits for each employee.
How to require employee car insurance
Auto liability insurance covers both injuries and property damage. Every auto insurance policy carries liability limits for these categories. These limits represent the highest amount the insurance company will pay for costs.
State minimum liability car insurance
Some employers default to state requirements. However, many states require very low coverage. A common standard is $15,000 for each bodily injury, $30,000 for all injuries, and $5,000 for property damage. This is designated as a 15/30/5 policy. However, a major accident with multiple injuries can far exceed $30,000 in medical bills.
Best employee car insurance coverage
Best practice says to require all employees to carry a 250/500/100 policy. This protects the company’s insurance from having to pay for nearly any car accident. The key, though, is to verify every six months that employees are still complying with the policy.
2. Negligent entrustment and MVR reports
Negligent entrustment is a legal concept that applies to dangerous tools, including vehicles. Negligent entrustment means that the employer acted with negligence when assigning the employee a role that required a vehicle.
Negligent entrustment requirements
In a negligent entrustment case, a victim files a suit alleging the following:
- the employee caused harm while acting on behalf of his or her employer AND
- the employer was negligent to entrust the employee with a company vehicle OR
- was negligent to entrust that employee with job responsibilities that required a vehicle
Proving negligent entrustment of a vehicle
To prove negligence, the plaintiff must show that the driver was reckless, incompetent, or unlicensed. In addition the plaintiff must show that the employer must have known or should have known this. Demonstrating negligence can include showing previous moving violations on the motorist's driving record.
Motor vehicle records and driver safety
Two main ways exist to protect against negligent entrustment. First, the employer should run regular motor vehicle record checks (MVRs). Second, management should create a comprehensive safety policy or "Driver Safety Program" that reduces distracted driving and other risks.
MVR checks
Most HR departments run MVR reports to check driving history during the hiring process. Not everyone continues this practice after hiring. However, employers need to know when employees get speeding tickets, reckless driving citations, and DUIs. If an employee with a spotty record causes an accident, the victims can establish negligence.
Driver safety program
If an employee MVR turns up a new incident, you can take actions to reduce the risk of vicarious liability. HR can then order the employee to take a driver safety course. If the incident was serious or part of a dangerous pattern, the organization can instead fire the employee.
Protecting your company from vicarious liability and respondeat superior
In our litigious society, vicarious liability is hard to avoid. Any time employees hit the road, the risk of accidents looms. However, you can manage that risk by following the practices we’ve outlined here. For more detailed steps you can take to protect your company, download our Mobile Employee Risk eBook.
Or start by calculating your current risk and get suggestions for steps to reduce it using our calculator below.