If an employee causes a car accident while on the job, the company could end up paying. It's all because of a legal concept called respondeat superior, or vicarious liability. Let's unpack these terms and explore how an employer can protect the company in the event of a car crash.
What are vicarious liability and respondeat superior?
If you have employees who drive as part of the job, you need to understand the risk of vicarious liability. Whether it's a company car or a personal vehicle, legal liability for an employee driver's actions can extend to the employer.
Vicarious liability simply means that one party can be held responsible for actions undertaken by another party acting on their behalf. This concept is based on the legal doctrine of respondeat superior, which literally means, “Let the master answer.” When your employee causes harm while on the job, the company can be included in a lawsuit against the employee.
Auto accidents constitute a significant risk when you have employees driving on the company’s behalf. However, if a plaintiff wants to sue the company because of damages caused by an employee, they must first demonstrate that the employee was acting on behalf of the employer. For instance, if the accident occurs while the employee was grabbing a cup of coffee or running a personal errand during the workday, can the employer still bear responsibility?
When it comes to applying respondeat superior to car accidents, courts typically distinguish between detour and frolic. A detour would be a minor departure from carrying out job responsibilities—getting coffee, grabbing lunch—whereas a frolic refers to a major departure for purely personal reasons—buying groceries, going to a movie. In the case of a detour, the employer could still be held liable under tort law, but not in the case of a frolic.
However, assuming that the employee is acting on behalf of the employer, there are two major ways respondeat superior could apply to a car accident: insurance liability and negligent entrustment. Both risks can be mitigated through proactive policies. Let’s explore best practices for each.
1. Car insurance liability and mandatory employee coverage
When an auto accident occurs, the victim’s insurance company will file a claim with the at-fault driver’s insurance company. But what if the at-fault driver has no insurance or has insufficient coverage to pay for the damages? If the at-fault driver was operating on behalf of an employer, then the victim will file a claim with the employer’s insurance company. Because of this vicarious liability, every organization with mobile employees should set a minimum required level of coverage for each employee.
Every auto insurance policy carries liability limits (the highest amount the insurance company will pay for costs). The three most important categories are bodily injury per person, bodily injury per accident, and property damage. Many states only require limits of around $15,000, $30,000, and $5,000 for these three respectively, expressed as a 15/30/5 policy. However, a major accident with multiple injuries can far exceed $30,000 in medical bills.
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.
And it's only fair to factor the expense of the higher coverage into the employee's car allowance or vehicle reimbursement. You can't ask them to pay more for insurance without compensating them for the expense.
Negligent entrustment is a tort law action undergirded by respondeat superior. In a nutshell, after an employee-caused car accident, the victim files a suit alleging that a) the employee caused harm while acting on behalf of his or her employer, and b) the employer was negligent to entrust that employee with a company vehicle or with job responsibilities that required a personal vehicle.
To prove negligence, the plaintiff must demonstrate that the driver was reckless, incompetent, or unlicensed, and that the employer knew or should have known this. This can be as simple as demonstrating that the employee had previous moving violations on his or her driving record.
Most employers run an MVR when hiring new employees, but not everyone continues this practice with current employees. However, when it comes to negligent entrustment, what you don’t know will hurt you. You need to know if an employee has gotten a speeding ticket, or reckless driving citation, or—even worse—a DUI. If an employee with a spotty record causes an accident, the victims can establish negligence on the company’s part.
But if an MVR check turns up a new incident, you can take actions to reduce the risk of vicarious liability. You can order the employee to take a driver safety course, or, if the incident was really serious or part of a dangerous pattern, you can cut ties with the employee before something bad happens.
A company-wide safety policy establishes practices that prevent car accidents as well as interventions when MVR checks turn up incidents. By reducing the risk of car accidents and by intervening when an employee’s risk profile increases, you establish a record that speaks loudly against charges of negligence should an accident occur.
Protect your company from vicarious liability and respondeat superior today
In our litigious society, vicarious liability is nearly unavoidable for a company with mobile employees. However, you can greatly mitigate the company’s risk by following the practices we’ve outlined here. For more in-depth information about these risks and more detailed steps you can take to protect your company, download our Mobile Employee Risk eBook.