If an employee causes a car accident while on the job, the company will likely face some liability. Vehicular accidents are one of the leading causes of work-related injuries and fatalities. Let's explore the legal ramifications and how to reduce liability.
Work-related vehicle accidents and injuries
From 2003 to 2018, over 29,000 U.S. workers died in a work-related vehicle accident. Most years, vehicle fatalities are the first- or second-leading cause of work-related death in every industry. Truck drivers and sales reps in particular account for around 20% of all fatally injured workers.
When an employee driver or passenger is killed or injured, the employer often pays worker's compensation. If an accident results in fatalities or injuries to other motorists or pedestrians, the employer often faces liability as well. The average company costs of a fatality or injury are $500,000 and $74,000, respectively. Add in property damage, and the cost of an employee-caused accident can be devastating.
Whether the employee drives a company vehicle or a personal vehicle, a work-related accident often brings liability to the employer via the legal concept of vicarious liability, or respondeat superior. Calculating and reducing the risk of vicarious liability should therefore be a priority.
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. 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 or insurance claim against the employee.
Determining employer liability for employee car accidents
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 job responsibilities – getting coffee, grabbing lunch – whereas a frolic refers to a major departure for 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.
Similarly, a commute is not considered on-the-job driving. However, if the employee has to stop at a job site or run a work-related errand on the way in to the office, or if the employee works from home and is driving to a client meeting, an accident could be considered work-related.
Reducing liability for work-related vehicle crashes
If 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. Insurance liability and employee auto insurance
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 is uninsured or underinsured? If the driver was operating on behalf of an employer, the victim will file a claim with the employer’s insurance company. Thus 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). Many states only require limits of around $15,000 per bodily injury, $30,000 for total injuries, and $5,000 for property damage, 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.
2. Negligent entrustment and MVR checks
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 vehicle or with job responsibilities that required a 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.
The two main ways to protect against negligent entrustment are to run regular motor vehicle record checks (MVRs) and to create a comprehensive safety policy or "Safe Driver Program" that reduces distracted driving and other risks.
Most employers run an MVR when hiring new employees, but not everyone continues this practice after hiring. However, you need to know if an employee has gotten a speeding ticket, or reckless driving citation, or 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.
Protecting your company from vicarious liability and respondeat superior
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.
Or start by calculating your current risk and get suggestions for steps to reduce it using our calculator below.