Don't Own Any Vehicles? 4 Steps To Tackle Non-Owned Auto Risk
Under common law, an individual serving an organization either as an employee or volunteer can create liability for the organization they are working on behalf of through his/her own negligence. Owning, maintaining, and driving a vehicle involves plenty of risk – and an unintentional act behind the wheel can have catastrophic consequences for all parties: driver, passenger(s), other driver(s), passenger(s), pedestrian(s)…and employer.
When an accident occurs, the driver’s own personal insurance covers his/her liability to the affected parties, while the organization’s Nonowned Auto Liability insurance (if purchased) addresses its vicarious liability for the individual’s actions. The acid test question, especially in a catastrophic circumstance, is whether either party has enough protection – and all too often, the individual’s falls short, placing his/her insurer, the organization’s insurer, and the plaintiffs in direct conflict.
Nonowned auto liability is a risk for any organization, yet it’s one of the most neglected and underestimated. It is also one of the easiest to manage, which you can do through a multi-pronged approach:
- A Nonowned Auto Use Agreement between the employee/volunteer and the organization. This covenant affixes individual responsibility for (1) maintaining specific insurance limits, (2) maintaining current state vehicle inspections, (3) maintaining one’s vehicle in safe operating condition when used for organization business, (4) furnishing proof of acceptable insurance and notifying the organization of material changes, (5) ensuring that any ancillary equipment, such as a trailer, be designed/rated for its use on the company’s behalf, (6) an acceptable motor vehicle report (MVR) meeting the organization’s policy, and (7) no ‘business use’ exclusion in personal auto insurance policy. The Agreement clarifies that the individual’s insurance is meant to be primary and that the individual is responsible for liability arising from operation of his/her vehicle.
- An Organizational Vehicle Use Policy addressing (1) vehicle use rules, (2) distracted driving, (3) driver selection criteria, including points system for moving violations, (4) rental vehicle policy, and (5) post-accident investigation guidelines.
- An “Employees and Volunteers as Insureds” endorsement to the organization’s Nonowned Auto Liability insurance policy. This simple rider extends the organization’s liability protection to the individual driver, excess of any valid and collectible personal insurance, minimizing the risk of inadequate insurance. Although not typically included in the off-the-shelf auto policy, this broadening feature is often available at nominal additional cost.
- Umbrella/Excess Liability insurance augmenting the organization’s primary Nonowned Auto Liability limits. This safety net increases the total amount of protection available for any one occurrence.
These safeguards will not only satisfy the most persnickety insurance underwriters, but will help conserve your resources for mission rather than settlements, judgments, or protecting your reputation.
Original article source But We Don't Own Any Vehicles by Scott Konrad of HUB International.