If you reimburse your employees for mileage, you probably want to know about employer liability in the unlikely event that your employee is involved in an auto accident.
When employees hop in their cars to run errands for work, employers might feel released of liability – out of sight, out of mind, right? Employees are in their own cars, for which they (better) have their own insurance. If they cause an accident, that’s their problem, right? Possibly, but sometimes, the liability falls on the employer.
- Lawsuits can be brought against an employer for an employee’s negligent acts while working off premises
- Workman’s comp can apply if the employee is hurt off premises while on the clock
Of course, when insurance is involved, you can bet it’s complicated so let’s take a look at how and when an employer can be held liable for employee accidents.
Vicarious liability puts the liability of an employee on the employer while the employee is serving the employer. An employer can be held liable for an employee’s negligent actions while working (or traveling for work).
Vicarious liability gives victims the right to sue employers for the damage employees cause while on the clock. So for example, if an employee drives to the bank for her employer and injures someone in an accident, the victim could sue the employer for damages. Suing an employer is usually more lucrative than suing an employee so victims can use this law to get the most out of a lawsuit. Vicarious liability can be a nice loop hole to get more money, but it’s also an important protection.
The thing to understand here is that vicarious liability can make a company liable for something that happens off premises. If an employee drives somewhere for work purposes and gets into an accident and badly injures someone or smashes a Tesla, say, the employer can be sued to cover the damages that the employee can’t afford to pay.
Employer’s Car Insurance
So what about the employee’s car insurance? Shouldn’t the employee’s car insurance take care of any damages or injuries? Yes, it should and will in most cases. The problem arises when the employee doesn’t have enough coverage. This can happen when there are multiple victims in an accident. All of the victims’ judgements combined might cost far more than a normal policy covers and so the victims go to the next in line, the vicariously liable employer. The same might be true for damage done to an incredibly expensive car. If an employee totals a $300,000 car, the employee’s insurance probably wouldn’t be enough to cover it.
An employer should protect itself against this eventuality by adding the appropriate coverage to their business auto policy.
“The standard business auto policy provides no coverage for the employees that are sued even if the accident took place on company time… Most insurers will add “employees as additional insured” for a small extra premium. ” – Scott Simmonds
The extra insurance adds coverage beyond what the employee’s insurance covers. Having this coverage doesn’t mean that the employee’s insurance doesn’t get used in the case of an accident. The insurance follows the vehicle so if an employee was in an accident in their own car, their insurance is primary. The employer’s insurance kicks in if the employee’s insurance wasn’t enough to cover the damage.
Employees can be eligible for worker’s compensation if they were injured while driving their personal vehicles for work related purposes. Again, if an employee was insured at the time of the accident, the employee’s insurance pays for injuries up to the covered amount. After that coverage is drained, the worker’s comp could cover further injuries or lost wages.
When the Employer is not Responsible
During a commute
When an employee is commuting to and from work, the employer is not liable for the employee.
If the employee stopped by Starbucks after running a work errand but before returning to work, they could not make a claim against the employer. Likewise, an employee could not make a claim against the employer if the accident happened after completing a work errand and heading home.
Damage to the employee’s vehicle
The employer’s liability does not include damage to the employee’s vehicle or the cost of the deductible.
Whether an employer chooses to assist an employee with these expenses is up to the employer but, generally, an employer can consider any of these expenses as a part of the overall mileage reimbursement.