Q.
I run a paint company with a few employees.
I lent my company van to an employee who was moving over the weekend.
However, the employee got into a car accident while moving.
A few months later, I received a letter from the other driver's attorney threatening to sue my company if it did not pay me $50,000.
An employee was involved in an accident while using a company vehicle for personal reasons. I am curious as to why he is demanding compensation for the accident from my company.
A.
Under a law called “respondeat superior,” which is Latin for “let the master answer,” employers can be held liable for the negligent acts of their employees while on the job.
For example, if a waiter accidentally spills soup on a customer, the restaurant may be liable for the injury suffered by the customer as a result of the employee's mistake. Accordingly, if an employee causes a car accident while delivering company goods, the employer may be liable for the damages suffered by the victim of the accident.
Note that one exception to this rule is if an employee is involved in a traffic accident while “going” to or “coming” from work (commuting), the employer is generally not liable.
Another exception is if the employee is away from work for personal reasons.
For example, if an employee stops by a dry cleaner to pick up some personal clothing while delivering goods and gets into a car accident, his employer is not liable for the accident.
What this means is that the employer is responsible for the accident caused by the employee while on duty, meaning that the person who suffered damages due to the accident caused by the employee can sue the employer.
In this case, if the employer has company insurance such as company car insurance, the compensation benefits for the accident will be paid up to the insurance limit. However, if the excess compensation amount exceeds the insurance limit, the share will go to the employer (company).
For example, if an accident claims $1.5 million and the company's auto insurance limit is $1 million, the employer (company) will be responsible for the remaining $500,000.
In the case of this accident, since the accident occurred while the employee was using the company vehicle for personal reasons (moving) and not while performing company work, the company has no reason to be held responsible for any compensation exceeding the automobile insurance amount for the company van. If any excess compensation amount is incurred, the responsibility for that will lie with the employee who caused the accident.
Therefore, you have absolutely nothing to worry about as there is no legal basis or reason for you to be liable for the $50,000 that the other driver's attorney is demanding from your company.
For the above reasons, what you must report to your insurance company is that an employee is permitted to drive a van for personal reasons unrelated to company activities.
This issue will be proven if we can obtain witnesses who prove that the employee used the van to move his furniture.
Here’s how to determine whether the employee is covered by the company van’s insurance in this case:
First, if the employee is registered on the company van’s insurance, they are covered.
Second, even if the employee is not registered on the company van’s insurance, if you allowed the employee to drive your car, your insurance would cover the driver under the “permitted driving” rules, so you would be covered for the accident up to the limits of your vehicle’s insurance. (The insurance company will pay out coverage unless you intentionally omitted the employee’s name when you signed up for this policy.) If you run a business, it’s very important to follow these steps to protect your company from liability exposure in accidents:
– Take out insurance with sufficient limits to prepare for unexpected accidents.
– Register all employees on the company car insurance list.
– Check whether employees have driver’s licenses and driving records.
– Establish and educate employees on safe driving rules to prevent them from engaging in dangerous behaviors such as using cell phones while driving.
Q.
I run a paint company with a few employees.
I lent my company van to an employee who was moving over the weekend.
However, the employee got into a car accident while moving.
A few months later, I received a letter from the other driver's attorney threatening to sue my company if it did not pay me $50,000.
An employee was involved in an accident while using a company vehicle for personal reasons. I am curious as to why he is demanding compensation for the accident from my company.
A.
Under a law called “respondeat superior,” which is Latin for “let the master answer,” employers can be held liable for the negligent acts of their employees while on the job.
For example, if a waiter accidentally spills soup on a customer, the restaurant may be liable for the injury suffered by the customer as a result of the employee's mistake. Accordingly, if an employee causes a car accident while delivering company goods, the employer may be liable for the damages suffered by the victim of the accident.
Note that one exception to this rule is if an employee is involved in a traffic accident while “going” to or “coming” from work (commuting), the employer is generally not liable.
Another exception is if the employee is away from work for personal reasons.
For example, if an employee stops by a dry cleaner to pick up some personal clothing while delivering goods and gets into a car accident, his employer is not liable for the accident.
What this means is that the employer is responsible for the accident caused by the employee while on duty, meaning that the person who suffered damages due to the accident caused by the employee can sue the employer.
In this case, if the employer has company insurance such as company car insurance, the compensation benefits for the accident will be paid up to the insurance limit. However, if the excess compensation amount exceeds the insurance limit, the share will go to the employer (company).
For example, if an accident claims $1.5 million and the company's auto insurance limit is $1 million, the employer (company) will be responsible for the remaining $500,000.
In the case of this accident, since the accident occurred while the employee was using the company vehicle for personal reasons (moving) and not while performing company work, the company has no reason to be held responsible for any compensation exceeding the automobile insurance amount for the company van. If any excess compensation amount is incurred, the responsibility for that will lie with the employee who caused the accident.
Therefore, you have absolutely nothing to worry about as there is no legal basis or reason for you to be liable for the $50,000 that the other driver's attorney is demanding from your company.
For the above reasons, what you must report to your insurance company is that an employee is permitted to drive a van for personal reasons unrelated to company activities.
This issue will be proven if we can obtain witnesses who prove that the employee used the van to move his furniture.
Here’s how to determine whether the employee is covered by the company van’s insurance in this case:
First, if the employee is registered on the company van’s insurance, they are covered.
Second, even if the employee is not registered on the company van’s insurance, if you allowed the employee to drive your car, your insurance would cover the driver under the “permitted driving” rules, so you would be covered for the accident up to the limits of your vehicle’s insurance. (The insurance company will pay out coverage unless you intentionally omitted the employee’s name when you signed up for this policy.) If you run a business, it’s very important to follow these steps to protect your company from liability exposure in accidents:
– Take out insurance with sufficient limits to prepare for unexpected accidents.
– Register all employees on the company car insurance list.
– Check whether employees have driver’s licenses and driving records.
– Establish and educate employees on safe driving rules to prevent them from engaging in dangerous behaviors such as using cell phones while driving.