QuestionQUESTION: As a potential home healthcare franchise owner, where my employees would be using their personal vehicle for work, there would be min requirements we would ask for on their personal policy and then we may purchase non-owned auto coverage as well for liability that exceeds those limits. Why am I being asked to verify my employees personal auto policy when I have non-owned auto that will kick in if the personal policy gets cancelled? What are the advantages of my employees maintaining their personal policy...outside of possible higher non-owned coverage premiums?
ANSWER: Barb,
That's a tricky one. Non-owned policies of a commercial nature will not protect the employee from personal liability. Depending on the percent of business use on the employee's vehicle, the personal policy may not even cover a claim whatsoever due to the business use.
It simply doesn't matter if your employee has personal insurance or not because your company will be vicariously liable for accidents occurring during the scope of their employment, even if they are using their own vehicle. The question is whether they are within the scope of employment when an accident occurs. The employee could be sued personally for damages resulting from an accident, and the non-owned policy would not protect them.
The problem is likely that determining whether or not the employee was under the companies direction and using the vehicle for company business is almost always a big question and fight when it comes to a commercial claim. Lunch break accident . . . not covered on the business side until it is proven that the employee is still under the companies direction, even at lunch. It is just complicated when a business policy is utilized and the inquiry into the existence of personal coverage is likely a risk factor question designed to keep the non-owned rate a little more competitive. We would have to get with the underwriting department of the company to determine exactly what they are looking for by requesting this information. I'll be they can't explain it either.
As for the advantages of the employees maintaining coverage. . . to avoid getting a no-insurance ticket, and to make sure they are personally covered. Again, the non-owned covers the business only.
---------- FOLLOW-UP ----------
QUESTION: Thank you for your reply! I was told we need to monitor their personal policy because it is part of a driver supervision program - the other part being the annual MVR check. I was told that helps if I was ever sued for punitive damages. They also mentioned that when we get the non-owned policy that we have to indicate on the application if the drivers have a personal auto policy. If we inducate yes, and then the insurance company investigates and they realize that driver had no insurance, the insurance company could deny the claim because of misrepresentation. Also that most accidents would be minor and we want the personal policy to cover those and not our non-owned policy. DOes all that sound right to you?
AnswerMost of that sounds valid. Punitive damages don't seem to apply on this issue as those types of damages are based on malicious conduct or violations of consumer protection laws, I fail to see much risk for a company like yours getting popped with a punitive issue over an auto accident, but I'm no attorney, and I may be missing something there.
The insurance company could claim misrepresentation, and the question would become whether it was material to your coverage or not, and those cases get complicated, but yes, if you lie, it is misrepresentation even if it was not intended.
The only issue with the personal policy is that when the policy is purchased, there is almost always a direct question regarding business use. If your employee is not completely honest about answering that question, then their personal carrier could claim misrepresentation.
Generally, all of that sounds like pretty honest attempts at valid explanations.
Sorry for the delay, I've been popular today.
