You’ve hired your first employee, congratulations! Being the busy entrepreneur you are, this is great! You can now make your new hire complete the mundane tasks you used to have to do like depositing checks at the bank, picking up the mail at the post office, or grabbing a cup of coffee from your favorite barista. Now what happens when an employee gets into a car accident while completing one of these “business as usual” activities? As you can imagine numerous liability exposures arise.
Scenario 1: The Employee was Driving their Own Personal Auto:
The problem here is many personal auto insurance policies will have an exclusion for being on company time. So, liability coverage for any bodily injury or property damage the employee caused, (while on company time) should be picked up by the business’s Non-Owned Auto Liability coverage. However, the physical damage to the employee’s car would not fall on the employer. Physical damage to an employee vehicle would be the responsibility of the employee and most likely covered by the employee’s personal auto insurance
o Non-Owned Auto Liability – Provides bodily injury and property damage liability coverage for employee’s vehicles
o Physical Damage - Employee’s personal auto coverage
o Liability & Bodily Injury - Business’s Non-Owned Liability
Scenario 2: The Employee was Driving a Rental Car:
Three things are needed here, Hired Auto Liability, Hired Auto Physical Damage and a Damage Waiver
o Hired Auto Liability – Provides bodily injury and property damage liability coverage for rented vehicles
o Hired Auto Physical Damage – Provides comprehensive and collision (physical damage) coverage for rented vehicles
Often the above are included in/with a Commercial Package or Business Owner’s Package insurance program listed as “Hired & Non-Owned Auto Liability with a $1,000,000 Combined Single Limit” while the Hired Auto Physical Damage will be added on.
If both of these are included in your insurance program, then it is not necessary to purchase any insurance from the rental car company. It is often cheaper to not purchase the insurance at the rental counter.
However at the rental counter, rental car companies often offer something called a “Damage Waiver”, which is separate from insurance. A Damage Waiver can provide coverage for things that are not covered by Hired Auto Liability and Physical Damage coverage, such as:
• Diminished Value – The hired auto was worth X before an accident and now is worth Y because of the accident. Essentially, you accelerated the deprecation of the rental car’s value.
• Loss of Use – As a result of an accident, the rental car company suffered additional loss for however long it took to make repairs. In other word's you smashed their car and now they can’t rent it to someone else to make money.
But Brian who still rents cars? Our employees Uber everywhere.
Scenario 3: Employee was using a Ride Sharing App and in a Driver’s vehicle
In this scenario it is much more of a grey area. Ride sharing apps are so new and innovative while many insurance companies can be over 100 years old and be slow to innovate.
First and foremost, Ride sharing App’s Users (in this case your employee) are extended some coverage via the Corporate Ride Sharing company (Lyft or Uber’s) insurance policy.
Below is wording from Uber’s Website:Read the full details here: https://www.uber.com/drive/insurance/
While a rider is in your car
When a rider is in your car, you have the same coverage as you do on your way to pick them up, plus the rider in your car is covered. You are covered by our insurance policy for three things: 1) your liability to a third party, 2) any injuries due to an uninsured or underinsured motorist, and 3) collision and comprehensive coverage if you already have such coverage on your personal insurance.
Third party liability coverage
This insurance covers your liability for damages to any third party such as the rider(s) in your vehicle, another driver, pedestrian, or property in case of an accident when you’re at fault. The coverage amount is at least $1 million of total liability coverage.
Uninsured or underinsured motorist bodily injury coverage
This insurance covers any occupant of your vehicle in case of an accident where another party is at fault but does not have insurance or is underinsured. This also covers hit and run accidents where the at-fault party can not be identified. The coverage amount is $1 million of total coverage for bodily injury.
Contingent collision and comprehensive coverage
This insurance covers your vehicle in case of an accident whether it was your fault or not, as long as you maintain auto insurance that includes collision coverage for that vehicle while not on an Uber trip. The coverage amount is up to the actual cash value of your vehicle. There is a $1,000 deductible.
So, while an employee is actively in an Uber they are covered under Third Party liability. Note however the individual Lyft/Uber Driver is supposed to have coverage on their personal insurance… well what if they don’t? and what if the individual Uber driver’s personal auto insurance has a ride sharing/livery service exclusion?
Now at this point and regardless of any auto related scenario If an employee is hurt on company time, Worker’s Compensation should cover employees for work related injuries.
Employees can also take their losses in this scenario and just use whatever personal health insurance they have whether provided by the employer or not.
Alternatively, a new start up called Sure Inc, backed by on the of largest property and casualty insurers in the world, Chubb, offers a solution to be sure (no pun intended) insurance coverage is in place specifically for using a ride sharing app. Essentially, for less than $3 for a 24-hour period, Sure (underwritten via Chubb) will offer a Ride Sharing Insurance policy that includes $100,000 of essentially disability/life insurance coverage (Accidental Death & Dismemberment Coverage) with $10,000 medical expense coverage. I downloaded the app and its pretty straight forward, you just create an account and connect it to your Uber or Lyft account.
Scenario 4: Employee is hit by a car walking to the office.
Tell your employee to look both ways before crossing the street, just kidding.
Coverage would be provided by the At Fault party who just hit the employee
If this car keeps going (hit & run) or the driver stops and isn’t insured or doesn’t have adequate insurance limits, then the employee’s personal auto policy could cover them if they have uninsured/underinsured motorist coverage on their personal auto policy. Again, worker's compensation could likely provide coverage as well.
Having trouble with commercial auto insurance? Feel free to reach out.