When employees get into accidents while driving their own cars at work, who pays?
Here’s where commercial auto insurance and personal auto insurance meet at a very tricky intersection.
Let’s say Sophia owns a high-end clothing boutique. When Sophia has a track lighting fail one morning, she sends her employee Ethan out for bulbs. He drives to the hardware store in his own car. But after completing the errand, he decides to swing by a grocery store and grab a few deli items. Mission accomplished, he pulls out of the parking lot and collides with Daniel, a cyclist. Daniel will be okay, but he does have injuries – and his bike needs serious repairs.
Let’s back up (like Ethan probably should have) and define personal and commercial auto insurance.
Personal auto insurance covers your own vehicle if it injures other people or damages property. This coverage is called bodily injury liability and property damage liability – and it’s legally required in all states if you own or operate a vehicle. (You can also add collision and comprehensive coverage to cover your own losses if your car is damaged or stolen.)
Commercial auto insurance covers any vehicles owned by your business. Like personal auto insurance, it covers company vehicles if they injure other people or damage property. (You can also add collision and comprehensive.) On top of that, many business owners choose to add non-owned vehicle insurance – which safeguards employee vehicles that may be used on the job.
So back to Sophia and Ethan. Who pays?
There’s a technical answer. Both primary and excess insurance coverage get involved because of vicarious liability.
But let’s untangle the terminology and start by saying:
Daniel’s insurance company will go to Ethan’s personal auto insurance first because it’s directly associated with the car. (This is the “primary insurance.”) The goal? Recover the full costs of the damages to Daniel and his bike. Fortunately, Ethan has kept up his payments. But depending on his coverage limits, that still might not be enough. So Daniel’s insurance company will look for the nearest deep pockets – in this case, the high-end clothing boutique that employs Ethan. (This is the “excess insurance.”)
But wait – wasn’t Ethan on a personal errand? We’re back to that tricky intersection. Courts often rule that personal trips like the one Ethan took are considered “detours” from a work-related task – and an employer still has vicarious liability. That means Sophia may be held responsible for the actions of her employee. Since there’s usually a higher cost for business owners (and maybe a hit to their reputations) to contest this in court, Sophia may choose to pay up.
Here’s where non-owned vehicle insurance kicks in. If Sophia’s commercial auto insurance only covers her company-owned vehicles, she could be on the hook for an out-of-pocket payment. But she’s protected now if she also insured Ethan’s car. (In some cases, damages may exceed those limits too. Sophia’s agent may recommend umbrella coverage – which adds an extra level of protection above the limits of all other coverage.)
Of course, whether you own a business or drive for one, you’ll want to consult an expert who can steer you to the right answers for your specific situation. We're excited to help you protect your business and favorite vehicles too!