In a prior SafeTalk, I wrote about “Negligent Entrustment,” the legal doctrine that permits an injured plaintiff to recover damages when an employer grants company vehicle access to a person it knew or should have known posed an unnecessary risk to other motorists. As a follow-up, this article addresses how an employer could have or should have known that a driver potentially posed a significant risk to other motorists.
We recommend that employers order Motor Vehicle Records (MVRs) once a year on all drivers who operate either company-owned vehicles or personal vehicles for company business. They should also be ordered as part of a new hire’s employment evaluation.
Obtaining an MVR is relatively easy: an online search will produce several nationwide vendors from which an employer can obtain MVRs. While an insurance agent or carrier may also order MVRs as a check on driver acceptability, it is the employer’s ultimate responsibility for evaluating employee drivers and determining whether an employee would be an acceptable driver based on several factors:
- How often will the employee be required to drive?
- What are the average travel distances?
- Are there any extenuating circumstances that would warrant an exception to the written acceptability criteria?
An insurance carrier or agent will typically obtain MVRs on an annual basis, shortly before the policy effective or expiration date, based on the driver schedule at that time. Assuming the bank hires employees throughout the year, or assigns driving duties to an employee who previously was in a nondriving position, the bank then has an obligation to evaluate that employee at the time those events occur. Once written acceptability guidelines are in place, a bank can evaluate employees on a uniform basis.
Driving violations are typically grouped into categories A, B and C (see chart).
Some insurance carriers consider a driver unacceptable if there have been any Type A violations in the past 5 years. Other carriers use a 3-year monitoring period. Some carriers lump all speeding violations into the Type B category, regardless of the magnitude of the speeding violation. A common standard is allowing no more than one Type B or C violation over the past 12 months and no more than 2 of these violations in the past 3 years. While some question why Type C violations are included, these violations could be indicative of a lack of concern for vehicle safety or maintenance that could then translate to a bigger risk on the road. When developing acceptability guidelines, we suggest that banks closely align guidelines with their insurance carriers to avoid potential conflicts.
When a driver exceeds the allowable criteria, what are your options?
- Do not allow the employee to drive on company business.
- If borderline (i.e. certain violation(s) will drop out of the evaluation period shortly), place the employee on watch. Subsequent violations may warrant more restrictive action.
- Consider an exception, preferably with the insurance carrier’s approval, if there are extenuating circumstances. For example, if a newly hired employee has multiple speeding violations on his record and does not meet the acceptability criteria, the employer may take into consideration the employee’s previous job as a traveling sales representative, which required extensive driving in time sensitive situations. Since this exposure no longer exists, it is unlikely that the employee’s previous driving record will repeat itself in the future.
Which employee drivers should be evaluated?
Ideally, those employees that the bank determines to be “regular” drivers of company owned or personal vehicles on business. A bank may consider an employee who drives on company business several times a week to be a regular driver while an employee who runs local business errands once or twice a week may not be.
Are drivers of company vehicles treated the same as drivers of personal vehicles on company business?
It depends on the carrier. An employee’s personal auto policy will provide primary coverage, with the bank’s policy serving as excess coverage. Therefore, it is important to confirm that the employee’s policy provides sufficient liability limits. The bank may want to establish minimum limits for the employee’s auto policy. Suggested limits are $300,000 Combined Single Limit or $100,000/$300,000/$100,000 limits if split between bodily injury and property damage.
Are MVRs an end-all/be-all solution?
No. While MVRs are a good tool for identifying some bad drivers, it won’t screen out those bad drivers who simply haven’t been caught. One possible option/alternative is telematics--using a GPS-based device to track a vehicle’s movements--which allows an insurance carrier to assess a person’s driving habits. Transmitted data could include the length of uninterrupted driving, how rapid or measured acceleration is, how harsh or smooth braking is and how smooth cornering is (four wheels are better than two wheels). Telematics is another topic for another day.
Are there consequences for not having a driver review program in place?
In addition to possible negligent entrustment issues, an Insured runs the risk of increased loss experience, resulting in increased insurance premiums and possibly fewer carrier choices.
Dirk Hanket is ABA Insurance Services’ P&C Product Manager. For additional information on P&C risk management or our full suite of Property & Casualty insurance, Dirk can be reached at 800-274-5222 or firstname.lastname@example.org.