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Courier owners can be liable if an employee has an accident in a personal or company vehicle. Sound risk management can steer employers clear of negligent entrustment lawsuits and million-dollar verdicts.
These are two words that can (and should) strike fear into a risk manager's heart. Why? Because your company could be liable for punitive damages if an employee has a collision while driving for work purposes in either his own or a company-supplied vehicle. Regardless of who's at fault in the accident, if you, the employer, are found to have a weak or nonexistent fleet risk management strategy, a negligent-entrustment claim could follow.
The principle of negligent entrustment is not based on negligence of the at-fault driver, but on negligence of the employer for supplying a vehicle to a driver who is not subject to any assessment, license record checks, driver safety training and ongoing activity/performance monitoring.
Insurance will cover the costs of physical damage and liability. But here's the real rub: Commercial automotive insurance typically doesn't cover punitive damages. If a court awards punitive damages, depending on the jurisdiction, the financial responsibility for those damages might be the sole responsibility of the employer.
"More and more companies are on the firing line for negligent-entrustment lawsuits, as the victims and their attorneys can be assured a larger payout if they win," says Ed Dubens, CEO/Founder of eDriving. "Organizations with high profiles are especially vulnerable to claims of negligent entrustment, whether they're true or not."
"Negligent entrustment implies you knew, or should have known, that you put an unsafe driver behind the wheel of your company vehicle," says Martin Schofield, vice president of product safety/liability for Hilti Inc., a manufacturer of commercial construction products based in Tulsa, Okla. "This picture should set off alarm bells at every level-injury to person, property loss, punitive damages, productivity, company reputation .... No matter how you look at it, taking steps to identify and address potentially high-risk drivers is the right thing to do."
A sampling of past cases demonstrates what could be at stake with negligent entrustment. In the case of Brooks v. Hancock, a 19- year-old student was turning left at an intersection when a pickup truck traveling in the opposite direction struck his car and killed him. The student's mother sued the company that owned the truck and employed the driver, the company's owner and the driver, claiming the driver was driving too fast.
The suit alleged negligent entrustment of the vehicle to the driver, who purportedly had a history of motor-vehicle citations. The jury awarded the plaintiffs $2.75 million in the case.
In another case in Texas, an employee was speeding in a vehicle provided by his company, disregarded a red light and collided with the rear end of a minivan. The driver of the minivan, a father of four children, was killed. Later the investigation showed the company driver had a history of reckless driving, before and after being hired and had caused several accidents, losing his license. The suit contended the company was negligent in its entrustment of the vehicle to the defendant in light of his driving history, which the employer never investigated.
In addition, the employer failed to have any fleet management program in effect to monitor its drivers. Following mediation, the family of the victim settled for $3.5 million.
Could It Happen To You?
Consider whether your company operations involve any of these scenarios:
Many employers might fit those scenarios, so Risk Managers should always know who is driving company vehicles and whether it's a good idea.
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