Policies for Company Car Use Prevent Accidents and Liability

Loss Amount: $350,000

Situation: The director of a practice allowed his 17 year-old son who had only 6 months of driving experience to drive one of the company cars. This proved to be a poor decision.

The young man and four of his friends, ages 14 to 17 were headed toward their high school. As the driver attempted to turn into the school’s driveway, he lost control of the vehicle and crashed into a concrete transformer enclosure. The investigation indicated that the vehicle was traveling over 60 mph in a 25-mph school zone.

This accident could have been much worse because there were four passengers in the car at the time of the accident but only one was seriously injured. A 14-year old who suffered a skull fracture and multiple deep facial lacerations suffered the most serious injuries. He had been sitting in the middle passenger seat and went through the front windshield upon impact.

Lesson Learned:

  • It is important to develop and implement policies on the use of company vehicles, and those owned by staff but routinely used for business-related purposes.
  • The policies should include criteria for driver disqualification based on initial and annual reviews of motor vehicle records for ALL people allowed to drive company vehicles. In addition, a current approved list of drivers should be maintained.
  • The policies should also restrict certain unqualified members of the family, such as inexperienced drivers, from driving a company car.
  • In many cases, management has a vested interest in the company and this type of incident lends itself to high potential severity and loss exposure for the entire organization.
  • A restrictive fleet use policy decreases the chance of Negligent Entrustment, where the organization could be held liable for the actions of a driver because management knew or should have known about a driver’s past motor vehicle record. Negligent Entrustment exposures can lead to judgments for punitive damages that may not be covered by the auto insurance policy.

For further assistance in preventing all types of losses, call VISC at 888.762.3143.