Your Vehicles and Liability

Why Buy Commercial Auto Insurance?

In most states, you’re required to have this type of auto insurance for your business. The coverage limits vary by state, but often equal the limits set for personal auto liability insurance.

Depending on the size and financial stability of your company, one serious accident caused by an employee in a work capacity can put your company in jeopardy―especially if there’s a lawsuit involved. Commercial insurance can help safeguard your business from this threat.

Even if you have a one-person business that involves the transportation of goods or people, you likely need the protection of commercial liability auto insurance.

How Much Liability Coverage is Enough?

That’s a question you should discuss with your insurance agent or company, or some other trusted source who is familiar with your business. However, many experts recommend you have at least $500,000 of liability coverage per vehicle.

Again, though, this varies with the nature of your business, your assets, and how easily your business can absorb losses. Keep in mind, though, insurance protection becomes relatively cheaper the higher it goes. In other words, a million dollar policy won’t be twice as expensive as a $500,000 policy.

And, you could purchase an umbrella policy―which is fairly inexpensive―for additional protection after your commercial auto policy leaves off.

Do You Need Business Auto Insurance?

This matter should be discussed with an insurance agent or a financial professional with experience in this area.

But, if you answer “yes” to the following two questions, you likely should have commercial car insurance:

  1. Do I derive income from this business?
  2. Do I frequently use my car in association with this business?

Commercial car insurance can apply to a diverse group of professions, including:

  • Plumbers
  • Landscapers
  • Couriers
  • Delivery (pizza, flowers, etc.)
  • Electricians
  • Salespeople
  • Realtors
  • Truckers
  • Tow operators

Just because your profession isn’t listed doesn’t mean you can avoid business car insurance.

Do you work for a company as an employee or independent contractor, and use your vehicle or a company-owned vehicle to perform your job? Check with the company to see if you’re covered by their auto insurance policy, and to what extent. You may need your own commercial auto policy to safeguard yourself while on the job.

When Does Employer Liability Arise?

There are two main ways that an employer can be held liable for a car accident caused by an employee: negligence on the part of the employer and vicarious liability.

Employer Negligence

Employer negligence may involve, for instance, negligent hiring of the employee or negligent supervision of the employee. When a company hires someone that they know will be driving a company vehicle, the employer has a duty to exercise reasonable due diligence in order to make sure that the employee is a safe driver.

At a minimum, if the employee is going to be driving a commercial vehicle, the employer should make sure that the employee has a commercial driver’s license that is in good standing and that has not been suspended. Many employers also take additional precautions like checking a past driving record or performing drug testing.

Negligent Supervision

Negligent supervision is another way in which an employer can become responsible for employee accidents. Employers should have reasonable safety policies in place and should make sure all of their drivers comply with safety laws. This means if an employer has truck drivers working for him/her, the employer should make sure the drivers follow logging requirements set by federal and state law and that cargo is properly weighted and loaded. If an employer fails to check and make sure that the employee is exhibiting reasonable care and skill in doing the job required, then that employer is liable for negligence.

Vicarious Liability

Vicarious liability doesn’t necessarily require that the employer was negligent in any way themselves. Vicarious liability is a doctrine of law that asserts that the actions of an agent are essentially the same as the actions of the principle directing the agent. This means that an employer is considered to be the “principle”, and when the employer tells employees (the agents) to do something, it is just as if the principle is the one acting. Of course, this rule only applies if the agent is actually in the process of doing something for the principle at the time when the accident happened.

For example, if an employee is sent to the store to pick up copies and got into an accident on the way to picking up those copies, then the employer could be liable. If the employee decides to stop for coffee on the way back and gets into an accident while getting coffee, he/she isn’t acting on behalf of the employer/agent, so the employer usually won’t be responsible. There are also usually exceptions that an employer will not be liable for intentional bad acts done by the employee, so if the employee decides he wants to run someone over, the employer won’t be at fault.

In any event the employer, although my not be at fault, will usually be part of a lawsuit with the thinking that a corporation may just settle rather than go to trial.  It is advisable that all businesses have in place specific driver safety programs in place and complete written handbooks on what is and is not acceptable use of the vehicle, especially if the vehicle is taken home at night with the driver.  Many insurance companies will give discounts for safety programs and related devices in the vehicles.  Business owners should contact their agents for more details.

Robert Drucker owns Boston Global Tracking and believes in a “trust but verify” when it comes to dealing with drivers and company vehicles.  He can be reached at