Best Practices

How Employees’ Driving Records Can Affect Your Company: Risks Inherent Based On the ‘Negligent Entrustment’ Principle

By William McCloy

You’ve seen it before – a good employee makes a horrible decision in his or her personal vehicle.

What are the implications for your company if the employee’s license is revoked, canceled or suspended due to alcohol, controlled substance or felony violations? 

If the employee in question is a CDL driver, he or she will lose driving privileges for one year. But what if he or she doesn’t hold a CDL, but instead drives a company sales car or pick-up truck? What if the incident involves excessive speed, reckless driving or bodily harm? What happens then?
As an employer, you are caught in the balance between a good employee and the potential for vicarious liability, which holds you responsible for the actions or omissions of another person — in this instance, your employee. 

As a result, you need to understand the “Doctrine of Negligent Entrustment” and the potential impact that your employees’ decisions can have on your business. In its general form, the Doctrine of Negligent Entrustment states:

“It is negligent to permit a third person to use a thing or to engage in an activity which is under the control of the actor, if the actor knows or should know that such a person intends or is likely to use the thing or to conduct himself in the activity in such a manner as to create an unreasonable risk or harm to others.”(Reference: Prosser, W. L. & Wade, J. W. (1965) Restatement of the Law Second, Torts. Philadelphia, Pa., American Law Institute)

The legal interpretation of the principle of “negligent entrustment” is not founded upon negligence of the driver of an automobile, but upon the primary negligence of the entruster in supplying an automobile to an incompetent driver. In other words, in such a situation as described above, the employer knew or should have known of the employee’s incompetence, but in spite of this knowledge, the employer entrusted the vehicle to the driver in the scope of his or her work. The employer may therefore be guilty of negligent entrustment.

Protecting Your Company 

It is important to be proactive in managing your drivers, both as part of your fleet safety program and to effectively maintain your CDL files. Below are some helpful tips for making this process easier and more efficient:

Develop a policy for motor vehicle record evaluations (CDL and all other drivers) that must be signed by the employee. A minimum three-year evaluation period is effective.

Evaluate a potential employee’s motor vehicle record at the time of hire and annually thereafter (using a minimum time standard). 

Establish guidelines for employees to immediately report major motor vehicle violations (such as driving under the influence, reckless driving, chargeable accidents), regardless of whether the incident occurs in a personal or company vehicle.

Develop a company policy for personal use of company vehicles that must be signed by the employee.

Develop a company policy for “occasional” drivers (for example, office employees who may drive to the bank or post office during the course of their work).

Develop a company policy for employees who may use their personal vehicles for company business (for example, outside salespeople). Establish minimum accident liability insurance limits that they must carry.

Provide driver training programs focusing on CDL and other key drivers. Include occasional drivers as part of your overall driver safety program. Document and establish these programs in written policy.  

Non-Driving Employment

In addition to the above suggestions, other options may exist for managing an employee with a history of driving infractions, including placing that individual in a non-driving employment role. However, the downside of that is that doing so may affect other roles and responsibilities, and other employees, within your organization.

Consequences of Liability

As an employer, it is important to remember that the consequences of allowing an employee with a less-than-perfect driving record extend beyond a possible traffic violation or accident. Due to the Doctrine of Negligent Entrustment, an employer must be aware of the potential liability to his or her company from allowing an employee with a poor driving history to operate any company motor vehicles – or even their personal autos – for company business. 

William “Bill” McCloy is managing director of programs at AmWINS Program Underwriters (APU), a division of AmWINS Group, the largest insurance wholesaler in the U.S. He started in the insurance industry in 1985, working with Western Surety, Travelers Insurance, and as vice president of programs for Royal & SunAlliance, overseeing its WDPG® program, before joining APU. He can be reached at [email protected]; 704-749-2730.

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