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How Negligent Entrustment Creates Liability For Your Company

Any company can be held liable for negligence because they allowed an employee to drive on company business, when the company had knowledge that the driver intends, or is likely, to drive in a manner as to create unreasonable risk. Employers have the responsibility to know if a person driving has something in their driving history that may create risk or harm to others. The risk can occur in a company owned vehicle, or a personally owned vehicle if on company business, it does not matter.

Legal Theory

The legal issue is that all companies have a duty to know the driving qualifications of all drivers, and take any action necessary to limit risks to third parties. These kinds of claims can also lead to punitive damage awards. While many states limit punitive damages, federal courts do not.

How Auto Insurance Applies

Many auto insurance policies exclude claims of negligent entrustment. Yet, even with coverage you may not have enough insurance if one of your employees is involved in a harmful accident. All insurers are expecting that businesses understand this issue and have a plan in place.

Examples of Negligent Entrustment

  1. An employee drove a personal car to drop off the day’s mail and ran a red light causing an accident. The employee had no insurance or license. The employer could be held liable for the accident under negligent entrustment.
  2. A business hired a driver without completing any driving background check. The employee’s job was to drive delivery trucks. The driver showed up to work drunk and during the day killed two people in an accident. After an investigation, the driver had two other DUI” on their driving record. This is a negligent entrustment issue. 
  3. As a favor to a friend, a business owner hired the friend’s son who is a known speeder. The son drove the company truck in excess of 85 miles per hour in a 45 mile speed zone and caused a serious accident. Again the business will be held responsible.

How To Reduce Your Risk

  • Annually review the driving records of all those with permission to drive on company business.
  • Monitor and enforce drug and alcohol policies.
  • Provide driver training to all authorized drivers.
  • Have all safety policies in writing.
  • Follow all local, state, and federal laws.
  • Develop post-accident review and training procedures 

You cannot guarantee that your drivers will never be in an accident, so the next best thing is to protect the company from lawsuits that could follow an incident with its drivers. The right training and screening procedures can help minimize the legal liability for negligent entrustment.

Mid States Insurance Agency is a full service independent insurance agency with the ability to help with all lines of insurance from personal auto, home, umbrella, boat, motorcycle, life and health, to the business owner with complex needs

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