More negative consequences from negligent entrustment

KMRD Are You Ready for One Minute From Normal?

More negative consequences from negligent entrustment

Negligent entrustment, as we recently e-mailed, typically arises from allowing an employee to use a vehicle on company business when you know or should know that the person intends or is likely to create an unreasonable risk of harm.

The legal theory supporting negligent entrustment is that the company has a legal duty to investigate the driving records and qualifications of all potential drivers and take action to prevent drivers from operating vehicles in an unsafe manner during the course of company business.

Unlike General Liability, a Business Auto Policy has no exclusions for negligent entrustment. And yet, even with coverage you may not have enough insurance if one of your insureds is involved in an accident.

Because anyone with permission to drive a vehicle on company business is classified as being an insured, it is important to define your permission policy before an incident occurs. Otherwise your insurance company will do so after a claim has been filed. The rule of thumb is to ensure flexibility without creating a personal use permission policy that is too broad.

When it comes to negligent entrustment, it is also important to remember that punitive damages are not insurable in most states. Since punitive damages are meant to punish employers, to do otherwise would be against public policy.

Following are some guidelines to steer clear of negligent entrustment:

  • Establish clear and concise safety policies and reinforce them often.
  • Enforce clearly defined driver criteria.
  • Pre-screen all drivers who have permission.
  • Monitor and enforce drug and alcohol policies
  • Monitor the driving records of all those with permission at least annually.
  • Mandate training modules for all at-risk drivers.
  • Maintain company vehicles regularly.

KMRD Partners provides risk management consulting and property & casualty insurance to protect against potentially catastrophic losses that wait on the other side of one minute from normal.  We are dedicated to anticipating risk, and helping firms to recover from unplanned events.

Contact us at before one minute from normal strikes your company, and we will identify and correct coverage and service gaps.


Got a Problem? We'd Love to Solve It!

Contact Us