Employees Using Their Personal Cars for Work: Which Auto Policy Applies?

Many businesses have employees use their personal cars for work purposes. It may be that they drive their own vehicles routinely for sales calls, or they may occasionally pick up or drop off company mail or handle banking deposits in their own autos.

What happens if the employee is involved in a collision during one of these scenarios? Often, the employee assumes they would be covered by the employer’s insurance policy. On the other hand, the employer may think the employee’s policy will provide the necessary coverage. This article explains what you need to know about employees using their own cars for work-related purposes.

Does the Business or Personal Auto Policy Provide Coverage?

Let’s begin with an unfortunate but typical scenario. On their lunch break, an employee drives to the post office in their own car to mail company contracts. On the way, the employee rear-ends another vehicle. Both vehicles sustain property damage, and the other driver is injured in the accident.

The potential exposures for this loss include:

• Damage to the employee’s personal auto
• Damage to the other party’s vehicle
• Bodily injuries to the person in the other vehicle

Now, let’s address how coverage could work under both your business auto policy and the employee’s personal auto policy. However, keep in mind that not all personal auto policies have the same exclusionary language. It’s important that the employee obtain and review a copy of their own personal auto policy.

First, your business auto policy includes the following covered auto symbols:

Symbol 7 (Specifically Described Autos): Only those autos described in item three of the declarations for which a premium charge is shown (and for covered autos liability coverage, any trailers you don't own while attached to any power unit described in item three).

Symbol 8 (Hired Autos Only): Only those autos you lease, hire, rent, or borrow. This does not include any auto you lease, hire, rent, or borrow from any of your employees, partners (if you are a partnership), members (if you are a limited liability company), or members of their households.

Under your business auto policy, the employee’s vehicle does not qualify under Symbol 7 or Symbol 8, so there would be no coverage. Therefore, the employee’s personal auto policy would be primary and may provide coverage for their vehicle damage, depending on the specific policy language. The employee is responsible for reporting the accident to their insurance company.

However, the employee’s policy would most likely deny coverage of physical damage and bodily injury claims due to policy exclusions such as business use of a personal auto.

For this exposure to be covered under the employee’s personal auto policy, the employee typically would need to add an endorsement that covers the use of a personal vehicle for business purposes.

What Can You Do to Mitigate Your Risks and Help Your Employees?

Your employee can be left without auto insurance coverage when using their personal car for work. Here are some steps to mitigate risk on both sides:

1. Before an employee uses their personal car for work purposes, encourage them to obtain and review their policy exclusions regarding business use.
2. If these situations are excluded, have them consider purchasing an endorsement that would allow business use of their vehicle. Keep in mind that not all insurance companies will offer protection for limited business use, and this type of endorsement can be costly.
3. Investigate the actions of the employee just prior to the loss. For example, if the employee was on their way back to work, their actions might be covered in some personal policies since the business task has already been completed.
4. In the event of a claim to their personal policy, some employers occasionally reimburse their employee for the cost of their deductible. It’s important to understand that this action sets a precedent. If an employer does this for one employee, they must do it for all employees.
5. Consider adding Symbol 9 coverage to your policy, as explained below.

Adding Symbol 9: Non-Owned Autos Only to Your Policy

Symbol 9 coverage fills in the provision gaps in Symbol 8. So, in the accident we’ve used as an example, Symbol 9 coverage would step in and provide liability coverage for the insured employer and their employee, while using their personal vehicle in the course and scope of their employment.

This addition covers only autos you don't own, lease, hire, rent, or borrow that are used in connection with your business. The coverage includes vehicles owned by your employees, partners (if you are a partnership), members (if you are a limited liability company), and members of their households but only when used while driving in your business or your personal affairs. Symbol 9 does not provide property damage coverage for the employee’s vehicle.

Discuss the option of adding Symbol 9 to your policy with your account team and decide what is best for your company.

The Best Practice Is Preparation

Making sure your employees are informed about their responsibilities when driving their personal vehicles for work is essential. We recommend you provide a clear explanation in your employee handbook.

Employers frequently reimburse their workers for the mileage they drive on behalf of the company. Employees should understand that this is partially to aid in paying for their own auto insurance (and any business use endorsements).

The coverage investigation surrounding an employee’s business use of their personal vehicle can be complicated and difficult to navigate since it specifically investigates what activities the employee was engaged in at the time of the loss. Your consultants at Woodruff Sawyer are here to assist you in navigating these issues. It is essential that you involve us in the very early stages of these types of claims, as each scenario is different. We will also help you review and interpret policy language, as certain terms can have a drastic impact on coverage.