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3 years ago · by · 0 comments

Are Company Cars Covered Under your Personal Insurance Policy?

Allowing personal use of company owned/leased vehicles greatly increases a company’s exposure to loss. Many organizations allow this practice as an employee fringe benefit, and therefore need to have policies in place to help minimize the risk.

Personal use may include using the vehicle to commute to and from home, running personal errands between business activities, or use of the vehicle during “off-hours” (i.e., weekends, evenings, etc.).

The risks are heightened when employees use company cars for personal use, simply because weekend driving increases usage by nearly 30%. Also, companies must worry about more than the obvious risk of an employee causing or being involved in a vehicle accident that results in bodily injuries to one or more people or extensive damage.

More importantly, an employer  must consider the public relations risks if an accident is bad enough to spur negative media attention to the company.


Who Pays if You’re in an Accident in a Company Car

If the car is insured, the insurance company will pay for the damage. If the accident results in uncovered injuries or damages, the responsible party will pay. The auto insurance policy on a company car will most likely be in the company name. However in some cases, if the employee is the responsible party in terms of liability, the employee may be required to pay the company back. Depending on how the employee was using the company car, it may be also the employer who pays for damage caused by the accident.


Employee vs. Employer: Whose Responsibility is it after an Accident?

During discussions regarding accident damage and fault involving employers and employees, majority of judges and lawyers apply the principle of respondeat superior. This means that employers are generally responsible for the actions of their employees as long as the employee is complying with the employment contract. In most states, if the employee is performing work-related tasks while driving the car, then the company is responsible for insurance-related matters.

However,  if the employee is driving the company car on personal business, then the respondeat superior principle does not apply. Therefore, if the employee is running personal errands or commuting to or from work, the employee is liable for the accident.

There are several other factors that will influence which party is liable for an accident in a company car. For example, the company may have a car policy or contract that either makes it liable or excludes it from liability in the event of an accident. The state in which the accident took place may also affect the liability determination. Different jurisdictions have different rules about liability. The terms of the insurance policy will play an important role as well. Some companies purchase collision insurance to cover employees, but that coverage may be limited or restricted according to certain factors.


What Can an Employer do to Safely Allow its Employees to Use the Company Car for Personal Use?

A vehicle operation policy detailing allowed personal use of company vehicles, as well as requirements for the use of restraints, obeying traffic laws, use of cell phones, towing of trailers, etc., must be in place and applied equally to all employees. Important issues to cover in the policy include:


Who May Drive the Vehicle?


An organization should “qualify” an employee-driver before giving them permission to operate a company vehicle. This qualification process should extend to any other permitted operators, if personal use is allowed beyond the employee.

When the setting permission for drivers other than the employee, a minimum policy should include that “driving is restricted to the employee and spouse, and that no children or other persons may drive the company vehicle, with the exception of emergencies.”

Whenever anyone aside from the employee, such as a spouse, is given permission to drive the company vehicle, a copy of the spouse’s driver’s license should be kept on file. The spouse’s Motor Vehicle Record (MVR) should be obtained on an ongoing basis. MVR’s should be reviewed to assure that the spouse meets the company’s criteria for a “qualified” driver.

All drivers should be required to promptly report any convictions for moving traffic violations, or accidents involving the company’s vehicle.


Driving Policies

It should be clearly stated that employees operating company vehicles are required to comply with all laws and state regulations. All occupants of company vehicles should be required to be secured in a safety belt. Children should be restrained in approved safety seats. The use of wireless communication devices, such as cell phones, while the vehicle is in motion, should be strictly limited, except in emergencies. In addition, the use of alcohol and controlled substances while operating a company vehicle is not allowed.



Company-Car-for-Personal-Use-Insurance-AccidentDrivers must complete an accident report form and report any accident involving a company vehicle to the employee’s supervisor or other designated company representative as soon as possible. A copy of the vehicle registration and insurance information, as well as a preliminary accident report form, should be carried in the vehicle at all times.





We’re here to help clear the confusion. Call Omni Safe Insurance at 1-877-728-9966 for more information on California Commerical Insurance.



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Omni Safe Insurance
1216 South Brookhurst St
Anaheim, CA 92804

3401 Pacheco Rd, Suite 1
Bakersfield, CA 93313

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