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Slippery When Wet: Corporate Liability for Reimbursed Mileage and Rental Vehicles

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In today’s world, it is very common practice for employees to be reimbursed for the cost of mileage incurred from driving their personally owned vehicles (POVs) or rental vehicles, when either are used for authorized, work-related purposes.

When it is known that an offer of employment will require operation of a company owned vehicle as part of the overall job function, many employers conduct a driving record check during their pre-employment background investigation of the candidate. But what about the employees who occasionally drive their own vehicles for work activities? Whether it be buying coffee supplies or attending an off-site meeting, these are very common activities. Yet many times, the individuals operating these vehicles have not undergone a recent driving history check if at all. And this is where serious liability problems can be lurking.

Under the concept of respondeat superior, courts have ruled that the entities reimbursing the mileage also share in the operator’s liability; a factor that can vary greatly and be significantly mitigated depending on how much due diligence was done beforehand. Though state rulings differ, California courts handed down a ruling, Moradi v. March USA, Inc. (Cal. Ct. App., Sept. 17, 2013), that not only defines but broadens the employer’s scope of liability. In this case, the employee had deviated from their work-related route to run a personal errand. But, because the errand was in the same zip-code as the work destination, the appellate court maintained that the employee was still acting within the scope of work and as such, the liability of the employer remained attached. This, and other similar case law, makes it clear that companies need to take a very close look at their risk management policies to address this issue. So, what factors should an employer consider to adequately protect themselves? Ask yourself these questions:

  • Does my company have written policy regarding the operation of POVs or rented vehicles if driven for work purposes? If so, does it address alcohol consumption?
  • Does my company maintain written records that the worker has acknowledged receipt and understanding of corporate policy?
  • Does the employee have a driving history that reflects a pattern of safe vehicle operation? If the individual has had a series of convictions for moving violations, or worse yet, a driving while intoxicated (DWI) or reckless driving charge, corporate liability exposure can increase significantly if they failed to identify and evaluate the risks beforehand.
  • Is the employee’s driving history periodically reviewed?
  • Does the vehicle owner have a valid insurance policy in place?
  • Do the limits of coverage of the worker’s insurance policy meet corporate risk management standards?
  • Is the vehicle properly equipped and maintained? A simple issue, such as worn brake pads or tires, could have a significant impact on the company’s risk exposure.

If the answer to any of the above questions is “no”, it may well be time to develop a more comprehensive risk mitigation plan to address these components.

Mileage reimbursement for POVs is not the only concern however. When an employee rents a vehicle while conducting company business, the same legal concepts and precedents can apply. Although the maintenance and insurance on the rented vehicle is much less likely to be of concern, the employee’s driving record is still a factor. The question that employers should be asking is whether they have done sufficient due diligence to help ensure that the individual driving the vehicle is doing so in compliance with corporate risk management policies. That answer will vary from company to company, therefore connect with your corporate counsel or risk management officer to make the best determination. In their desire to contain costs, most companies would not consider greater risk exposure as a viable alternative. In that same vein, if companies consider the above questions as part of their comprehensive risk management strategy, the foresight and planning may help them steer clear of treacherous roads.

Glenn Sandford is a Director at AT-RISK International. In this role, he develops strategies and practices to cultivate relationships with new and existing customers. Glenn has over 25 years in public and private security and has a wide breadth of experience across many security genres. Mr. Sandford has authored first edition security procedures manuals, pioneered several highly successful risk management and protection programs, and is a published author.

 

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