One of my clients wants to pay her employees mileage if they deliver goods to a work site. The employees would use their own personal vehicles to deliver the stuff.
She sent me a draft of a procedure that she wants her employees to sign and asked for my input. Included in the draft is the amount of reimbursement per mile, a request that the employee share their personal automobile insurance policy with her as the employer, and that each employee carry “adequate” insurance.
I have some serious concerns for both her business assets and her employees’ auto insurance coverage.
How does her business liability insurance cover this so-called agreement? Are employees covered under the business auto liability insurance policy when they’re driving their own vehicles for business?
Under the usual “employees non-ownership liability” endorsement, the answer is “no.” It only covers the business if employees cause an accident while performing a job-related delivery with their own vehicle. The employee would need their own insurance. How do we get around that dilemma? We add an endorsement on the client’s insurance policy called “employees as additional insureds.” That costs the client money, money that I’m sure they hadn’t planned on spending when they thought about the benefits of paying employees to deliver stuff.
How does an employee’s personal auto insurance handle this? It’s very questionable.
There’s an exclusion in the personal auto insurance policy that basically reads “if the insured vehicle is used as a person livery or livery of any sort” there is no coverage. Ouch! The policy does not go on to define livery but it's pretty clear that it means to deliver something. So, are they delivery people? Not really, but the insurance policy is very clear and the interpretation is in the hands of a claims adjuster.
That is not a place where I want the answer to come from.