Because we focus so much on the perils of financial risks, it’s easy to overlook other areas of risk that present a threat to the bottom line.
When one of your employees uses a vehicle in the conduct of business, a risk is created that can open the door to a multi-million dollar lawsuit against your financial institution.
Over the last decade, these “negligent entrustment” lawsuits involving commercial vehicles have consistently populated the list of the top 100 litigated cases nationwide[1] and have been consistently increasing in frequency and settlement sizes (including punitive damages which are almost never covered by insurance!).
What is “negligent entrustment”?
When providing a company vehicle to an employee or instructing an employee to use their personal/rental vehicle to conduct official business, reasonable care must be taken by your financial institution to ensure that you’re not endangering the public by entrusting that activity to a careless or negligent driver. If your financial institution fails to make sure that an employee has a valid driver’s license and a clean driving record, you could be judged to have negligently posed a risk to the public.
Should one of your employees be at fault in a vehicle accident while conducting business on behalf of your financial institution, it becomes a near certainty that the injured party’s lawyer will come after your business for recovery, claiming “negligent entrustment.”
The Negligent Entrustment doctrine presumes that the employer should have known - so just assuming that a licensed employee is “good to go” is a potentially costly oversight.
In all but one state, the negligent entrustment doctrine permits juries to assess punitive damages, so this is a particularly attractive target for plaintiff lawyers to drive up the settlement value.
How can you manage the risk?
- Don’t be casual about sending employees out on the road. Even a seemingly innocent stop at the post office or errand to the store can put the financial institution’s assets on the line.
- Inform your auto insurance company of all who can be reasonably expected to drive with any regularity on financial institution business. Most insurance companies check driving records and will inform you of any bad reports to be addressed.
- Have a written driver safety policy that is acknowledged regularly by any employees who will drive on financial institution business, as well as by any employees personally using a financial institution vehicle (including spouses). Consistently enforce that policy. This is key to a strong defense against claims of negligent entrustment.
- Routinely run motor vehicle record (MVR) checks on all who drive a financial institution owned vehicle or their personal vehicle on financial institution business and compare them against the acceptability guidelines in your written policy.
- When appropriate, provide driver safety training courses.
Contact us to find out more about the solutions we offer to help your financial institution remain better protected from property and casualty loss risks.
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[1] “The Top 100 Verdicts 2016 | National Law Journal.” The Travelers Companies Inc, Verdict Search, 24 Apr. 2017, www.travelers.com/iw-documents/business-insurance/excess-casualty-top-100-2016-verdicts-BEXBR.0004.pdf.
This blog is for informational purposes only and is not to be considered legal advice.