Negligent entrustment is a legal concept that every business owner and risk manager should take seriously. It applies when a company allows an employee to operate a vehicle or equipment, despite knowing (or having reason to know) that the individual is unfit to do so safely. This risk extends beyond company-owned vehicle. For example, if an employee is driving their personal vehicle for the business and causes an accident, your business could still be on the hook.
Even worse, most commercial auto insurance policies don’t cover punitive damages, which means a negligent entrustment claim could result in a significant uncovered insurance claim that your business would be forced to pay out-of-pocket.
How Does Negligent Entrustment Work?
A negligent entrustment claim typically includes these key elements:
- The driver is unfit to operate the vehicle safely—whether due to a poor driving record, lack of experience, or impairment.
- The employer knew or should have known about the driver’s history.
- The company allowed the employee to drive for work purposes.
- The driver’s negligence caused the accident.
Real-World Consequences
Negligent entrustment lawsuits can lead to multi-million-dollar verdicts. For example, in a recent case, a commercial truck driver who had three traffic violations and tested positive for methamphetamine and marijuana caused a rear-end collision. The injured party sued both the driver and the trucking company, arguing that the company failed to follow its own hiring and training policies. Despite the victim initially stating they weren’t injured at the scene, a jury still awarded a staggering $101 million verdict against the employer. (Travelers Insurance)
How to Protect Your Business
The best way to avoid negligent entrustment claims is through a proactive risk management strategy. Here are some essential steps:
✔ Thorough Driver Selection and Screening – Review motor vehicle records (MVRs) before hiring and continue monitoring them at least annually, if not more often. Establish acceptable/unacceptable driver selection criteria and use this to determine if an employee can be put behind the wheel.
✔ Clear Driver Safety Policies – Implement and enforce policies on safe driving practices, use of company vehicles, and consequences for violations. Make sure employees understand and acknowledge these policies in writing.
✔ Ongoing Training – Provide regular driver safety training, including defensive driving courses and updates on traffic laws.
✔ Vehicle Maintenance Program – Maintain all company vehicles properly to reduce the risk of mechanical failures contributing to accidents.
✔ Driver Behavior Monitoring – Use telematics or other tracking systems to monitor speed, braking, and other risky behaviors in real time.
✔ Proper Insurance Coverage – Review your commercial insurance policies to ensure you have adequate coverage and appropriate limits, including hired and non-owned auto liability insurance.
Final Thoughts
Negligent entrustment is a serious risk that can lead to devastating financial consequences for a business. The best defense is a strong, well-documented fleet safety program that focuses on prevention. By taking the right precautions, you not only reduce liability exposure but also create a safer environment for your employees and the public.
Would your current policies hold up in court? If you’re unsure, now is the time to review and strengthen your fleet risk management strategy.
