One of the most difficult situations to face as a business owner is when your business faces potential liability for damage to another's property or injury to a person. Liability claims can come from anywhere. Auto accidents involving company vehicles, falls and injuries by patrons or visitors to the business are the most typical claims. This article addresses the liability claim, the role of business liability insurance, and what your business can expect. For purposes of this article, I will use an auto accident as the example and the commercial auto policy. However, the examples here can be applied to any situation and not just auto accidents.Preparation is Key
Your business should have a plan in place to address potential liability claims. Often, business insurers have programs available to assist business owners in developing such a plan. The plan should focus on risk reduction and lowering premiums, but should address the possibility of damage or injury and how to respond as well.
- Employee Training.Employees need to be trained in safe, non-aggressive driving techniques. Employees need to inspect and clean display area and public areas regularly. Employees need to know how to call emergency services, key company personnel, and need to be instructed to be polite, confident, but not to discuss or admit company liability.
- Documentation.Every company vehicle needs insurance documentation, title and registration readily available. Each vehicle should have an accident report form in the glove box. For public areas, employees should have access to pre-printed incident reports.
- Appropriate Insurance.Obviously, having appropriate insurance in place is critical. Appropriate insurance means insurance sufficient to cover most losses and the particular loss most likely to occur.
- Surveillance and Monitoring. Liability claims can be limited by surveillance and monitoring. Public areas can be monitored by cameras. Vehicles can have speed governors installed and have contact numbers displayed so employees can be monitored while driving.
One of your employees, while making deliveries for your company, ran a red light and hit a car in the intersection. You are told that the driver of the car suffered serious injuries. Your vehicle has been towed and impounded. Your employee was charged with the traffic offense arrested and released with minor injuries. What do you do?
First, call your insurance professional or insurance company and report the event. Never delay reporting. You will be given claims forms or you will report the claim orally and your insurance company or professional will fill out the forms for you. Most companies use what are called Acord forms to report claims. Basic information will be required like the name of the employee, the identity of the vehicle (preferably by VIN number), and the name and insurer of the injured car driver.
You will want to speak with your employee as soon as possible. You will want them to write down everything about the accident they can remember. You want to find out if there was anything mechanically wrong with the vehicle or any contributing factors. Most importantly, you will want to confirm that your employee was on a work related activity at the time of the accident. If the employee was on what the law calls a "frolic and detour," coverage may be denied. Find out all of the facts: good and bad. You will want to know any court dates set for your employee.
Your insurer should provide you with an attorney as quickly as possible. Insurance companies have a duty to defend as well as a duty to indemnify on a claim. Your insurer provides you with an attorney to defend on the claim or will pay for an attorney of your choice if you have a choice of counsel provision. Unfortunately, some insurers delay as long as possible in providing an attorney to save money. A good agent or broker will push the insurer to provide counsel quickly.
You are going to want to talk to the attorney as soon as possible and get them all relevant information including your employee's court date. If your employee was doing their job, the attorney will represent you and your employee. If there is a conflict between you and the employee (the employee was on a "frolic and detour," intoxicated, or their actions were intentional) the insurer may deny the employee a defense and defend only your company or provide separate counsel to the employee. You may want to hire an attorney for your employee's criminal hearing. Why? Because in most states, a plea of "guilty" in a criminal manner is admissible in the civil case, while a plea of "no contest" is not. Some employees will plea "guilty" to "get it over" without realizing the effect on the employer's liability.
While this is going on, it can easy to forget the vehicle in the impound lot. As soon as possible, you or your insurer should arrange to have the vehicle picked up. Talk to your insurance professional about your insurer's policy in this regard. You will want to take photos, remove any goods, perishables and valuables. Take photos of the vehicle in case of a later dispute with the insurer. You also need to be aware of any additional reporting requirements you may have with your state or federal department of transportation.
Finally, your employee will have medical bills and, depending on your state, a workers' compensation claim. Some owners believe that when an accident is the employee's fault, there is no workers' compensation claim. This is not always the case and you will want to review this with your workers' compensation insurer.