Insurance Coverage and Compensation for Car Accidents at Work

Accidents involving company cars, trucks, and other vehicles present several legal questions:

  • Who’s responsible?
  • Whose insurance company pays?
  • What benefits are available?
  • What’s the role of workers’ compensation insurance?
  • What role does negligence play?

This section answers these questions and covers legal issues related to company vehicles, car accidents at work, and on-the-road injury claims.

Respondeat Superior

The relationship between employers and employees who drive company vehicles falls under the legal doctrine of respondeat superior. This means employers are legally responsible for the actions of their employees while “acting within the scope of their employment.” The employer’s responsibility includes paying for injuries and property damage caused by an employee while driving a company vehicle.

Company Vehicles

When an employee is driving a company car, truck, or other motorized vehicle, usually the employee is acting within the scope of his or her employment. This includes making deliveries, driving to and from off-site jobs, driving to and from work (with the employer’s permission), and using the company vehicle while pursuing other job duties.

The doctrines of respondeat superior and acting within the scope of employment apply particularly to accidents involving company vehicles. When an employee’s negligence causes another person’s (third party) injury or property damage, the employee and her employer may be held liable. Third parties include drivers of other vehicles, their passengers, passengers in the company vehicle, and bystanders.

In most cases of car accidents at work, the employer’s liability insurance indemnifies the employee against third-party actions. This means the employer’s insurance company protects the employee so he doesn’t have to pay damages to injured third parties.

Damages can include medical bills, out-of-pocket expenses (for medications, bandages, crutches, etc.), lost wages, and pain and suffering. Indemnifying an employee also means the employer’s liability insurance pays the employee’s legal fees if a lawsuit is filed against him by injured third parties.

Example: Car accident while making sales calls

Jon used his company car to make sales calls across the state. One evening while running late for an appointment with a customer, he collided with another car. The driver of the car suffered a whiplash injury and property damage.

Jon’s employer’s commercial insurance paid for the injured driver’s injuries and property damages. Hoping to “double dip,” the injured driver sued Jon personally. The employer’s insurance policy stepped in and provided an attorney at no cost to Jon.

An exception to employee indemnification applies when the employee is committing a crime while driving a company vehicle. If the accident involves criminal action, the employer may rightfully refuse to indemnify the employee from third-party lawsuits.

Additionally, if the employee was injured while committing a crime (other than traffic offenses), workers’ compensation may rightfully deny coverage for the employee’s medical bills, out-of-pocket expenses, and lost wages.

Workers’ Compensation vs. Liability Insurance

Liability and workers’ comp are two different types of insurance:

Workers’ compensation covers an employee injured while driving a company vehicle (within the scope of his employment). Coverage can include reimbursement for the employee’s medical bills, out-of-pocket expenses, and a portion of his lost wages. Workers’ comp does not pay for pain and suffering. If an accident at work is serious enough to result in disability, workers’ comp will also pay a settlement award.

Liability insurance pays for damages sustained by third parties. Under the employer’s commercial liability policy, coverage may include standard damages plus an additional amount for pain and suffering; however, if passengers in the company vehicle were employees, they’re only entitled to workers’ comp benefits (but if the passengers were aiding and abetting the driver in a criminal act, they all may be denied workers’ comp).

Example: Broken leg in car accident at work

Paula was using a company van to deliver flowers when another car illegally crossed an intersection and collided with her. Paula sustained a broken left femur, and she filed a workers’ compensation claim. Workers’ comp paid for her medical bills, out-of-pocket expenses, and about two-thirds of her wages while she was recovering.

Paula wanted to be compensated for her pain and suffering, but state laws governing workers’ compensation do not permit it.

Example: Employee and hitchhiker injured

Jack was driving a company car to a business meeting. While en route, Jack pulled over and picked up a hitchhiker. As Jack pulled back onto the highway, he collided with another car which had the right of way. Jack and his passenger were injured.

Jack successfully sought coverage under his employer’s workers’ compensation policy. His passenger successfully sued Jack’s employer under his commercial policy. As part of their verdict, the jury awarded Jack’s passenger compensation for her medical bills, out-of-pocket expenses, all her lost wages, and an amount for her pain and suffering.

Injury Due to Negligence of a Third Party

When an employee driving a company vehicle is injured due to the negligence of another driver (a third party), the employee is entitled to damages under his employer’s workers’ comp policy AND under the other driver’s liability insurance policy.

Unlike workers’ comp benefits, which only pay a portion of an injured employee’s lost wages (and nothing for pain and suffering), the third party’s liability insurance will pay all the employee’s lost wages, and an amount for pain and suffering.

If the employee-driver receives workers’ comp and also gets compensation from the third party’s liability insurance, the employee will probably have to reimburse workers’ comp. Since workers’ compensation benefits don’t include pain and suffering, and only pay two-thirds of lost wages, the injured employee can keep the award for pain and suffering and any amount in excess of the partial wage payments.

Example: Suing a negligent driver outside of workers’ comp

Sally was driving a company van delivering meals to elderly citizens. Another car collided with the back of the van, and Sally was seriously injured. She received workers’ compensation benefits and retained an attorney to sue the other driver for negligence. The negligent driver settled Sally’s case by paying her medical bills, out-of-pocket expenses, all her lost wages, and a substantial amount for her pain and suffering.

Under state law, Sally had to reimburse the workers’ comp insurance company for the benefits they paid her. She was able to keep the portion of the settlement representing her pain and suffering, and the portion for lost wages above her worker’s comp benefit.

Injury to a Third-Party Driver

Some jobs require an employee to use his personal vehicle, such as outside sales, pizza delivery, and home health care. Vehicle accidents that occur in an employee’s own car present coverage questions. His private insurance company may deny coverage for any injuries and property damage he causes.

To avoid denials, either the employer’s commercial insurance policy must cover such events, or the employee must purchase a “rider” from his insurance company.

A rider is an addendum to personal car insurance that provides coverage in case of an accident while using the car for company business. Purchasing a rider usually increases premiums, and some employers are willing to reimburse the additional cost. Without a rider, the employee’s insurance company can deny coverage and leave him personally liable for any damage he causes.

A rider may not be necessary if an employer provides coverage under her commercial liability policy. The employer should provide proof of insurance or a copy of her commercial policy. If she refuses or says it’s not available, the employee should assume he’s not covered. Having a car accident at work without proper coverage can be disastrous, so he’d be wise to consider other options.

If an employer permits an employee to drive a company vehicle to and from work each day, her commercial insurance should cover property damage and personal injuries even when the employee isn’t actively working. In any case, criminal activities while using a company vehicle may void coverage.

An employer’s commercial policy may cover her employee’s personal vehicle while he’s working, but not when he’s commuting to and from work. Accidents that occur outside of the workplace, while commuting to and from home, or when driving between job sites, may not be considered acting within the scope of employment.

To ensure coverage during these times, the employee must ask his employer to provide coverage or purchase a rider to his own personal car insurance policy.

Example: Rider to personal insurance policy

Aidan used his own car to make pizza deliveries for a national pizza franchise. In compliance with corporate rules, Aidan provided his employer with proof he purchased a rider to his car insurance policy. The rider insured Aidan for up to one million dollars against third-party injury claims. The company reimbursed Aidan for the additional cost of the rider.

Example: Employer-provided coverage

Rebecca drove her car to deliver pizzas for another national franchise. The company provided her coverage for up to one million dollars under their commercial liability policy.

Example: Insurance denies coverage for work accident

Justin used his car to drive from one work site to another. In the morning, he drove from home to the worksite designated by his employer. At the end of the day, Justin drove his employer from the worksite to the main office. One morning, while driving from his home to the worksite, Justin changed lanes too quickly. He collided with another car, causing it to crash into an abutment. The driver and passengers were injured.

The injured third parties sued Justin’s employer, alleging Justin was acting within the scope of his employment at the time of the crash. His employer’s commercial liability insurance denied the claim, saying Jack was not acting within the scope of his employment.

In this case the court ruled in favor of the third parties. The court stated Justin’s commute each day to various job sites was within the scope of his employment. If Justin had used his car only to drive between his home and his employer’s headquarters, then the accident would not have been within the scope of his employment.

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