The state of AZ contracts with psychologists and other doctors (“Vendors”) to perform Consultative Exams to assess disability. Most exams are performed in the
Vendor’s office, but some providers travel for one or more days per month to perform exams.
Providers (vendors) are reimbursed per day, and paid a set fee for office space and lodging (obtained by provider), and for mileage (44.5 cents/mile, AZ rate).
AZ calculates mileage from provider’s office to the work site.
Providers travel by personal or rented vehicle, usually from home to work site and then home.
Providers receive 1099 income for work done for AZ Disability Determination Service; i.e. reimbursement for mileage, lodging, and office space plus professional fees for exams is reported on a single 1099 every year.
The state does not receive mileage logs or receipts from providers.
AZ now wants providers to obtain auto insurance with a one million dollar limit with following endorsement:
“The State of Arizona, and its departments, agencies, boards, commissions, universities, officers, officials, agents, and employees shall be named as additional insureds with respect to liability arising out of the activities performed by or on behalf of the Contractor, involving automobiles owned, leased, hired or borrowed by the Contractor.”
b. Policy shall contain a waiver of subrogation endorsement (Blanket Endorsements are not acceptable) in favor of the “State of Arizona” for losses arising from work performed by or on behalf of the Contractor.
AZ believes that because they reimburse for “mileage” they can require providers to have this insurance.
AAA, my auto insurance, will not provide this coverage, which they say must be a commercial policy.
Can the state of AZ require independent contractors (Providers) who commute 1-2 times per month to perform exams in another city to obtain commercial auto insurance at Provider’s own expense? Can anything be done about this? Thank you.
Disclaimer: Our response is not formal legal advice and does not create an attorney-client relationship. It is generic legal information based on the very limited information provided. Do not rely upon the information in our response, or anywhere else on this site, when deciding the proper course of a legal matter. Always get a personalized case review from a local attorney.
We performed an exhaustive search to to find the contract you refer to in your question. Unfortunately, we were unsuccessful. Without reviewing the contract in its entirety, and not just one clause of it, it is quite difficult to address the questions you ask.
However, our research led us to contracts for independent vendors for the City of Tucson, Phoenix, and Scottsdale. All three contracts are devoid of any language requiring independent vendors to carry property damage and/or liability insurance for their private vehicles when the vendors are driving to and from their assigned work for the city.
However, in the contracts we reviewed there was no clause wherein the City reimburses the independent vendor for mileage. Therein lies the rub… In your case the State of Arizona is reimbursing you for mileage. That mileage reimbursement may be the connecting rod between you and the State.
Because of the reimbursement for mileage it can be argued you are acting as an agent for the State. As such, the State of Arizona may be exposed to civil liability for your negligent acts. For example, if while driving to a State requested examination of a third party you caused an accident, the State of Arizona might be held liable.
This agency issue falls under the legal doctrine of Respondeat Superior. Under Respondeat Superior an employer is responsible for the negligent acts and omissions of employees and agents when those actions or omissions occur while the employee or agent is engaged in the normal and customary work duties for the employer.
Driving to and from assigned examinations and being reimbursed for mileage by the State of Arizona could arguably fall under Respondeat Superior.
We might suggest you speak with the State of Arizona and see if they will exempt you from the insurance and subrogation agreement if you agree not to accept reimbursement for mileage. You can argue if you don’t accept reimbursement for mileage, then while driving to and from examinations you would have no ties with the State of Arizona. You can always deduct mileage separately when you do your federal taxes.
In the event the argument is not persuasive you may have to bite the bullet and agree to provide the insurance the State is requesting under the existing contract.
The above is general information. Laws change frequently, and across jurisdictions. You should get a personalized case evaluation from a licensed attorney. Find a local attorney to give you a free case review here , or call (888) 647-2490.
Best of luck,
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