by Kerri Quigley, Assurance
Before placing an employee in a position to drive a client’s vehicle, staffing firms need to evaluate the insurance requirements and other contractual provisions they’ve agreed to. Provisions that would normally be acceptable for General Liability exposure can completely change the way Auto Liability coverage is intended to respond to claims involving non-owned vehicles.
Claim Example: Your employee is transporting goods for your client in a vehicle owned by the client when they rear-end another car. Both the employee and the driver of the other car are injured, and both vehicles are damaged, as well as some of the goods being transported.
In the absence of a contract that amends insurance provisions or includes indemnification language, the damages involve multiple insurance policies:
Contractual provisions can completely change the way that the auto liability policy is intended to respond. Let’s now assume that the staffing firm has signed a contract in which they agree to add the client company as an Additional Insured on a primary & non-contributory basis to their auto liability policy. Let’s say they’ve also signed a hold harmless agreement stating that they will defend and indemnify the client company for any claims or damages arising from the negligence of their employees. Here’s the way this same example would play out:
Non-owned auto liability coverage is significantly less expensive than owned auto liability coverage, as it’s intended to apply on an excess and incident basis, with the vehicle owner’s policy being the primary response. If a staffing firm assumes the primary auto liability for their clients’ vehicles, they may jeopardize their ability to obtain coverage in the event of a loss. Consider the difference in how a carrier writing a $2,000 hired & non-owned auto liability policy would view a $25,000 liability claim versus a carrier writing a $150,000 owned auto liability policy for a fleet of vehicles.
So, what does this mean for you and your staffing firm?
Best practice for a staffing firm placing their employees driving client vehicles is to add either a carve out or addendum to the existing contract specific to driving exposure. This ensures that any hold harmless provisions don’t apply to driving exposures, nor any endorsements adding Additional Insured or primary & non-contributory status.
Kerri Quigley is a Vice President who specializes in the staffing industry. With over 10 years of insurance experience, Kerri has solidified her expertise in providing in-depth coverage analysis, including the reconstruction of staffing industry products with Philadelphia, AIG, CNA and Hanover Insurance. Her extensive knowledge of the industry is further augmented through various speaking and teaching opportunities. Kerri earned a Bachelor of Arts degree in Computer Science from the University of California, San Diego. She's a member of the American Staffing Association and New Jersey Staffing Alliance. Kerri also obtained a number of insurance designations, including Chartered Property Casualty Underwriter (CPCU), Associate in Risk Management (ARM) and Associate in Commercial Underwriting (AU), among others. In 2017, Kerri was named an Elite Woman in Insurance by Insurance Business America.
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