On this episode of PeopleWork, we are joined by Jeff Leyonmark of The Wolf Agency for an interesting discussion about the liability that employers face when employees drive for business-related purposes. Jeff explains why employers may want to consider updating their employee handbooks with a policy that requires any employee that would drive for the company to increase their coverage limits on their personal auto insurance policies - as well as other commercial policies that employers can take out to further protect the business from loss.
You can watch the video and read the transcript from the conversation below:
Before we get into the topic that Jeff is going to talk about, which I find really interesting even though I knew literally nothing about it before we kind of connected, Jeff, why don't you tell me a little bit more, and everybody else a little bit more, about yourself and the Wolf Agency?
Well, the most important thing that you should know is that a small agency like ours is a true professional agency dealing with employers regularly. We have many, many clients that are large and small employers, so we're pretty experienced in that field.
The other thing I would like people to know about me personally is that I'm a fourth-generation broker. What that really means is I come from a very long pedigree of outstanding insurance, and happens to be men, only because it was my great-grandfather and grandfather and father and now me, but a long history of acumen in the insurance industry, so I've learned from really quality people, and we have good people in our agency, too.
Awesome. Today what we're going to explore together with the help of our friend Jeff is the topic of driving. We're going to look into employers who have employees that drive for the business. Not necessarily that drive company cars, cars owned by the company, but specifically drive as part of their job working for their employer, and what employers might want to consider about their employees' individual coverage limits and how that relates to their exposure. Jeff, why do you explain to us why this is an issue and why you think you have some wisdom to impart on everybody watching us.
First of all, CJ, I'm pretty impressed that you remembered all that, because we haven't talked that much about it.
What I'm hoping to accomplish today, ultimately, is a dialogue for basically human resource directors and/or employers that have created an employee handbook, and maybe a way of adapting or modifying the handbook that would protect them better and would protect their employees better. Let me explain the exposure that the employers have.
Through a balance of responsibility, well, it's called apportionment, employers are ultimately responsible for the actions of their employees. What that really means with regard to driving a vehicle ... And we're specifically talking about vehicles that are not owned by the corporation, that are owned by the individual employee that happen to be operating on behalf or during business hours, okay? That's our concern.
For instance, if an employee is asked to go and pick up some paper towels for the office bathroom, and employers will say, "Here you go, Susan, would you please drive to the store in your vehicle, because we don't have a fleet of corporate vehicles, and pick up during your business hour, pick up a roll of paper towels? Here's $5." So Susan, in the course of driving to that location, is involved in an accident where she's negligent. Okay?
Ultimately, what's going to happen, and the assumption is that it would be a personal injury would be involved, bodily injury, somebody got hurt, what's going to happen, ultimately, is there's going to be a balance of who's responsible. Clearly, the employee would be number one, right? Because they were negligent. It hurt somebody else. But secondarily, the employer will be brought into that lawsuit.
The question is does the employee's limits, which is primary, which is the first limit, so their auto bodily injury property damage limits, is the first limit that protects both entities. We want to make sure, number one, if that's the case, that those limits are adequate, clearly, to the exposure. They may or may not be, but the more, the merrier.
Then secondarily, do we have protection on an excess or secondary level, for the employer? That coverage is called hired and non-owned auto. Okay? That's an endorsement that is automatically included in New York, generally, on a commercial auto policy, meaning if you had a fleet of vehicles, you have the coverage. You don't have to do anything. But if you don't have a fleet of vehicles, like a lot of office exposures, my office doesn't have a scheduled vehicle, doesn't have a commercial auto policy, we have hired and non-owned auto coverage that's added to our liability protection. Okay? It's cheap. $100, $200 a year. What that does is it gives us $1 million, in our case it's $2 million, more or excess over the employee's limits. Okay?
That's the first kind of exposure is Article 16 of the New York Civil Practice Law and Rule says that you have a vicarious liability as employer for the actions of your employee. You're going to get sued if your employee hurts somebody in an auto accident on business time. Okay? It's very important that we preface that.
That's my biggest concern as a consultant with employers is ... And I mandate. I just add it to every single liability policy. I don't care how big or small the employer is, I add it automatically, and sometimes I don't even, well, I always tell them they have it, but I don't give them a choice. I just say you've got a hired and non-owned auto. The first thing I would say.
To me, it's malpractice if an agent writes a policy without the dialogue of this exposure. We have a single entity LLC with no employees and they're never going to have employees, you know, I might acquiesce and say, "Okay, well you don't need the coverage." Truthfully, CJ, I add it anyway because it's $150 or $125. A year. For $1 million-plus. Maybe $2 million. Exactly, so why wouldn't I add it? But certainly anyone with an employee, even if they think their employee is going to drive for them or not, we add it automatically. That's half of the problem. Does that make sense?
That's how we like to protect employers, but what about the employee? That's where this is a little different than what, I think, other HR directors have thought about it. They might know about hired and non-owned. They might know about this vicariously liability apportionment, how in New York state they could share in the negligence, the vicarious liability that they carry. But they may not know that it is lawful, from my research and talking to really smart consultants that work in that space, that you can mandate if anyone drives on behalf of the corporation that they have certain auto liability limits. Does that make sense?
It is legal for an employer to mandate to a certain threshold where their employees set their own personal auto liability?
Correct. Correct. As long as, and this is a very important element in this discussion, as long as there's a fairness in that document, meaning the employee handbook, that clearly states that anyone has to have this. It can't be, "Well, we decided, Joe, he's brand new to our company and he's a younger person. He's got 25/50 on his auto, which is low limits. That's the lowest you can have in New York state to drive a vehicle, $25,000. We're just going to let him have it, but Bob over here, who is an executive vice president that operates his own vehicle on behalf, he's got to have $500,000." You can't do that. You have to be very disciplined.
It literally has to be for every single person in the company. What if there are some people who just don't drive? You know what I mean? Can you separate between people who may drive and people who will never be asked to drive?
What you're saying is for those people who may drive, you set the policy and it has to be consistent throughout.
Right. Again, I'm not sitting in the HR director's chair. I don't know. They know their staff. Right? But it would be in the handbook for those who do operate or would operate on behalf of the corporation, we would ask that.
Now, if there's an occasion where someone does that and they don't have it, again, that's how you handle that legally or within discipline within the company. I don't know. I'm saying that I have...
Sorry. So, I totally understood what you talked about on the employer side, where you talked about how they carry vicarious liability through their employees and how you guys add on an additional part of the policy for a couple hundred bucks a year that gives them all this added protection. But how specifically does an employee's increased coverage limits help protect the employer? I haven't seen that connection yet. Can you clarify that for me?
Let's go back to the lawsuit. I think it was Susan. We are picking on Susan here. I should have made it a guy's name. Susan is driving, hurts somebody. Susan has assets as well, you assume, or something to lose. Right?
The larger her number, the less we're diluting her number with Susan and the employer, because both entities are sharing one number. Where if you didn't, in the absence of hired and non-owned liability, you would only have Susan's auto liability limits to protect both entities. Does that help you a little bit?
Obviously, the employer, even if they are 10% negligent, could share maybe a larger proportion of the payout. They're saying, "Well, it's not fair. I wasn't texting and driving. That was Susan." Well, you told Susan to do this and she hurt somebody. You bear some negligence.
In the absence of that coverage, hired and non-owned auto coverage, then we would only have Susan's limits that would protect Susan and the employer. Why would it matter to Susan? Well, number one, her limits are being diluted by protecting another entity, right? She may or may not like that. But more importantly, CJ, and we're spinning it now to the employee side, because that was really what I was hoping to kind of… That was the direction I was hoping to take this. I believe in protecting employers. I represent employers, but I also represent employees because I have clients that are just drivers. I have personal-lines clients. I always write, as you know, because we've talked about it, I write very large limits. There's a specific reason.
But in the case of Susan, if the employer really cared about Susan, they'd also look at this differently. They want to protect themselves, clearly, but most importantly, if Susan ... Because Susan is only driving for the company maybe one hour out of seven days out of a year. Right?
The 360 other days of the year, Susan is driving with low limits. When she's not on company time, if she's injured in an auto accident, and she has low limits, and let's say that she's injured by the negligence of someone else and doesn't have uninsured motorist coverage that's adequate to her injuries, she might be losing work time. She's reliant then on the work disability policy. Right?
Which, as you know, disability pays 1/2 of 50% up to $170 a week for statutory disability. Who can live on $170 a week? Will Susan be impacted, ultimately, if she had low limits?
See, that's the rosy picture, the silver lining on the clouds is, yes, we're mandating, or Big Brother or The Man is telling you, "I have to have large numbers," but in the reality, it protects Susan. See what I mean?
That's the direction I'd like it to go for employers.
You would like to see more employers...
Care about what their people are driving with.
Yeah. Let me ask you this. Earlier, you talked about putting something in the employee handbook. I want to make sure that we clarify this.
Because we didn't really clarify it. We didn't clarify it.
You talked about putting something in the employee handbook. You talked about, well, why don't I just jump to the question? Can an employer legally require it or is it just something that they put in the handbook and request or ask their employees to maintain these limits? How much influence does an employer have in this situation, forcing the hand on their employees' individual coverage limits?
I actually called before this opportunity to speak with you. I called two people to confirm what I thought was correct. I didn't call the New York State Department of Labor, but I called… Well, I called an attorney, an employment attorney, somebody that I'm hoping you're going to have on soon. I also talked to another consultant, another person you know, and I think have a highly regard, and polled that person. From what I understand, it is legal for an employer to mandate, require, not recommend, but require certain auto liability limits for those employees specifically who may or do, may or do, operate their vehicle on behalf of the corporation.
Remember, it's not going to be everybody. If you have a staff of 30 people, you might have one or two. One might be a clerical person or an administrative assistant or a vice president, those kinds of folks. It's not going to be everybody, CJ. I actually have an employer who does it.
That was going to be my next question.
I'm told it is legal to do it. It is lawful.
You were told by HR consultants and employment attorneys that it is legal. We will double-check on that, too.
You should. You should. Of course.
It presumably can be done. Tell me about anybody you know that has done this and what's...
Well, I've got an architectural firm who is very sophisticated in how they manage their employees. They ask very deep, deep-drilled questions about coverages specifically related to the products that I sell, whether it's employment liability practices, insurance, or it's the statutory disability piece that we write.
We're not an HR firm. We're an insurance company or agency. But this particular architectural firm is very proactive and very thoughtful in how they crafted their employee handbook. I tell you, one reason they are is because they pay a consultant, a really good consultant, who has advised them to do so.
That's the caveat to all of this, CJ. Maybe it's just as simple as an employer who hasn't even looked at their employee handbook in five years, that opens it up because we've brought this to light. See what I mean? Maybe they'd be smart enough to go to Complete Payroll. I assume you offer HR solutions. I should know that or not.
We actually do have an employee handbook service specifically.
Of course. They would contact you and say, "I'm probably not compliant and I heard that guy talking about my vicarious liability. We should be talking about this." Because I'm telling you, this is one element of compliance. There are 1,000 things that they're probably non-compliant with. This isn't a compliance issue. I'm just saying this is a great platform to talk to your consultant, you, to have the dialog. That's really what I'm hoping it does.
But back to this architectural firm. I think they've mandated $500,000 combined single limit for anyone who drives it on their auto liability limit.
How do their employees feel about it? Do you have any feedback? Have they shared any of that with you?
I don't care. I don't care.
You just say it's in their best interest. This is what to do.
Yep. Let's use the seatbelt law as an example. Obviously, there's a lot of dialog about gun issues now as well. A lot of smart people have talked about how the auto industry has protected people better. Whether people like it or not, they made seatbelts a law. Right? A lot of people don't like it. They don't have to wear seatbelts, but most people say, "Well, it's the law and I feel compelled to wear it." But the reason that we have a seatbelt law is so people wear seatbelts so they don't die in an auto accident.
Unfortunately, New York state, and I have a strong opinion about this, as you know, New York state said, "Well, to drive a car in New York state, you have to have $25,000 for one person, $50,000 for accident, and $10,000 in property damage." CJ, if anyone is driving on the roads with those kinds of limits today, and anything happens to them, they're done, and they don't understand that.
Maybe this is me being a little Big Brother saying, "I think our auto liability and uninsured motorists should be higher. Maybe this is one way to protect one or two people in a corporation that maybe would have lower limits and now have larger limits because they had to." Does that make sense?
Yeah. Yeah, it does. It really does.
There's a little bit of an ulterior motive for me. It's to encourage the world to understand the value of coverage that they should have and for employers to say, "Well, if I really care about my employees, I might even have a workshop and talk about these things." It's not just this. It's smoke detectors in your house, or whatever it is.
Life insurance. A bazillion things. You know? The employers that I respect the most actually have training that's outside of their customary job-specific training and talk about some life skill training stuff.
I know some HR people will say, "Jeff, I don't have time to have lunch. You know? I can't create a suite of new training exercises for 140 employees." But we're talking about retention in this culture today. We're talking about jobs that people feel valued and fulfilled in. Maybe some of these conversations will help in retention. Who knows?
Absolutely. You know, when you talk about employee retention and all the things that people do that I've studied, and that we've studied, that honestly definitely does seem like something that would fit within the category of training and employee retention. Because it's very similar with a lot of things that we've noticed that employers do, or are willing to do, are open to, or anything else like that.
Just to clarify, though, I want to make sure that when you previously mentioned that New York state's minimum coverage limits on auto policy are $25,000/$50,000, and when you said if somebody gets into actually a meaningful accident, something serious happens, you referenced they're done. To make sure I'm understanding you properly, what you're saying is that those limits are far, far too low to take care of them in the result of any fallout, whether it be property damage, bodily damage, loss of wages because you can't go to work, things like that.
You're just a firm believer. I want to make sure that I'm interpreting this correctly. You just believe in just in general, forget even the issue of whether employers will mandate this for employees who drive for their business, or anything like that, you just believe that people should have higher coverage limits across the board. Is that correct?
Correct. CJ, I'm very blessed in my book of business. I have a large number of really smart personal injury attorneys who are my clients. They're my clients for a reason. They came to me for a reason because of what I espouse. They see everyday, good, hard-working people injured in an auto accident based on someone else's negligence. Their own auto limits and uninsured motorists limits are low. The person who injured them also carried low limits. Because you can't control who hurts you, right?
If Terry Pegula hits you, eh, maybe you're probably okay. Right? Maybe there's some money behind that.
For those of you who don't know, Terry Pegula is the owner of the Buffalo Bills and Buffalo Sabres.
And a billionaire.
And a billionaire. Yes. Thank you. Continue.
Forgive me. Sometimes I think it's just you and I talking. That being said, if you know an attorney specifically who practices in personal injury law, and you may or may not know those folks, but if you do, ask them a simple question: What happens to people? Can you help someone when their own limits are low and the other party who hits them, limits are low? Specifically, those people who are negligent probably also aren't sitting on $30 million of liquid assets. Okay? Can you help those people?
The answer is always no because there's nothing to sue and there's not even insurance on our end, on the injured party's end. In our case, it would be the plaintiff's end to go after. The attorneys can't do anything.
Imagine their disappointment when someone injured that can't work anymore, can't support their family, whatever that is, comes to them and says, "Can you help me?" They have to say, "I'm sorry, Mrs. Jones, I can't help you because you chose to have low liability limits and the other party who hits you has no assets to attach." That doesn't happen to my clients because even if the person who injures them has low limits, my clients have big numbers to offset that exposure.
Back to employers. The person who got injured can't come to work anymore. What if that's a key person? Let's say they're out of work for six or eight months. Does the employer continue to pay them their salary because all they would have is statutory disability? I don't know. They could do that. You could do that. Most employers probably wouldn't because they have to hire somebody to replace that person. Right?.
Even if that person comes back, wouldn't it be in their best interest to have big numbers for New York state, what we call PIP or personal injury protection in New York state, no fault, that pays loss of earnings up to $6,000 a month in some companies? Wouldn't it be nice if that employer knew that that person, even though they couldn't pay them, was getting $6,000 a month?
This is my feeling. This is why I'm weaving this into the employer-employee relationship. Employers don't have to do any of this. It's just me thinking outside the box. Does that make sense?
Right. It does. It does. That's why we bring people on. Right? We're trying to bring people on who can present us with a different perspective on a variety of issues. I clearly believe that you have done that. I think it's very interesting on both the employer and the employee side and, really, when it's one in the same. Before we wrap up, Jeff, what I want to ask you...
Good, because I'm exhausted.
Well, you don't seem it. Before we wrap up, I want to ask you, let's suppose that an employer is watching this right now and is thinking, "Okay, I see what he's talking about here. I definitely see some upside and I want to look into this myself, not only protecting my vicarious liability through a commercial policy, but also maybe trying to enforce some type of individual coverage limit policy through my employee handbook, something like that." Where would they go? Where would they get started?
That's a great question. I would do two things. You reminded me, and I think of you when I'm speaking in New York state, we're talking specifically with New York state law, the research I've done, or at least what I've been told is related to New York state specifically. First thing you have to do in your state is determine through Department of Labor whether you could mandate coverage limits for auto, whether it's possible or whether it's lawful. First thing. The second thing I would do then is I would then boil that down to their own HR consultant, whether that's in-house HR, whether that's a second or a third party. Just to say, "Hey, this is what we're thinking about. Tell me what you think about this. What is the precedent that's being set?" I know there's a precedent in New York because I've seen it.
Then, lastly, they might want to touch base with their own property and casualty agent that writes their commercial auto or has their general liability, has their employee practices liability, whatever it is. Don't forget we're affected as agents when our insureds get sued. You know? If we've not discussed at least some products that could offset that exposure, we've got our own errors and omissions, our own malpractice to consider.
But I would start in that order, CJ. I would start with the Department of Labor in that state, or the rules that govern that state. I would talk to smart HR people. Then you might want to even talk to an employment attorney about it.
One thing I would just add, and I think I said it, but I want to make sure that we hammer it home, it has to be fair. That's everything that an employee book has. It has to be fair. It has to relate or has to be consistent for every employee that it affects. You just can't indiscriminately change it or whatever. I just want to make sure that employers understand it has to be fair, first of all. Once you put something like that in a handbook, you better make sure that you're following that handbook as doctrine.
Of course. Hopefully, if they do follow your three steps, at step two, when they consult their HR counsel, whether in-house or a third party, that their counsel will certainly help keep them on track. Basically, Department of Labor and/or employment attorney to verify that this policy is legal in their state, where they do business, two, consult with some type of HR counsel, and then, finally, bring in their insurance agent.
Right. Don't forget. Remember, this was meant to be a little outside the box. You know? This was a different topic of discussion. I just thought it would be something interesting for employers to hear about.
Well, you know, as somebody who did not have a lot of knowledge in this subject going into it, I certainly found it very interesting. Jeff, thank you so much for your time and your attention. I'm sure that everybody who is watching this will have found this very interesting and informative as well. Anything else that you'd like to share before we part ways?
Go Bills. We're a couple months early, but I guess it's never too early to say that. Thanks, again, Jeff. Take care.
You're welcome. Take care.
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