There’s Risk in Exceptions
Not once a week, not twice a week, but ten times a week we are asked to make an exception to allow a driver with too many traffic violations to be included on the company’s insurance policy. We are given one of two rationales which never vary. Either, “I am desperate to find someone, anyone, to drive my route truck.” Or, “He is a long-term, key employee, and I cannot lose him!” We get it, we empathize. However, it is essential that you fully understand the risks to the company, and to you personally, when exceptions are made.
As the PCOC Insurance Program’s representatives, it is our responsibility to maintain the professional standards that ensure your ability to avoid losses, survive losses, and keep your employees healthy and at work. We are here to help you make some tough choices. We are all about assisting you do what is best for your company and your employees. However, sometimes we have to be the proverbial reality check.
Increasing Auto Accidents, Escalating Repair Costs, and Stunning Jury Awards
Here is the challenge. When it comes to employees driving your company vehicles, you are facing what every commercial industry is facing: increasing auto accidents and escalating repair costs, combined with stunning jury awards. As of today, the National average commercial auto loss ratio is over 90%. Understanding that insurance carriers lose money whenever the loss ratio goes over or between 55% and 60%, you can see the problem.
Let’s Bring this Home to the California Pest Control Industry
Auto losses account for 78% of all pest industry losses (excluding Workers’ Compensation.) 66% are the pest industry drivers’ fault. This tells all of us that we need more qualified drivers, more skilled drivers. Not more exceptions that lower driver standards. Common sense might even tell all of us to be stricter in who we hire. The solution for insurance carriers is very simple: raise rates and increase driver restrictions. The bad news doesn’t stop here. Never forget California’s Doctrine of Negligent Entrustment.
Negligent Entrustment demands the need to exercise reasonable care when allowing use of company-owned vehicles. The Negligent Entrustment Doctrine, in its general form, is set forth in Section 308 of the Restatement (second) of Torts (1965) as follows:
“It is negligent to permit a third person [the driver in question] to use a thing or to engage in an activity which is under the control of the actor [employer], if the actor knows or should know (my emphasis) that such a person intends or is likely to use the thing or to conduct himself in the activity in such a manner as to create an unreasonable risk of harm to others.”
Thus, there is a significant cause of action against the employer if an employee with a poor driving record causes an accident. Here is the kicker: under Negligent Entrustment, the court may award punitive damages due to alleged negligent employment.
Punitive Damages are Not Covered by Insurance
Thus, the pest control company is left holding the “punitive bag.” The bag gets very full. Discouraging isn’t it? May be, but we are all about hope, help, and solutions. Five key and quick-to-install solutions under your control:
- Driver selection
- Driver training
- Driver incentives and rewards
- Driver accountability
- Vehicle telematics (formerly called GPS tracking)
I was tempted to put telematics at the top of the list, because for about $19 a month per vehicle you get instant accountability. The technology is phenomenal. However, too often the novelty wears off and the PCO stops paying attention to reports, and drivers revert to former habits. Think about that. In the meantime, consider these quick tips:
Driver Selection, Training, and Accountability Measures
- MVR pre-employment review—employ only those that have less than three major moving violations. Make sure your carrier will accept them before the hiring.
- If you must hire an applicant with a poor driving record, put them in a non-driving position.
- Do not hire an applicant that has had a DUI conviction within the last three years.
- Beware: “Reckless” convictions are often a plea bargain down from a DUI. Ask for an explanation and proceed accordingly.
- Check all driver MVRs annually.
- Have a formal driver safety training program for new and existing drivers.
- Have and enforce a written driving conduct standards policy.
- Perform post-accident reviews and write how the accident could have been prevented. Discuss the results with your staff.
- Reward good driving through bonus plans and other positive reinforcements.
- Send borderline employees to a four-hour class sponsored by the state department of motor vehicles or local chapter of the National Safety Council; the cost is typically $50.
- Keep excellent records detailing steps 1 – 10. This will facilitate strong defense against a negligent entrustment claim.
There is a torrent of information and training we can give you, so call us, and use us. We understand the challenges you face when forming and maintaining a competent workforce within your company. Stay resolved to find the best. The PCOC Insurance Program is standing by.
ProPest™ is a specialty program offering brought to you by EPIC Insurance Brokers & Consultants, in partnership with PCOC Insurance experts. For over 30 years, this program has offered coverage specifically designed for the pest control operators industry, including risk assessment, claims management, and loss prevention.