Dear Alex:
I own a restaurant, and we have decided to offer food delivery services. Our employees will drive in their own cars, but I have been told that I will need auto insurance for my employees.
If my employees already have their own auto insurance, why do I have to provide insurance for them?
When an employee is acting on behalf of an employer, inside or outside the office or workplace, the employer bears the risk of liability for actions of the employee.
In a food delivery service, one of the most significant concerns is the possibility of an automobile accident.
If your delivery person is driving food to a delivery and causes an accident, your business may be responsible for the damages resulting from that accident, even if the employee is driving his or her own vehicle.
It is very likely that your employee’s personal auto insurance policy will not cover losses suffered while the employee is conducting business activities for your restaurant. The potential for significant damage and losses from automobile accidents is fairly high, and is a risk that should be insured.
The rule that an employer may be liable for the actions of an employee, when the employee is acting within the scope of his or her employment, is called “vicarious liability,” or sometimes “respondeat superior.”
The rule of vicarious liability applies broadly to all businesses, not just in the case of employees driving for their employer.
Employers sometimes feel that this rule is unfair; they may argue that if the employee is the one to cause an accident, the employer cannot control that risk and should not suffer because of the employee’s negligence or misconduct.
However, it is ultimately the employer who benefits from the activities of the employee, so in the eyes of the law it is also the employer who should run the risk of losses resulting from those activities.
This rule also protects victims. Frequently, employees do not have access to sufficient resources to compensate the losses of the victims of their actions.
Employers, however, are considered to be more economically capable of insuring against such risks, and therefore their own liability for the acts of their employees aids in ensuring that victims have access to the resources needed to remedy their losses.
Not all employee activities are the responsibility of the employer.
Many factors contribute to the determination of whether the employee or the employer is responsible for damages caused by an employee. This includes whether the activity was within the employee’s scope of work, and the time, nature and place of the employee’s conduct, and the intent of the employee in the conduct of their behavior.
Activities outside the scope of the employment, even if made on the employer’s time, may not be the liability of the employer. Independent contractors are not employees; therefore in most cases, companies will not face vicarious liability for the activities of independent contractors.
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