Seven Practices to Mitigate Negligent Entrustment

By Tim Unger, Loss Control Specialist

Whether you lead a fleet or operate an auto dealership, the threat of negligent entrustment is there. Negligent entrustment is a legal concept that addresses the act of putting someone in control of a vehicle or equipment without verifying their ability to operate it properly or providing training. In the event of an incident resulting in bodily injury and/or property damage, it can put a business owner in a very difficult and defensive legal position.

Typically, negligent entrustment arises in an employment situation when:

1. The employer carelessly allowed or entrusted an employee to use an instrument or vehicle that could cause harm
2. The employer knew or should have known the employee was incapable of operating the instrument or vehicle safely due to lack of training, previous incidents, or not being appropriately licensed
3. The employee’s lack of training or license was a substantial factor in the cause of injury

As a business owner, it’s your obligation to only put trained and qualified employees in these positions to ultimately ensure safety. And that does not end after the hiring process – it extends through the entire period of employment.

Under a charge of negligent entrustment, an employer may be liable for the damages caused by an undertrained or unlicensed employee. Punitive damages may be awarded if negligent entrustment is proven. In many cases, these damages are not covered by insurance policies. Some states do not permit punitive damages to be covered, or the damages may exceed the policy limits.

To better protect your business, the following practices are recommended:

1. Establish a formal fleet safety program
   This should include minimum driver qualification standards, corrective action programs and training requirements
2. Require documentation proving road test completion
3. Review each driver’s motor vehicle record (MVR) at hire and annually thereafter
   Establish criteria for acceptable MVRs
4. Provide periodic defensive driver training
5. Conduct post-accident reviews
   Review all accidents individually with the driver involved to determine the cause of the accident and potential need for additional training
6. Establish a drug and alcohol testing program
   Provide testing at hire and post-accident at a minimum. Ensure all drug and alcohol policies are documented and followed
7. Ensure all vehicles are properly maintained and repairs are made promptly when deficiencies are discovered

NEGLIGENT ENTRUSTMENT AND AUTO DEALERSHIPS

Most adults begin driving as a teenager and drive for their personal needs for many years which is why this obligation is often overlooked in the auto dealership world. It’s easy to assume they are properly qualified to operate a vehicle and that their driving record reflects that. However, if you do not verify that fact and you have employees driving on business, then you position yourself for potential negligent entrustment. This includes technicians, salesmen, shuttle drivers and any employee who drives in the course of their duties. And again, this obligation extends throughout the course of employment and must be verified periodically. Documentation of the steps you’ve taken to qualify drivers should be maintained and consistent for any employee, regardless of title.

Additionally, negligent entrustment can also arise for dealerships in the sales of vehicles when proper steps are not taken to ensure the customer is qualified to operate the vehicle. To best address this, all customers should be required to provide a valid driver’s license and proof of insurance.

To learn more about IAT Insurance Group’s Loss Control resources, click here.

The recommendation(s), advice and contents of this material are provided for informational purposes only and do not purport to address every possible legal obligation, hazard, code violation, loss potential or exception to good practice.  IAT Insurance Group and its affiliates and subsidiaries ("IAT") specifically disclaim any warranty or representation that acceptance of any recommendations or advice contained herein will make any premises, property or operation safe or in compliance with any law or regulation. Under no circumstances should this material or your acceptance of any recommendations or advice contained herein be construed as establishing the existence or availability of any insurance coverage with IAT. By providing this information to you, IAT does not assume (and specifically disclaims) any duty, undertaking or responsibility to you. The decision to accept or implement any recommendation(s) or advice contained in this material must be made by you.