What You Need to Know and How to Avoid Negligent Entrustment

Jul 22, 2024 | Business Insurance, Personal Insurance

As a business owner, you are likely well aware of the numerous dangers and obligations your company faces. However, you might not know that you could be held responsible for any mishaps or damage caused by your team if it includes drivers.

For businesses that depend on the usage of automobiles for their operations, auto accidents are a costly liability. Distracted driving and a legal doctrine known as negligent entrustment have both contributed to an increase in these hazards in recent years.

What does negligent entrusting mean?

You commit negligent entrustment when you allow an employee with a spotty driving record to drive on behalf of the business. This applies whether the vehicle is commercial or passenger, and regardless of ownership by the company. Authorities might consider any moving offenses or collisions caused by your driver as indicators of a poor driving history.

As a business owner, it is your duty to make reasonable efforts to find out that driver’s history before letting him or her operate your vehicle.

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The employer and the policies and practices in place (or absent) at that business are the main targets of negligent entrustment lawsuits. “Negligent entrustment” in commercial auto operations occurs when an employer knowingly allows an employee to operate a vehicle, despite understanding the potential danger to others.

In contrast, these circumstances, employers may be liable for acting negligently, carelessly, or failing to follow prescribed procedures. Moreover, it’s important to recognize that lawsuits and verdicts for negligent entrustment are increasing, settlements often reach substantial amounts, and courts frequently award punitive damages in judgments.

From 2017 through 2020, there were verdicts totaling more than $4.5 billion. Thus, the biggest individual settlement surpassed $1 billion in 2021 after being $410 million in 2020. The largest verdict in Wisconsin in 2020 was almost $38 million. Additionally, by using the proper risk management techniques and practices to reduce and manage the inherent risks businesses confront, these nuclear verdicts can be averted.

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Employer liability theories

There are two other ideas about employer liability that are connected to negligent entrustment:

1. Holds an employer accountable for an employee’s behavior while the employee is operating in the course of his or her employment, according to Respondent Superior

2. Negligent Hiring: Holds an employer accountable for an employee’s behavior if they failed to exercise reasonable care in selecting and keeping them.

Failure to check a driver applicant’s driving history when it would have revealed a poor driving history, or learning of a “poor” rating through the driver applicant’s motor vehicle report and allowing that person to drive despite the information, are examples of situations involving negligent hiring.

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negligent entrustment

Situations surrounding situations of irresponsible entrustment

In the case of commercial auto operations, allegations of negligent entrustment frequently surface following a collision where the employee or contractor was sent without taking into account their qualifications or competence to operate the vehicle properly. Although the driver’s personal fault in creating the accident is typically the main problem, the investigation into a negligent entrustment accusation will primarily focus on two things:

  • A company’s protocols
  • Actual business practices

Do the realities (the actual practices) and the ideas (the policies) align, to put it another way? Basic inquiries are made, including:

  • Does the business have a selection and training procedure for drivers?
  • Did the management group follow the guidelines of that policy?
  • In conclusion, did the insureds follow their own advice?

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The specifics of careless entrustment

When could a situation result in a lawsuit or claim claiming negligent entrustment? Usually present are the following components:

  • The driver lacked skill.
  • The employer knew about this ineptitude or ought to have known about it
  • The car must have been given to the driver by the employer.
  • The incident in question involved the motorist being careless.
  • The accident was primarily caused by the driver’s carelessness.

The plaintiff’s attorney often reviews all relevant work records of the driver in attempt to demonstrate that the employer knew or should have known of the driver’s incapacity. Additionally, they thoroughly research the driver’s past, including their driving history. Moreover, if the employee’s driving history is not accurately and completely documented in the employment records, the plaintiff’s lawyer will claim that the employer “knew” or “should have known” of the employee’s ineptitude. The employer should have been able to find the same facts if the plaintiff’s attorney independently finds records proving ineptitude.

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Furthermore, the car was probably given to the driver by the employer if they were acting within the scope of their employment and it wasn’t stolen without consent.

Finally, investigations by “expert witnesses” frequently play a significant role in demonstrating that the driver’s negligence directly contributed to the collision. However, issuing the motorist with a ticket, criminally accusing the driver, or having the driver found to be “at-fault” following the presentation of evidence is the quickest ways to establish carelessness.

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Limit your exposure and stay away from careless entrustment

The following steps can be taken to lessen the risk of being exposed to negligent entrustment losses:

Pre-screening of all people given license to drive for commercial purposes is a part of the recruitment and selection practices for drivers.

  • Appraisal of new hires and orientation
  • ongoing training and evaluation of drivers
  • reviews following accidents and training
  • driver MVR checks every year
  • Enforcement of a zero-tolerance policy for driving misconduct and a driver conduct policy
  • programme for vehicle maintenance
  • the creation and implementation of drug and alcohol policy
  • Complete and in-depth documentation of everything mentioned above

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Companies are growing more concerned about claims related to negligent entrustment and other aspects of vehicle safety. When compared to the psychological and monetary consequences of irresponsible entrustment, establishing and implementing a safety and risk management program is minimal when one understands the risk connected with drivers. However, to explore your present policies and practices and how they can be changed to limit your exposure, get in touch with your M3 account executive or risk manager.

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