November 17, 2010
Credit Union Management magazine’s Web-only “Insurance Matters” column runs the third Wednesday of each month.
A teller leaves your CU to attend a local chamber of commerce networking event. On the drive, he takes his eyes off the road and accidentally hits a group of kids in a crosswalk.
The CEO of a credit union is driving her personal vehicle to a business meeting. She spills her coffee on her lap and swerves into oncoming traffic. She is not injured, but the people in the other car are not so lucky.
Employers are responsible for the actions of their employees. Both of the above accidents will trigger a variety of claims.
Certainly, the driver’s personal auto insurance will come into play. There will, without doubt, also be a claim against the credit union’s. The insurance coverage solution is “non-owned auto liability insurance.” Fortunately, the coverage is probably already in your insurance program. Ask your insurance agent.
Claims such as the two described above can exceed $1 million. You may need more coverage than the limits of protection included in most auto policies. The umbrella liability policy provides additional coverage over your auto policy, your general liability, and a part of your workers’ compensation insurance. For example, let’s say one of the claims above happens to your credit union. The resulting award against your organization is $1.5 million. Let’s assume you have non-owned auto insurance at $1 million and a $3 million umbrella policy. First, your auto insurance pays the policy limit of $1 million. The next $500,000 of coverage comes from your umbrella policy.
As additional protection for your employees, your CU insurance policy should include coverage for liability claims that are larger than your employees’ personal auto insurance—called “employees as insureds.”
How about damage to an employee’s car being driven on CU business? Are you going to pay for that? Many employees will assume the credit union’s insurance will repair their car. Here’s where things can get messy.
Of course, you could pay for the employee’s damage. You can buy insurance for the exposure too. However, neither is the approach I recommend.
You have three options. One, pay for the employee damage by purchasing non-owned collision insurance. Two, reimburse employees for their own insurance deductible. Three, pay nothing, and let the employees’ insurance respond to the claims.
I suggest the third choice. Pay employees a fixed price per business mile driven (the IRS allows 50 cents). That payment reimburses employees for the expenses of operating their car on credit union business: gas, tires, oil, registration, wear and tear, and insurance. Let your employees decide what insurance they want on their car.
Make your driver-policy a part of your employee handbook. Send a note to your employees so they know what to expect. (Send me an e-mail at Scott@ScottSimmonds.com and I’ll be glad to send you a sample letter.)
Your employees need to know the insurance they buy on their car is what will protect them if they have an accident while driving on CU business. Their insurance is always the first place employees should look for payment of accidental damage—whether they’re going to the grocery store or to a chamber of commerce meeting.
Questions for Your Insurance Agent:
-Do we have non-owned auto liability insurance? Why not?
-What is the limit of coverage for our umbrella policy? How much will our premium increase if we double this coverage?
-Are our employees listed as insureds on our CU auto liability insurance coverage?
-Does our insurance provide collision insurance for employees’ cars when they are driving on credit union business?
Reader Questions:
Q: We have a $3 million umbrella policy and $2 million in directors’ and officers’ insurance. That’s $5 million of coverage. Isn’t that enough insurance?
A: This is a common misunderstanding. Your umbrella policy provides coverage in addition to your auto liability, general liability, and employers’ liability. The umbrella is intended to pay for bodily injury and property damage. Your directors’ and officers’ insurance is not included in your umbrella. D&O pays for decisions and actions taken by your board of directors and the officers of your credit union and specifically excludes bodily injury and property damage.
Scott Simmonds is the unbiased insurance guy, consulting on, but never selling, insurance. His credit union Web site is www.CUinsuranceConsultant.com. Simmonds welcomes questions from readers. He will attempt to answer as many as possible in future columns.
