Agents can provide meaningful service to their clients bywarning them about the risks of negligententrustment.

Negligent entrustment arises when one party (the entrustor) isheld liable for negligence because he provided another party (theentrustee) with a dangerous instrument, and the entrusted partycaused injury to himself or a third party, or damaged property,with that instrument.

One way a business can find itself at risk of negligententrustment is by allowing an employee to drive a vehicle oncompany business, when management knows or should know that thedriver intends or is likely to drive the vehicle in such a manneras to create an unreasonable risk of harm. This can happen when theemployer chooses to overlook the fact that an employee has ahistory of substance abuse, anger management and/or recklessdriving.

The legal theory supporting negligent entrustment is that thecompany has a legal duty to investigate the driving records andqualifications of all potential drivers, and take action to preventdrivers from operating vehicles in an unsafe manner during thecourse of company business.

With general liability coverage there is a specific exclusionfor “bodily injury or property damage arising out of the ownershipor entrustment to others of any aircraft, auto or watercraft ownedor operated or rented or loaned to any insured.” No matter how muchgeneral liability coverage an insured carries, there will be nocoverage for a negligent entrustment incident.

Unlike general liability, a business auto policy has noexclusions for negligent entrustment. Yet even with coverage, aninsured may not have enough insurance if one of its employees isinvolved in a harmful accident.

Because anyone with permission to drive a vehicle on companybusiness is classified as being an insured, it is important for acompany to define its permission policy before an incident occurs.Otherwise the insurance provider will do so after a claim has beenfiled. The rule of thumb in creating a permission policy is toensure flexibility without creating a personal use permissionpolicy that is too broad.

When it comes to negligent entrustment, it is also important toremember that punitive damages are not insurable in most states.Since punitive damages are meant to punish employers, to dootherwise would be against public policy.

Following are some guidelines for your clients to use to avoidthe potentially devastating consequences of negligententrustment:

1. Read the literature on negligent entrustment to understand therisks.
2. Teach by example, especially when driving with youngemployees.
3. Put clear safety policies in writing.
4. Enforce clearly defined driver guidelines with zerotolerance.
5. Pre-screen all individuals who are granted permission to driveon company business.
6. Monitor and enforce drug and alcohol policies.
7. Review the driving records of all those with permission todrive on company business annually.
8. Mandate training modules for all at-risk drivers.
9. Maintain company vehicles to meet stringent safetystandards.