While all staffing firms have non-owned auto liability exposure from incidental driving in the course of business, staffing firms that place temporary employees with driving responsibilities must especially closely evaluate insurance requirements and other contractual provisions before making an assignment. This is because provisions that may be commonplace for general liability exposure can both fundamentally change the way auto liability coverage is designed to respond to claims and be unavailable in the current insurance marketplace.

For example, let’s consider a scenario where your temporary employee is driving a client’s vehicle transporting goods, gets into an accident and, as a result, the employee and the driver of the other car are injured. Additionally, both vehicles and some of the goods being transported are damaged.

In the absence of a contract that amends insurance provisions or includes indemnification language, multiple insurance policies would respond as follows:

• Injury to the employee
  • The staffing firm’s workers’ compensation policy will respond, as the employee was injured while performing their job.
  • The client company won’t be responsible for the injury to the staffing firm’s employee unless their negligence contributed for the injury.

• Damage to the vehicle being driven and property within it
  • The staffing firm’s auto liability policy won’t respond. Damage to property that is in their care, custody or control is excluded.
  • The client company’s collision physical damage coverage will cover the damage to their vehicle from the crash. Their property policy or motor carrier policy will respond to the damage to the property within the vehicle, depending on who owns the property.

• Injury to the other driver and damage to his or her vehicle
  • The employee, staffing firm and client company can all be sued for the injury and property damage caused to the other driver and their vehicle.
  • The staffing firm’s non-owned auto liability coverage only covers themselves and not the employees when driving non-owned vehicles.
  • The client company’s owned auto liability coverage covers themselves, the employee driving the vehicle and the staffing firm if they are liable for the conduct of another insured.
  • The client company’s auto liability policy will respond first, and if their limits are exhausted, the staffing firm’s policy will respond. Owned auto liability coverage responds on a primary basis, while non-owned auto liability responds on an excess basis.

Contractual provisions can significantly impact how auto liability policies respond. If the staffing firm adds the client company as an additional insured on a primary and non-contributory basis, and signs a hold harmless agreement, several major changes occur:

• Damage to the vehicle being driven or property
  • The staffing firm may now be responsible for paying out of pocket based on their agreement to cover damage from employee negligence.

• Injury to the other driver and damage to their vehicle
  • The staffing firm’s non-owned auto liability coverage now also covers the client company.
  • The staffing firm’s auto liability will respond first, and if their limits are exhausted, only then will the client company’s policy will respond.

Staffing firms assuming primary auto liability on a non-contributory basis for client vehicles may jeopardize their ability to obtain coverage in the event of a loss, as auto liability coverage is designed to be provided by the vehicle’s owner. In fact, this coverage is now largely unavailable to staffing firms placing drivers in the current insurance marketplace. Best practices for staffing firms include utilizing a carve out or addendum to contracts that establishes separate insurance and indemnification provisions that protect the staffing firm for any driving exposure.